Practical Accounting by Valix PDF

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Problem 15-4 (AICPA Adapted)Able Company received the bank statement for the month of March. However, the closing balance of the account was unreadable.Attempts to contact the bank after hours did not secure the desired information.February 28 book balance 1,460, Note collected by bank 100, Interest...

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Problem 15-4 (AICPA Adapted) Able Company received the bank statement for the month of March. However, the closing balance of the account was unreadable. Attempts to contact the bank after hours did not secure the desired information. February 28 book balance

1,460,000

Note collected by bank

100,000

Interest earned on note

10,000

NSF check of customer

130,000

Bank service charge on NSF check

2,000

Other bank service charges

3,000

Outstanding checks

200,000

Deposit of February 28 placed in night depository

85,000

Check issued by Axle Company charged to Able’s account

What is the cash balance per bank statement? a. 1,435,000 b. 1,530,000 c. 1,340,000 d. 1,550,000

Solution 15 – 4

Answer b

20,000

February 28 book balance

1,460,000

Note collected by bank

100,000

Interest earned on note

10,000

NSF check of customer

(130,000)

Bank service charges

(2,000+3,000)

(5,000)

Adjusted book balance

1,435,000

Balance per bank statement (SQUEEZE)

1,530,000

Deposit in transit

85,000

Bank error - erroneous charge

20,000

Outstanding checks

(200,000)

Adjusted bank balance

1,435,000

The bank statement balance is “squeezed” by working back from the adjusted balance.

Problem 15 - 5 (IAA) Stellar Company provided the bank statement for the month of December which included the following information: Ending balance, December 31

2,800,000

Bank service charge for December

12,000

Interest paid by bank to Stellar Company for December

10,000

In comparing the bank statement to its own cash records, the entity found the following: Deposits made but not yet recorded by the bank

350,000

Checks written and mailed but not yet recorded by the bank

650,000

In addition, the entity discovered that it had drawn and erroneously recorded a check for P46,000 that should have been recorded for P64,000.

What is the cash per ledger on December 31? a. 2,500,000 b. 2,520,000 c. 2,540,000 d. 2,800,000

Solution 15 – 5

Answer b

Balance per book

2,800,000

Deposit in transit

350,000

Outstanding checks

(650,000)

Adjusted bank balance

2,500,000

Balance per ledger (SQUEEZE)

2,520,000

Interest income

10,000

Service charge Book error

(12,000) (64,000-46,000)

Adjusted book balance

(18,000) 2,500,000

The cash balance per ledger is “squeezed” by working back from the adjusted balance.

Problem 15 - 6 (IAA) Letty Company provided the bank statement for the month of April which included the following information: Bank service charge for April

15,000

Check deposited by Letty during April was not collectible and has been marked “NSF” by the bank and returned

40,000

In comparing the bank statement to its own records, the entity found the following: Deposits made but not yet recorded by bank

130,000

Checks written and mailed but not yet recorded by bank

100,000

All deposits in transit and outstanding checks have been properly recorded in the entity’s books.

A customer check for P35,000 payable to Letty Company had not yet been deposited and had not been recorded by the entity. The cash in bank account balance per ledger is P920,000.

What amount should be reported as adjusted cash in bank on April 30? a. 900,000 b. 865,000 c. 930,000 d. 965,000

Solution 15 – 6

Answer a

Balance per ledger

920,000

Unrecorded customer check

35,000

Bank service charge

(15,000)

NSF check

(40,000)

Adjusted book balance

900,000

The deposits in transit and checks outstanding are ignored because these are bank reconciling items.

Problem 15-7 (IAA)



Gallant Company showed a cash account balance of P4,500,000 at the month-end.



The bank statement did not include a deposit of P230,000 made on the last day of the month.



The bank statement showed a collection by the bank of P94,000 for the depositor and a customer check of P32,000 returned because it was NSF.



A customer check for P45,000 was recorded by the depositor as P54,000 and a check written for P79,000 was recorded as P97,000.

What amount should be reported as cash in bank? a. 4,765,000 b. 4,571,000 c. 4,819,000 d. 4,801,000

Solution 15 – 7

Answer b

Balance per book

4,500,000

Collection by bank

94,000

NSF customer check

(32,000)

Book error – customer check overstated

(9,000)

Book error – check written overstated

18,000

Adjusted book balance

4,571,000

Customer check

45,000

Recorded by depositor

54,000

Book error – overstatement of a collection

9,000

Company check

79,000

Recorded by depositor

97,000

Book error – overstatement of payment

18,000

The deposit in transit of P230,000 is a bank reconciling item.

Problem 15 - 8 (IAA) Aries Company kept all cash in a checking account. An examination of the accounting records and bank statement for the month of June revealed the following information: 

A cash balance per book on June 30 was P8,500,000.



