ASSIGNMENT #4

Chapter 9 from Hermanson Book (Receivables and Payables)

& Chapter 8 (Cash, Petty Cash, Bank Reconciliations, Internal Control) from the
Edwards textbook
1)

The cash account in the general ledger for Mattie Confectionary Co. on March 31,2014, shows a
balance of $16,450.00. The companys bank statement reports an ending balance of $18,345.00
for March 31, 2014. Comparing the bank statement, the canceled checks, and the accompanying
memorandums with the records revealed the following reconciling items:
a.
b.
c.
d.
e.
f.

Checks outstanding totaled $3,620.00

A deposit of $4,496.00 had been made too late to appear on the bank statement.
A check for $1,233.00 returned with the statement had been incorrectly recorded as
$233.00. The check was originally credited to accounts payable.
The bank collected $4,541.00 on a note left for collection.
Bank service charges for March amounted to $25.00.
A check for $745.00 was returned by the bank because of insufficient funds.

Prepare a bank reconciliation as of March 31, 2014. Also record the necessary journal entries
related to the bank reconciliation. Use the answer sheet provided.

Bank reconciliation as of March 31, 2014

Balance as per Cash account

$
16,450

Add: Checks outstanding

$
3,620

Less: Deposit in transit

$
(4,496)

Less: Error in recording cheque issued

(1233-233)

$
(1,000)

Add: Collection of note

$
4,541

Less: Bank Service Charges

$
(25)

Less: Cheque returned

$
(745)

Balance as per Bank Statement

$
18,345

Adjusting journal entries:

Debit

Accounts payable

Credit

$
1,000

Cash

1000

(Being adjustment made for error)

Cash

$
4,541

Notes receivables

4541

(Being cash collcted on note)

Bank charges

$
25

Cash

25

(Being bank charges paid)

Acounts receivables
Cash

$
745
745

(Being cheque returned by bank)

2) Using the answer sheet provided, prepare entries to record the following petty cash transactions:

(a)
(b)

(c)

Carter Inc. established a petty cash fund of $350.

Carter, Inc.s petty cash fund now has a balance of $75.80. The Company replenished the
fund, based on the following disbursements as indicated by a summary of the petty cash
receipts: office supplies expense, $89.50; miscellaneous administrative expense, $108.75;
and miscellaneous selling expense, $65.60.
Carter Inc. increased the petty cash fund to $400.

A . Debit: Petty Cash A/c $350

Credit: Cash A/c $350
b. Debit: Office supplies A/c $89.50
Debit: Adminnistrative expenses A/c $108.75
Debit: Selling expenses A/c $65.60
Credit: Petty Cash A/c $263.85
For replishment:
Debit: Petty Cash A/c $274.20
Credit: Cash A/c $274.20
c. Debit: Petty Cash A/c $50
Credit: Cash A/c $50

3) Mesa Camping Equipment Companys balance sheet dated December 31, 2013 reported
Accounts Receivable of $400,000 and a credit balance in Allowance for Doubtful Accounts of
$32,000. During 2014, Mesa Camping Equipment had the following transactions: sales on
account $1,500,000; sales returns and allowances, $50,000; collections from customers,
$1,250,000; accounts written off $36,000; previously written off accounts of $6,000 were
collected.
Instructions

(a) Prepare the journal entries for the 2014 transactions.

(b) If the company uses the percentage of sales basis to estimate bad debts expense and
anticipates 3% of net sales to be uncollectible, what is the adjusting entry at December 31,
2014?
(c) If the company uses the percentage of receivables basis to estimate bad debts expense and
determines that uncollectible accounts are expected to be 8% of accounts receivable, what is
the adjusting entry at December 31, 2014?
(a) Prepare the journal entries for the 2014 transactions.
GENERAL JOURNAL
Date

Accounts

Debit

Account Recievable

1,500,000.
00

1,500,000.
00

Sales

sales returns and allowances

50000

Account Recievable

Cash

50000

1250000

Account Recievable

Allowance for Doubtful Accounts

Credit

1250000

36000

Account Recievable

Cash

36000

6000

Bad Debt recovered

6000

(b) If the company uses the percentage of sales basis to estimate bad debts expense and anticipates
3% of net sales to be uncollectible, what is the adjusting entry at December 31, 2014?
Bad debts expense and anticipates = 3%*(1500000-50000) = $ 43500
GENERAL JOURNAL
Date

