ACCT5001_Accounting Principles_2009 Semester 1_Week 9 Sem 1 2009 Solutions for Out-of-Class Study
ACCT5001 Week 9 Solutions for Out-of-Class Study
Chapter 8
Q20.The lack of agreement between the balances may be due to either:
(1) Time lags — a cheque written in July does not clear the bank until August.
(2) Errors — a cheque for $110 is recorded by the depositor at $101.
Q21.The four steps are: (1) determine outstanding deposits, (2) determine unpresented cheques, (3) discover any errors made, and (4) trace direct debits and credits.
P8.4A
(a) MOONEY COMPANY
Bank Reconciliation
as at 30 November 2007
Balance per bank statement ........................................................... $17 069.40 Add: Outstanding Deposits ........................................................... 1 338.00 ....................................................................................................... 18 407.40 Less: Unpresented cheques
No. 2451 ...................................................................... $1 260.40
No. 2472 ...................................................................... 503.60
No. 2478 ...................................................................... 538.20
No. 2482 ...................................................................... 612.00
No. 2484 ...................................................................... 829.50
No. 2485 ...................................................................... 974.80
No. 2487 ...................................................................... 398.00
No. 2488 ...................................................................... 1 200.00 6 316.50 Adjusted cash balance per bank..................................................... $12 090.90 Balance per books.......................................................................... $10 846.90 Add: Note collected by bank.......................................................... 1 505.00 ......................................................................................... 12 351.90 Less: Cheque printing charge ........................................................ $72.00
Error in recording cheque No. 2479 ................................. 180.00 *
Error in 21-11 deposit ($2954 – $2945) ............................ 9.00 261.00 Adjusted cash balance per books ................................................... $12 090.90 *$1750 – $1570
(b) Nov. 30 Cash ....................................................................... 1 505
Miscellaneous Expense (15)
Notes Receivable ........................................... 1 400
Interest Revenue (120)
30 Miscellaneous Expense (72)
Cash (72)
30 Accounts Payable (180)
Cash (180)
Nov. 30 Accounts Receivable (9)
Cash (9)
Chapter 9
EXERCISE 9-6
(a) Apr. 2 Accounts Receivable — Julie Dusting ...................................... 1 800
Sales ................................................................................. 1 800 May 3 Cash .. (700)
Accounts Receivable — Julie Dusting (700)
June 1 Accounts Receivable — Julie Dusting (11)
Interest Revenue [($1 800 – $700) × 1.0%] (11)
(b) July 4 Accounts Receivable — American Express ($350 – $14) (336)
Service Charge Expense (4% × $350) (14)
Sales (350)
10 Cash (336)
Accounts Receivable — American Express (336)
P9.2A
(a) $26 000.
(b) $32 800 ($1 640 000 × 2%).
(c) $27 000 [($620 000 × 5%) – $4 000].
(d) $33 000 [($620 000 × 5%) + $2 000].
(e) There are two major weaknesses with the direct write-off method. First, it does not
match expenses with the associated income. Second, the accounts receivable are
not stated at cash realisable value at the balance sheet date.
P9.3A
(a) June 30 Bad Debts Expense ..................................................... 27 790
Allowance for Doubtful Debts.............................. 27 790
($35 790 – $8 000)
(a) & (b)
Bad Debts Expense
Date Explanation Ref. Debit Credit Balance 2007
June 30 Adjusting 27 790 27 790 Allowance for Doubtful Debts
Date Explanation Ref. Debit Credit Balance 2007
June 30
30 Sept. 1 Nov. 1 Balance
Adjusting
1 100
27 790
1 100
8 000
35 790
34 690
35 790
(b) (1)
Sept. 1 Allowance for Doubtful Debts ....................................... 1 100
Accounts Receivable .......................................... 1 100
(2)
Nov. 1 Accounts Receivable .................................................... 1 100
Allowance for Doubtful Debts.............................. 1 100
1 Cash ........................................................................... 1 100
Accounts Receivable .......................................... 1 100 (c) 2008
June 30 Bad Debts Expense ..................................................... 32 500
Allowance for Doubtful Debts.............................. 32 500
($31 300 + $1200)
P9.1B
(a) 1. Accounts Receivable ................................................................ 3 315 000 Sales ............................................................................... 3 315 000 2. Sales Returns and Allowances ................................................. 50 000
Accounts Receivable .......................................................
50 000 3. Cash ........................................................................................ 2 810 000 Accounts Receivable ....................................................... 2 810 000 4. Allowance for Doubtful Debts ................................................... 90 000
Accounts Receivable ....................................................... 90 000 5. Accounts Receivable ................................................................ 29 000
Allowance for Doubtful Debts .......................................... 29 000 Cash ........................................................................................ 29 000
Accounts Receivable .......................................................
29 000
(b)
(c) Balance before adjustment [see (b)] ....................................................
$ 9 000
Balance needed .................................................................................. 125 000 Adjustment required ............................................................................ $116 000
The journal entry would therefore be as follows:
Bad Debts Expense ............................................................................. 116 000
Allowance for Doubtful Debts .....................................................
116 000
(d) 2000)325$1000($960000$50–000315$3÷+ = 500
142$1000
265$3 = 2.86 times
P9.7B
Jan. 5 Accounts Receivable — Billings Company ................................... 16 000
Sales ................................................................................... 16 000
20 Notes Receivable ......................................................................... 16 000
Accounts Receivable — Billings Company .......................... 16 000 Feb. 18 Notes Receivable ......................................................................... 8 000
Sales ................................................................................... 8 000 Apr. 20 Cash ($16 000 + $360) ................................................................. 16 360
Notes Receivable ................................................................ 16 000
Interest Revenue ($16 000 × 9% × 3/12) (360)
30 Cash ($15 000 + $600) ................................................................. 15 600
Notes Receivable ................................................................ 15 000
Interest Revenue ($15 000 × 12% × 4/12) (600)
May 25 Notes Receivable ......................................................................... 6 000
Accounts Receivable — Fiona Inc. ...................................... 6 000 Aug. 18 Cash ($8 000 + $360) ................................................................... 8 360
Notes Receivable ................................................................ 8 000
Interest Revenue ($8 000 × 9% × 6/12) (360)
25 Accounts Receivable — Fiona Inc ($6 000 + $105) ...................... 6 105
Notes Receivable ................................................................ 6 000
Interest Revenue ($6 000 × 7% × 3/12) (105)
Sept. 1 Notes Receivable ......................................................................... 12 000
Sales ................................................................................... 12 000