Week 4 Homework Solutions

Chapter 08 - Cash and Internal Controls 8-26 Problem 8-4B (30 minutes) Part 1 STYLE CO. Bank Reconciliation December 31, 2011

Bank statement balance .............. $45,091.80 Book balance ................................$31,743.70 Add: Add: Deposit of Dec. 31 ....................... 7,666.10 Error (Ck 1267) .... $ 18.00 52,757.90 Proceeds of note less $20 fee........ 19,980.00 19,998.00 51,741.70 Deduct: Deduct: Checks No. 1242 ..... $ 370.50 NSF check ............ $ 749.50 1273 ..... 1,084.20 Printing fee ........... 79.00 1282 ..... 390.00 1,844.70 828.50 Adjusted bank balance ................. $50,913.20 Adjusted book balance ..............$50,913.20

Part 2 Dec. 31 Cash .....................................................................18.00 Office Supplies ............................................. 18.00 To correct an entry error.

31 Cash .....................................................................19,980.00 Collection Expense ............................................20.00 Note Receivable ............................................ 20,000.00 To record note collection less fees.

31 Accounts Receivable—Titus Industries ...........749.50 Cash ............................................................... 749.50 To charge account for NSF check plus fees.

31 Miscellaneous Expenses ...................................79.00 Cash ............................................................... 79.00 To record check printing charge.

Part 3 In a banking context, a debit memo is notification from the bank that it has debited the depositor's account. Since the depositor's account is a liability of the bank (a credit balance account), the debit notification means the bank has reduced the depositor's account balance. Conversely, a credit memo is a notification that the depositor's account has been credited, which means the bank has increased the depositor’s cash balance. Chapter 9 - Receivables 9-18 Problem 9-2A (35 minutes) 2014 a. Accounts Receivable ....................................... 1,803,750 Sales ............................................................ 1,803,750 To record sales on account.

Cost of Goods Sold ..........................................1,475,000 Merchandise Inventory .............................. 1,475,000 To record cost of sales.

b. Allowance for Doubtful Accounts ................... 20,300 Accounts Receivable ................................. 20,300 To write off accounts.

c. Cash ................................................................... 789,200 Accounts Receivable ................................. 789,200 To record cash received on account.

d. Bad Debts Expense .......................................... 35,214 Allowance for Doubtful Accounts ............ 35,214 To record estimated bad debts.*

*Beginning receivables ...................... $ 0

Credit sales ....................................... 1,803,750 Collections ........................................ (789,200) Write-offs ........................................... (20,300) Ending receivables ........................... 994,250

Percent uncollectible ........................ x 1.5% Required ending allowance .............. 14,914** Cr.

Unadjusted balance .......................... 20,300 Dr. Adjustment to the allowance ........... $ 35,214 Cr.

** rounded to nearest dollarChapter 09 - Receivables

9-19 Problem 9-2A (Concluded) 2015 e. Accounts Receivable ........................................... 1,825,700 Sales ................................................................ 1,825,700 To record sales on account.

Cost of Goods Sold ..............................................1,450,000 Merchandise Inventory .................................. 1,450,000 To record cost of sales.

f. Allowance for Doubtful Accounts ...................... 28,800 Accounts Receivable ..................................... 28,800 To record write-off of accounts.

g. Cash ...................................................................... 1,304,800 Accounts Receivable ..................................... 1,304,800 To record cash received on account.

h. Bad Debts Expense .............................................. 36,181 Allowance for Doubtful Accounts ................ 36,181 To record estimated bad debts.*

*Beginning receivables ..................... $ 994,250

Credit sales ....................................... 1,825,700 Collections ........................................ (1,304,800) Write-offs .......................................... (28,800) Ending receivables .......................... 1,486,350