A deposit of P1,000,000 that was placed in the bank’s night depository on June 30 did not appear on the bank statement.



The bank statement showed that on June 30 the bank collected note for the entity and credited the proceeds of P950,000 to the entity’s account, net of collection charge P50,000.



Checks outstanding on June 30 amounted to P300,000 including certified check of P100,000.



The entity discovered that a check written in June for P200,000 in payment of an account payable had been recorded in the entity’s records as P20,000.



Included with the June bank statement was NSF check for P250,000 received from a customer on June 26.



The bank statement showed a P20,000 service charge for June.

1. What amount should be reported as cash in bank on June 30? a. 9,000,000 b. 8,300,000 c. 9,360,000 d. 9,180,000 2. What is the balance per bank statement on June 30? a. 8,300,000 b. 9,700,000 c. 8,660,000 d. 8,200,000 3. What is the net adjustment to cash in bank on June 30? a. Net debit

P950,000

b. Net credit

P450,000

c. Net debit

P500,000

d. Net debit

P860,000

Solution 15 - 8 Question 1

Answer a

Balance per book

8,500,000

Note collected by bank

950,000

Total

9,450,000

Book error

(200,000–20,000)

(180,000)

NSF check

(250,000)

Service charge

(20,000)

Adjusted book balance

Question 2

9,000,000

Answer d

Balance per bank (SQUEEZE)

8,200,000

Deposit in transit

1,000,000

Outstanding checks (300,000–200,000 certified check)

(200,000)

Adjusted bank balance

9,000,000

Question 3

Answer c

Cash in bank

950,000

Service charge

50,000

Note receivable

1,000,000

Accounts payable

180,000

Accounts receivable

250,000

Service charge

20,000

Cash in bank

450,000

The two entries can be compounded and the net effect is a debit to cash in bank of P500,000.

Problem 15 - 9 (PHILCPA Adapted) 

Boracay Company kept all cash in checking account. An examination of the bank statement for the month of December revealed a bank statement balance of P8,470,000.



A deposit of P950,000 placed in the bank’s night depository on December 29 does not appear on the bank statement.



Checks outstanding on December 31 amount to P270,000.



The bank statement showed that on December 25 the bank collected a note for Boracay Company and credited the proceeds of P935,000 to the entity’s account which included P35,000 interest.



Boracay Company discovered that a check written in December for P183,000 in payment of an account had been recorded as P138,000.



Included with the December 31 bank statement was an NSF check for P250,000 that Boracay Company had received from a customer on December 20.



The bank statement showed a P15,000 service charge for December.

1. What is the adjusted cash in bank on December 31? a. 9,150,000 b. 9,240,000 c. 9,195,000 d. 9,215,000

2. What is the unadjusted balance per book on December 31? a. 8,480,000 b. 8,525,000 c. 8,435,000 d. 8,510,000 3. What is the net adjustment to cash in bank on December 31? a. Net debit

P935,000

b. Net credit

P310,000

c. Net debit

P625,000

d. Net credit

P625,000

Solution 15 - 9 Question 1

Answer a

Balance per bank

8,470,000

Deposit in transit

950,000

Checks outstanding

(270,000)

Adjusted bank balance

9,150,000

Question 2 Answer b Balance per book (SQUEEZE)

8,525,000

Note collected by bank for the depositor

935,000

Book error in recording check

(183,000-138,000) (45,000)

NSF check

(250,000)

Service charge

(15,000)

Adjusted book balance

9,150,000

Question 3

Answer c

Cash in bank

935,000

Service charge

15,000

Note receivable

950,000

Accounts payable

45,000

Accounts receivable

250,000

Service charge

15,000

Cash in bank

310,000

The two entries can be compounded and the net effect is a debit to cash in bank of P625,000.

Problem 16-3 (IAA) In reconciling the cash balance on December 31 with that shown in the bank statement, Sam Company provided the following information: Balance per bank statement

4,000,000

Balance per book

2,700,000

Outstanding checks

600,000

Deposit in transit

475,000

Service charge

10,000

Proceeds of bank loan, December 1, discounted for 6 months at 12%, not recorded on Sam Company’s books

940,000

Customer check charged back by bank for absence of counter signature Deposit of P100,000 incorrectly recorded by bank as

50,000 10,000

Check of Sim Company charged by bank against Sam account

150,000

Customer note collected by bank in favor of Sam Company. Face

400,000

Interest

40,000

Total

440,000

Collection fee

5,000

Total

435,000

Erroneous debit memo of December 28, to charge Sam account with settlement of bank loan Deposit of Sim Company credited to Sam account

200,000 300,000

What amount should be reported as adjusted cash in bank on December 31? a. 4,315,000 b. 3,925,000 c. 3,075,000 d. 4,015,000

