CONNECT ONLINE ACCESS FOR INTERMEDIATE
10th Edition
ISBN: 9781264798834
Author: SPICELAND
Publisher: MCG
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Chapter 2, Problem 2.1DMP
Judgment Case 2–1
Cash versus accrual accounting;
• LO2–4, LO2–8
You have recently been hired by Davis & Company, a small public accounting firm. One of the firm’s partners, Alice Davis, has asked you to deal with a disgruntled client, Mr. Sean Pitt, owner of the city’s largest hardware store. Mr. Pitt is applying to a local bank for a substantial loan to remodel his store. The bank requires accrual based financial statements but Mr. Pitt has always kept the company’s records on a cash basis. He doesn’t see the purpose of accrual based statements. His most recent outburst went something like this: “After all, I collect cash from customers, pay my bills in cash, and I am going to pay the bank loan with cash. And, I already show my building and equipment as assets and
Required:
1. Explain the difference between a cash basis and an accrual basis measure of performance.
2. Why, in most cases, does accrual basis net income provide a better measure of performance than net operating
3. Explain the purpose of adjusting entries as they relate to the difference between cash and accrual accounting.
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Problem 6-18A (Algo) Preparing a bank reconciliation LO 6-3
Rick Hall owns a card shop, Hall's Cards. The following cash information is available for the month of August Year 1:
As of August 31, the bank statement shows a balance of $12,985. The August 31 unadjusted balance in the Cash account of Hall's
Cards is $8,491. A review of the bank statement revealed the following information:
1. A deposit of $1,190 on August 31, Year 1, does not appear on the August bank statement.
2. It was discovered that a check to pay for baseball cards was correctly written and paid by the bank for $2,805 but was recorded on
the books as $3,705.
3. When checks written during the month were compared with those paid by the bank, three checks amounting to $4,810 were found
to be outstanding.
4. A debit memo for $26 was included in the bank statement for the purchase of a new supply of checks.
Required:
Prepare a bank reconciliation at the end of August showing the true cash balance.
Note: Negative amounts…
eBook
Chapter 4Critical Thinking Case 2Reconciling the Wells' Checking Account
Vivian and Rowen Wells are college students who opened their first joint checking account at the American Bank on September 14, 2020. They've just received their first bank statement for the period ending October 5, 2020. The statement and checkbook ledger are shown in the table below.
From this information, prepare a bank reconciliation for the Wells family as of October 5, 2020,
Given your answer to Question 1, determine what, if any, adjustment will the Wells family need to make in their checkbook ledger. Enter the answers as positive value. Round the answer to the nearest cent.
$
If the Wells family earned interest on their idle balances because the account is a money market deposit account, what impact would this have on the reconciliation process?
The effect of the interest earnings would have been a(n) -Select-decreaseincreaseItem 19 in both bank and checkbook balances.
Explain.
The…
Chapter 2 Solutions
CONNECT ONLINE ACCESS FOR INTERMEDIATE
Ch. 2 - Explain the difference between external events and...Ch. 2 - Each economic event or transaction will have a...Ch. 2 - What is the purpose of a journal? What is the...Ch. 2 - Explain the difference between permanent accounts...Ch. 2 - Describe how debits and credits affect assets,...Ch. 2 - Describe how debits and credits affect temporary...Ch. 2 - What is the first step in the accounting...Ch. 2 - Prob. 2.8QCh. 2 - Prob. 2.9QCh. 2 - Prob. 2.10Q
Ch. 2 - What is an unadjusted trial balance? An adjusted...Ch. 2 - Define adjusting entries and discuss their...Ch. 2 - Define closing entries and their purpose.Ch. 2 - Define prepaid expenses and provide at least two...Ch. 2 - Deferred revenues represent liabilities recorded...Ch. 2 - Define accrued liabilities. What adjusting journal...Ch. 2 - Prob. 2.17QCh. 2 - [Based on Appendix A] What is the purpose of a...Ch. 2 - [Based on Appendix B] Define reversing entries and...Ch. 2 - [Based on Appendix C] What is the purpose of...Ch. 2 - Prob. 2.21QCh. 2 - Transaction analysis LO21 The Marchetti Soup...Ch. 2 - Journal entries LO22 Prepare journal entries for...Ch. 2 - Prob. 2.3BECh. 2 - Journal entries LO22 Prepare journal entries for...Ch. 2 - Adjusting entries LO25 Prepare the necessary...Ch. 2 - Adjusting entries; income determination LO24,...Ch. 2 - Prob. 2.12BECh. 2 - Journal entries LO22 Prepare journal entries to...Ch. 2 - T-accounts and trial balance LO23 Post the...Ch. 2 - Prob. 2.5ECh. 2 - Debits and credits LO22 Indicate whether a debit...Ch. 2 - Prob. 2.7ECh. 2 - Prob. 2.8ECh. 2 - Reversing entries Appendix 2B The employees of...Ch. 2 - Special journals Appendix 2C The White Companys...Ch. 2 - Prob. 2.24ECh. 2 - Prob. 2.3PCh. 2 - Prob. 2.4PCh. 2 - Prob. 2.8PCh. 2 - Prob. 2.12PCh. 2 - Judgment Case 21 Cash versus accrual accounting;...Ch. 2 - Communication Case 23 Adjusting entries LO24 I...Ch. 2 - Prob. 2.1DA
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