Accounts

Debit

Bad Debt Expenses

43500

Allowance for Doubtful Accounts

Credit

43500

(c) If the company uses the percentage of receivables basis to estimate bad debts expense and
determines that uncollectible accounts are expected to be 8% of accounts receivable, what is the
adjusting entry at December 31, 2014?
Accounts receivable = 400000 + 1500000 -50000 - 1250000 - 36000
Accounts receivable = $ 564000
Allowance for Doubtful Accounts at the end required = 8%*564000 = 45120
Debit Balance in Allowance for Doubtful Accounts = 32000 -36000
Debit Balance in Allowance for Doubtful Accounts = 4000
Estimate bad debts expense = 4000 + 45120 = 49120
GENERAL JOURNAL
Date

Accounts

Debit

Bad Debt Expenses

49120

Allowance for Doubtful Accounts

Credit

49120

4) Holly Transport Inc. had the following transactions related to accounts and notes receivable.
Apr. 1, 2013

Accepted Brando Company's 1-year, 12% note in settlement of a $25,000

account receivable.
July 1, 2013 Loaned $15,000 cash to Laurel Bailey on a 9-month, 10% note.
Dec. 31, 2013 Accrued interest on all notes receivable.
Apr. 1, 2014 Received principal plus interest on the Brando note.
Apr. 1, 2014 Laurel Bailey dishonored its note: Holly Transport, Inc. expects it will
eventually collect.
Instructions
Prepare journal entries to record the transactions. Holly Transport Inc. prepares adjusting entries
once a year on December 31.
Apr. 1, 2013 Accepted Holly Company's 1-year, 12% note in settlement of a $25,000 account receivable.
Dr Notes Receivable 25,000
Cr Accounts Receivable 25,000
July 1, 2013 Loaned $15,000 cash to Richard Dent on a 9-month, 10% note.
Dr Notes Receivable 15,000
Cr Cash 15,000
Dec. 31, 2013 Accrued interest on all notes receivable.
25,000 x 12% x 9/12 = 2,250
15,000 x 10% x 6/12 = 750
Dr Interest Receivable 3,000
Cr Interest Revenue 3,000
Apr. 1, 2014 Received principal plus interest on the Holly note.
Dr Cash 28,000
Cr Notes Receivable 25,000
Cr Interest Receivable 2,250
Cr Interest Revenue 750 (25,000 x 12% x 3/12)
Apr. 1, 2014 Richard Dent dishonored its note; Singletary expects it will eventually collect.
Dr Accounts Receivable 16,125
Cr Notes Receivable 15,000
Cr Interest Receivable 750
Cr Interest Revenue 375 (15,000 x 10% x 3/12)

5)

On January 2nd Perry Company borrows $12,500.00 cash on a note payable from Manny Financial
Company with terms 90 days, 12%. Perry Company and Manny Financial Company uses a 360 day year
for interest calculations. Perry Company makes adjusting entries at the end of each calendar quarter.
Prepare the journal entries for Perry Company for (a) the initiation of the loan, (b) the recognition of
interest expense for the quarter and (c) the payment of the note on its due date.
a) Debit: Cash A/c $12,500
Credit: 12% Notes Payable $12,500
b) Debit: Interest Expense A/c $375
Credit: Interest Payable A/c $375
c) Debit: 12% Notes Paybale A/c $12,500
Debit: Interest Payable A/c $375
Credit: Cash A/c $12,875

6) The following is a summary of Taylor Trucking Companys payroll for the monthly pay period ending July
15 indicated the following:
Sales salaries
Federal income tax withheld
Office salaries
Medical insurance withheld
Social security tax withheld
Medicare tax withheld

$125,000
32,300
30,000
7,370
10,200
2,550

On the answer sheet provided, prepare the journal entries to record (a) the payroll and (b) the employer's
payroll tax expense for the month. The state unemployment tax rate is 3.1%, and the federal
unemployment tax rate is 0.8%. Only $30,000 of salaries are subject to unemployment taxes.
Particulars

Debit

Sales Salaries

125000

Office Salaries

30000

Credit

Federal Income Tax withheld Payable

32300

Medical Insurance Withheld Payable

7370

Social security tax withheld Payable

10200

Medicare Tax Withheld Payable

2550

Salary Payable

10258

0
Salary & Withholding Tax Payable Paid
Particulars

Debit

Federal Income Tax withheld Payable

32300

Medical Insurance Withheld Payable

7370

Social security tax withheld Payable

10200

Medicare Tax Withheld Payable

2550

Salary Payable

102580

Credit

15500
0

Bank
Unemployment Tax expense booked & paid
Particulars

Debit

State unemployment Tax expense:

30000*3.1%

930

Federal unemployment Tax expense :

30000*0.8%

240

Bank

Credit

1170

Expense Transfer to P&L

Particulars

Debit

State unemployment Tax expense:

30000*3.1%

930

Federal unemployment Tax expense :

30000*0.8%

240

Sales Salaries

125000

Office Salaries

30000

Profit & Loss Account

Credit

15617
0