Solution 16 – 3 Balance per book

Answer d 2,700,000

Add: Proceeds of bank loan

940,000

Customer note collected

435,000

Total

1,375,000 4,075,000

Less: Service charge Customer check charged back

10,000 50,000

60,000

Adjusted book balance

4,015,000

Balance per bank

4,000,000

Add: Deposit in transit

475,000

Incorrect deposit

90,000

Erroneous bank charge

150,000

Erroneous debit memo

200,000

Total

915,000 4,915,000

Less: Outstanding checks Erroneous bank credit Adjusted bank balance

600,000 300,000

900,000 4,015,000

Problem 16 - 4 (IAA) Susan Company showed the following information on August 31:

Balance of cash in bank account

1,300,000

Balance of bank statement

1,200,000

Outstanding checks, August 31: Number 555

10,000

761

55,000

762

40,000

763

25,000

764

65,000

765

70,000

Receipts of August 31, deposited September 1

275,000

Service charge for August

5,000

NSF check received from a customer

85,000



The cashier book-keeper had misappropriated P30,000 and an additional



P 10,000 by charging sales discounts and crediting accounts receivable.



The stub for check number 765 and the invoice relating thereto showed that it was for P50,000. It was recorded incorrectly in the cash disbursements journal as P70,000.



This check was drawn in payment of an account payable.



Payment has been stopped on check number 555 which was drawn in payment of an account payable. The payee cannot be located.

What is the adjusted cash in bank on August 31? a. 1,240,000 b. 1,230,000 c. 1,210,000 d. 1,200,000

Solution 16 – 4

Answer a

Balance per book Add:Overstatement of check number 765 Check number 555 stopped for payment

1,300,000 20,000 10,000

Total

30,000 1,330,000

Less: Service charge

5,000

NSF check

85,000

90,000

Adjusted book balance

1,240,000

Company check number 765

50,000

Recorded by depositor

70,000

Overstatement of payment

20,000

Balance per bank

1,200,000

Add: Undeposited collections

275,000

Total

1,475,000

Less: Outstanding checks: Number 761

55,000

762

40,000

763

25,000

764

65,000

765

50,000

Adjusted bank balance

235,000 1,240,000

Problem 16 – 5 (PHILCPA Adapted) Mcbride Company provided the following data pertaining to the cash transactions and bank account for the month of May:

Cash balance per accounting period

1,719,000

Cash balance per bank statement

3,195,000

Bank service charge

10,000

Debit memo for the cost of printed checks delivered by the bank; the charge has not been recorded in the accounting record

12,000

Outstanding checks

685,000

Deposit of May 30 not recorded by bank until June 1

500,000

Proceeds of a bank loan on May 30, not recorded in the accounting record, net of interest of P30,000 Proceeds from a customer promissory note, principal

570,000

amount P800,000 collected by the bank not taken up in the accounting record with interest

810,000

Check No. 1086 issued to a supplier entered in the accounting record as P210,000 but deducted in the bank statement at an erroneous amount of

120,000

Stolen check lacking an authorized signature deducted from Mcbride’s account by the bank in error

80,000

Customer check returned by the bank marked NSF, indicating that the customer balance was not adequate to cover the check; no entry has been made in the accounting record to record the returned check

What is the adjusted cash in bank? a. 3,000,000 b. 2,910,000 c. 3,080,000 d. 2,990,000

Solution 16 – 5 Answer a

77,000

Balance per book

1,719,000

Service charge

(10,000)

Debit memo for printed checks

(12,000)

Proceeds of bank loan

570,000

Proceeds of customer note

810,000

NSF customer check

(77,000)

Adjusted book balance

3,000,000

Balance per bank

3,195,000

Outstanding checks

(685,000)

Deposit in transit

500,000

Bank error in recording check

(90,000)

Stolen check deducted by bank in error

80,000

Adjusted bank balance

3,000,000

Problem 16 – 6 (AICPA Adapted) Carefree Company prepared the following bank reconciliation on March 31:

Book balance Add: Deposit in transit

1,405,000 750,000

Collection of note

2,500,000

Interest on note

150,000

Total

3,400,000 4,805,000

Less: Careless Company deposit credited to our account Bank service charge

1,100,000 45,000

1,145,000

Adjusted book balance

3,660,000

Bank balance

5,630,000

Add: Error by depositor on recording check

45,000

Total

5,675,000

Less: Preauthorized payment for water bills

205,000

NSF customer check

220,000

Outstanding checks

1,650,000

Adjusted bank balance

2,075,000 3,600,000

The check erroneously recorded by the depositor was made for the proper amount of P249,000 in payment of account. However it was entered in the cash payments journal as P294,000.

The entity authorized the bank to automatically pay its water bills as submitted directly to the bank.

What amount should be reported as cash in bank on March 31? a. 3,660,000 b. 3,600,000 c. 3,630,000 d. 2,880,000

Solution 16 – 6

Answer c

Book balance

1,405,000
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