Help I am stuck in the middle of this entry. In June, Bill commented to you that
ID: 2466089 • Letter: H
Question
Help I am stuck in the middle of this entry.
In June, Bill commented to you that he could never figure out his bank statement, “it never matches the balance in my accounting records” he tells you. So you explain that a bank reconciliation is a tool used to balance the bank statement to the accounting books. He gives you his bank statement for June, 2014 (shown below). The general ledger shows a balance for the account cash of $14,319.00 on June 30, 2014 (detail transactions below). Bill’s business only has one checking account and no other cash accounts.
Bill has begun to have problems collecting some of his credit accounts and is considering writing off a couple of customer account balances. He asks you how these bad debts should be recorded and has asked you to begin recording bad debt using the allowance method for June, 2014. Selected account balances at the end of June, 2014 are:
Sales $7,200
Sales on Credit $2,900
Accounts Receivable $3,200
As a result of increased focus on collecting accounts receivable, Bill has decided to extend credit for one customer, Alan Jones, who owes Bill’s Lawn Care $500. Bill and Alan have agreed to a 90-day 6% note for $500 issued on June 5, 2014.
Instructions:
Using the bank statement and the general ledger, prepare a bank reconciliation for Bill’s Lawn Care as of June 30, 2014. Record the necessary journal entries to adjust the books for the appropriate reconciling items.Start with Page 6 for the journal entries.Explanations are optional.
Using the information given above, calculate the amount of bad debt using:
Percentage of Sales on Credit = 1.5%
Percentage of Accounts Receivable = 1%
Using the chart of accounts, record the journal entry for bad debt expense for Bill’s Lawn Care using the percentage of sales on credit method.
Using the note receivable information above and the chart of accounts, record the following entries in the general journal (continue these entries on Page 6):
Receipt of the note in payment of the accounts receivable balance.
Adjusting entry at the end of June, 2014 for the note receivable. (Round interest calculations to two decimals)
Assume that Alan pays the note and interest in full on the due date, record the necessary journal entry.Assume that interest has been accrued at the end of each month.
Assume that Alan defaults on the note and interest on the due date, record the necessary journal entry.Assume that interest has been accrued at the end of each month.
Please note that the calculation pages in the Excel template are required . Please show your work on those pages.
CHECKING ACCOUNT DETAIL:
DATE
TRANSACTION
TYPE & NUMBER
AMOUNT
BALANCE
BEGINNING BALANCE
$12,850.00
6/2/2014
CHECK #1570
226.00
12,624.00
6/5/2014
CHECK #1571
83.00
12,541.00
6/6/2014
EFT #43
127.00
12,414.00
6/10/2014
DEPOSIT #104
1,550.00
13,964.00
6/15/2014
CHECK #1572
145.00
13,819.00
6/15/2014
CHECK #1573
185.00
13,634.00
6/20/2014
DEPOSIT #105
885.00
14,519.00
6/24/2014
EFT #44
143.00
14,376.00
6/28/2014
CHECK #1574
87.00
14,289.00
6/28/2014
CHECK #1575
95.00
14,194.00
6/30/2014
DEPOSIT #106
425.00
14,619.00
6/30/2014
CHECK #1576
155.00
14,464.00
6/30/2014
CHECK #1577
145.00
$14,319.00
BANK STATEMENT:
FIRST NATIONAL BANK
ACCOUNT SUMMARY JUNE 30, 2014
BEGINNING BALANCE
$12,850.00
PAYMENTS
$1,021.00
DEPOSITS
2,440.00
FEES
20.00
ENDING BALANCE
$14,249.00
PAYMENTS
DATE
REFERENCE
AMOUNT
6/5/2014
1570
$266.00
6/9/2014
1571
83.00
6/10/2014
43
127.00
6/19/2014
1572
145.00
6/28/2014
1573
185.00
6/28/2014
NSF
120.00
6/30/2014
1575
95.00
TOTAL PAYMENTS
$1,021.00
DEPOSITS
DATE
REFERENCE
AMOUNT
6/11/2014
104
$1,550.00
6/23/2014
105
885.00
6/30/2014
INTEREST
5.00
TOTAL DEPOSITS
$2,440.00
FEES
6/30/2014
SVC CHG
$20.00
TOTAL FEES
$20.00
Additional Information: Check #1570 was written for $266.00, but was recorded incorrectly in the general ledger. The check was for fuel.
DATE
TRANSACTION
TYPE & NUMBER
AMOUNT
BALANCE
BEGINNING BALANCE
$12,850.00
6/2/2014
CHECK #1570
226.00
12,624.00
6/5/2014
CHECK #1571
83.00
12,541.00
6/6/2014
EFT #43
127.00
12,414.00
6/10/2014
DEPOSIT #104
1,550.00
13,964.00
6/15/2014
CHECK #1572
145.00
13,819.00
6/15/2014
CHECK #1573
185.00
13,634.00
6/20/2014
DEPOSIT #105
885.00
14,519.00
6/24/2014
EFT #44
143.00
14,376.00
6/28/2014
CHECK #1574
87.00
14,289.00
6/28/2014
CHECK #1575
95.00
14,194.00
6/30/2014
DEPOSIT #106
425.00
14,619.00
6/30/2014
CHECK #1576
155.00
14,464.00
6/30/2014
CHECK #1577
145.00
$14,319.00
Explanation / Answer
The problem has shown bank balance as per checking account and bank statement. They are not agreeing. On detailed study following points are noted.
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On the basis of above analysis, following Journals are passed to rectify the checking account
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After such correction, adjusted checking account balance and reconciliations are shown below:
Checking Account details Dated Details Checking Bank Comment account Statement 6/1/2014 Opening balance 12850 12850 No difference in opening balance 6/2/2014 Check 1570 issued for fuel -226 -266 Error of $40 in checking A/c corrected by Journal 6/5/2014 Check 1571 issued -83 -83 Correctly debited by bank on 6/9/14 6/6/2014 EFT payment 43 -127 -127 Correctly debited by bank on 6/10/14 6/10/2014 Deposited ref 104 1550 1550 Correctly credited by bank on 6/11/14 6/15/2014 Check 1572 issued -145 -145 Correctly debited on 6/19/14 6/15/2014 Check 1573 issued -185 -185 Correctly debited on 6/28/14 6/20/2014 Deposit refrence 105 885 885 Correctly credited by bank on 6/23/14 6/24/2014 EFT payment 44 -143 0 Not recirded by bank 6/28/2014 Check 1574 issued -87 0 Not cleared by bank 6/28/2014 Check 1575 issued -95 -95 Cleared by bank on 6/30/14 6/30/2014 Deposit 106 425 0 Not recirded by bank 6/30/2014 Check issued 1576 -155 0 Not cleared by bank 6/30/2014 Check issued 1577 -145 0 Not cleared by bank 6/30/2014 Interest credited 0 5 Not entered in checking Ac Journal passed 6/30/2014 Service charge 0 -20 Not entered in checking Ac Journal passed 6/30/2014 NSF payment 0 -120 Not entered in checking Ac Journal passed Closing Balance 14319 14249Related Questions
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