ACCT CH 4 SI Notes PDF

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SI NOTES...

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Lesson 4 Supplemental Instruction - Bank reconciliations - Bank (Company’s bank statement) - Beginning balance + deposits outstanding - checks outstanding and +/- bank errors = ending balance - Company -company’s general ledger - Beginning balance - NSF checks (non sufficient funds) + interest - service fees EFTs (electronic funds transfer) + notes collected by the bank +/- company errors = ending balance WORKSHEET PROBLEM #1 1. Indicate whether the firm should add or subtract each item below from its balance of cash or the bank’s balance of cash in preparing a bank reconciliation.

1. Checks outstanding … BANK 2. NSF Checks …. Company 3. Deposit recorded twice by company … Company 4. Interest earned …. Company + 5. Deposits outstanding …. Bank + 6. Bank service fees …. Company WORKSHEET PROBLEM #2 A company’s general ledger shows a cash balance of $2,380. Comparing the company’s cash records with the monthly bank statement reveals several additional cash transactions such as deposits outstanding of $1,760, note collected by the bank on the company’s behalf of $1,000, and interest earned of $20. The company also finds an error by the bank of an additional deposit of $100. Calculate the correct balance of cash. COMPANY Beginning balance = 2380 + 1000 (Note collected) + 20 (interest earned) = 3400 3400 in Cash is the ending balance

WORKSHEET PROBLEM #3 A company’s bank statement shows a cash balance of $4,170. Comparing the company’s cash

records with the monthly bank statement reveals several additional cash transactions such as checks outstanding of $2,110, NSF check of $200, interest earned of $30, service fee of $40, and a check for $150 recorded twice by the company. Calculate the correct balance of cash. Bank Beginning Balance = 4170 - 2110 (Checks outstanding) = 2060 Ending cash balance = 2060 Journal Entries to Adjust the Balance of Cash -

-

Only for the company not for the bank Adjustments to increase cash - Cash XX - Notes receivable XX - Interest revenue XX Adjustments to decrease cash - Service fee Expense (Service fees) XX - Accounts receivable (NSF checks) XX - Rent Expense (EFTs) XX - Cash XX

WORKSHEET PROBLEM #4 A company’s Cash account shows a balance of $3,450 at the end of the month. Comparing the company’s Cash account with the monthly bank statement reveals several additional cash transactions such as bank service fees ($50), an NSF check from a customer ($300), a customer’s note receivable collected by the bank ($1,000), and interest earned ($100). Prepare the necessary entries to adjust the balance of cash. Company 3450 (beginning balance) -50 ( bank service fees) -300 (NSF Check) 1000 (check collected) 100 (interest) Increase Cash: Cash

1100 Notes receivable

1000

Interest Revenue

100

Decrease Cash:

Service fee expense 50 Accounts receivable 300 Cash

350

WORKSHEET PROBLEM #5 1. Madison Company’s cash ledger reports the following for the month ending March 31. Information from March’s bank statement and company records reveals the following additional information: a. The ending cash balance recorded in the bank statement is $6,790. Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

b. Cash receipts of $2,100 from 3/26–3/31 are outstanding. Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

+2100 (deposits outstanding) c. Checks 545 and 547 are outstanding. Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

+2100 (deposits outstanding) -1500 (checks outstanding) d. The deposit on 3/11 included a customer’s check for $400 that did not clear the bank (NSF check). Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

+2100 (deposits outstanding)

-400 (NSF check)

-1500 (checks outstanding) e. Check 543 was written for $2,800 for office supplies in March. The bank properly recorded the check for this amount. Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

+2100 (deposits outstanding)

-400 (NSF check)

-1500 (checks outstanding)

-600 (company error)

f. An automatic withdrawal for March rent was made on March 4 for $1,500. Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

+2100 (deposits outstanding)

-400 (NSF check)

-1500 (checks outstanding)

-600 (company error) -1500 (EFT for rent)

g. Madison’s checking account earns interest based on the average daily balance. The amount of interest earned for March is $50. Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

+2100 (deposits outstanding)

-400 (NSF check)

-1500 (checks outstanding)

-600 (company error) -1500 (EFT for rent) +50 (interest earned)

h. Last year, one of Madison’s top executives borrowed $4,000 from Madison. On March 24, the executive paid $4,200 ($4,000 borrowed amount plus $200 interest) directly to the bank in payment for the borrowing. Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

+2100 (deposits outstanding)

-400 (NSF check)

-1500 (checks outstanding)

-600 (company error) -1500 (EFT for rent) +50 (interest earned) +4000 (note collected by bank) +200 (interest revenue)

i. The bank charged the following service fees: $30 for NSF check, $10 for automatic withdrawal for rent payment, and $20 for collection of the loan amount from the executive. Bank

Company

6790 (beginning balance)

5700 (beginning Balance)

+2100 (deposits outstanding)

-400 (NSF check)

-1500 (checks outstanding)

-600 (company error) -1500 (EFT for rent) +50 (interest earned) +4000 (note collected by bank) +200 (interest revenue) -60 (Service fees)

Ending Balance: 7390

Ending balance: 7390

Prepare a bank reconciliation for March 31, and record the necessary cash adjustments. Journal Entries Company Increase cash: Cash

4250 Notes receivable

4000

Interest revenue

250

Decrease cash: Accounts Receivable

400

Supplies

600

Rent expense

1500

Service fees expense

60

Cash

2560...