Cash
Hard Test
Hard Test
Click the “Check Your Answer” box below each problem to reveal the correct answer and explanation.
A. net method
B. gross method
Answer
Collections:
Gross 20,000 – discount 0.5% of 100 = 19,900 net
Gross 25,000 – discount 0.5% of 125 = 24,875 net
Return:
Gross 1,600 – discount 0.5% of 8 = 1,592 net
1.A. Net method: Record the accounts receivable always at the net amount
September 2nd Sale:
Accounts Receivable 58,705
Sales 58,705
September 14th Collection, take the discount:
Cash 19,900
Accounts Receivable 19,900
September 16th returns:
Allowance for returns 1,592
Accounts Receivable 1,592
September 29th Collection, did not take the discount:
Cash 25,000
Accounts Receivable 24,875
Sales Discount – Forfeited 125
Note: The accounts receivable balance is now $12,388, net
1.B. Gross method: Record the accounts receivable always at the full amount
September 2nd Sale:
Accounts Receivable 59,000
Sales 59,000
September 14th Collection, take the discount:
Cash 19,900
Sales Discount 100
Accounts Receivable 20,000
September 16th Return
Allowance for returns 1,600
Accounts Receivable 1,600
September 29th Collection, did not take the discount:
Cash 25,000
Accounts Receivable 25,000
Note: The accounts receivable balance is now $12,400, gross
A. the net method
B. the gross method
Answer
Sale: $400,000 – discount 2% of 8,000 = 392,000 net
Estimated Returns: $400,000 x 4% = $16,000 – discount 2% of 320 = 15,680 net
Collection: $400,000 x 20% = 80,000 – discount of 2% of 1,600 = 78,400 net
Collection: $400,000 x 72% = 288,000 – discount of 2% of 5,760 = 282,240 net
Returns: $12,000 – discount of 2% of 240 = 11,760 net
2.A. Net Method: Record accounts receivable always at the net amount
Sales:
Accounts Receivable 392,000
Sales 392,000
Estimated returns:
Sales returns 15,680
Allowance for returns 15,680
Collection – take discount:
Cash 78,400
Accounts Receivable 78,400
Collection – discount not taken:
Cash 288,000
Accounts Receivable 282,240
Sales Discounts – Forfeited 5,760
Returns:
Allowance for returns 11,760
Accounts Receivable 11,760
Note: The accounts receivable balance is now $19,600, net
2.B. Gross Method: Record accounts receivables always at the full amount
Sales:
Accounts Receivable 400,000
Sales 400,000
Estimated returns:
Sales returns 16,000
Allowance for returns 16,000
Collection – take discount:
Cash 78,400
Sales Discount 1,600
Accounts Receivable 80,000
Collection – discount not taken:
Cash 288,000
Accounts Receivable 288,000
Returns:
Allowance for returns 12,000
Accounts Receivable 12,000
Note: The accounts receivable balance is now $20,000, gross
January 31st:
| Adjusted cash account balance 1/1 | 10,490 |
| Bank collected on a note receivable | |
| including $19 interest | 200 |
| Deposits not posted by the bank on 1/31 | 899 |
| Checks not cleared by the bank on 1/31 | 1,400 |
| NSF checks | 422 |
| Deposits posted by the bank during January | 2,200 |
| Total checks written in January | 21,905 |
| Total deposits made in January | 22,705 |
A. Prepare the bank reconciliation for the company for the month of January.
B. Determine the ending balance on the January 31st bank statement.
C. Prepare the journal entries required to adjust the cash account.
Answer
| Cash | Bank | ||
| Ending Balance 1/31 | $11,290 ** | $ ?? 11,569 | |
| Auto collection | $ 181 | ||
| Auto collection | $ 19 | ||
| Deposits in transit | $ 899 | ||
| Outstanding Checks | ($1,400) | ||
| NSF Checks | (422) | ||
| Adjusted 1/31 balance | $11,068 | must = | $ ?? 11,068 |
| Beginning Cash balance | $10,490 | ||
| + Deposits | 22,705 | ||
| – Check written | (21,905) | ||
| Ending Cash balance | $11,290 ** | ||
3.B. The adjusted bank balance must equal the adjusted cash balance of $11,068.
Work backwards to determine that the beginning balance must be $11,569.
3.C. Record items in the cash column only.
| Accounts Receivable | 422 |
| Cash | 222 |
| Notes Receivable | 181 |
| Interest Income | 19 |
Unadjusted cash balance on 2/28 is $14,679
Recorded in the cash account during March:
Deposits made $11,967
Checks written $ 9,054
| Checks cleared by bank during March | $ 7,290 |
| Deposits posted by bank during March | $ 9,908 |
| Outstanding checks on 2/28 | $ 1,290 |
| Deposits in Transit on 2/28 | $ 2,210 |
The bank recorded a deposit of $1,200 for the amount of $2,100
Bank service charges were $120 and interest earned on the account is $200
Answer
| Cash balance 2/28 | $14,679 |
| + Deposits | 11,967 |
| -Check written | (9,054) |
| Cash balance 3/31 | $17,592 |
Determine deposits in transit and outstanding checks
| Deposits | Checks | |
| Outstanding/not posted 2/28 | 2,210 | 1,290 |
| + made/written | 11,967 | 9,054 |
| – posted/cleared | (9,908) | (7,290) |
| Ending In Transit/Outstanding | 4,269 | 3,054 |
| Cash | Bank | |
| Ending Balance 3/31 | $17,592 | $17,357 |
| Service Charge | (120) | |
| Interest Earned | 200 | |
| Bank error | ( 900) | |
| Deposits in transit | $ 4,269 | |
| Outstanding Checks | ($3,054) | |
| Adjusted 1/31 balance | $17,672 | = $17,672 |
Balances on 6/30
cash G/L account $11,027 unadjusted
bank statement ??
A deposit made by the company for $1,398 was entered by the bank as $1,938
A check written for $1,325 was cleared by the bank for $1,235
The bank charged the company processing fees of $100
Interest earned on the account was $169. The company had previously estimated and recorded $150 in the cash account for interest.
The bank collected a note and interest for the company in the amount of $1,000 for the note and $115 interest.
Automatic payments to suppliers were made for $2,967
Deposits not posted by the bank totaled $2,200
Checks not cleared by the bank totaled $3,900
Answer
| Cash | Bank | ||
| Ending Balance 1/31 | $11,027 | $11,424 ?? Must be | |
| Auto collection | $ 1,000 | ||
| Auto collection | $ 115 | ||
| Deposits in transit | $2,200 | ||
| Outstanding Checks | ($3,900) | ||
| Error – bank – deposit | ($540) | ||
| Error – bank – check | ($90) | ||
| Service Fees | ($100) | ||
| Correct interest | $ 19 | ||
| Auto payment | ($2,967) | ||
| Adjusted 1/31 balance | $9,094 | = | $9,094 |
The two columns have to equal so the adjusted bank balance on 1/31 must also be $9,094.
Work up to compute the bank statement balance on 1/31.
Record only items in the cash column. Debit/credit cash for the difference in the ending and the adjusted cash column. A decrease is a credit.
| Service Fees | 100 |
| Accounts Payable | 2,967 |
| Interest Revenue | 19 |
| Note Receivable | 1,000 |
| Interest Revenue | 115 |
| Cash | 1,933 |
Positive numbers are credits
Negative numbers are debits