Accounting 220 Help Week 4- Chapter 6 & 7

profileFlair4H
week_4_chapter_6.xls
Home>Business & Finance homework help>Accounting homework help>Accounting 220 Help Week 4- Chapter 6 & 7

B-6.01

Review the following items and decide if each would be more appropriately classified as:
Cash
Cash equivalent
Neither cash nor cash equivalent
(a) Currency in the petty cash box
(b) Postage stamps in a file cabinet
(c) The balance on deposit in a regular checking account
(d) An advance to an employee for travel costs to be incurred
(e) A certificate of deposit maturing in 2 years
(f) A 30-day certificate of deposit
(g) An investment in a government treasury security maturing in 2 years
(h) A 90-day government treasury security
(i) A post-dated check accepted from a customer
(j) Amounts due from customers
(k) Amounts paid to suppliers by check, but the supplier has not yet cashed the check
&R&"Myriad Web Pro,Bold"&20B-06.01
B-06.01

Worksheet-B-6.01

(a) Currency in the petty cash box
Cash
(b) Postage stamps in a file cabinet
(c) The balance on deposit in a regular checking account
(d) An advance to an employee for travel costs to be incurred
(e) A certificate of deposit maturing in 2 years
(f) A 30-day certificate of deposit
(g) An investment in a government treasury security maturing in 2 years
(h) A 90-day government treasury security
(i) A post-dated check accepted from a customer
(j) Amounts due from customers
(k) Amounts paid to suppliers by check, but the supplier has not yet cashed the check
&L&"Myriad Web Pro,Bold"&12Name: Date: Section: &R&"Myriad Web Pro,Bold"&20B-06.01
B-06.01

B-6.02

Arctic Blast has developed a cold treatment process for killing home-invading ants and termites. Its pesticide-free process provides a highly attractive alternative to sprays and poisons. The business is growing quite rapidly and it is investing heavily in new equipment. Frank Miller is Arctic's treasurer and he is preparing a cash budget. The budget reveals that the company can anticipate periods of cash flow difficulties as they attempt to finance ever increasing amounts of receivables, inventories, and equipment. Frank is evaluating the merits of eight alternative cash management strategies. Each has a potential downside that Frank must consider. Match each item in the "strategy" list with one of the "hazards."
Strategy
Borrowing money
Attempting to accelerate customer collections
Delaying payments
Writing checks against future receipts not yet deposited
Slowing expansion plans
Establishing bank overdraft protection or a line of credit
Issuing additional capital stock
Planning full utilization of cash flows, with no reserves
Hazard
May necessitate offering of a discount
May result in unnecessary financing costs
May dilute ownership of existing shareholders
May alienate key suppliers
May result in unexpected shortfall
May be an illegal strategy
May give competitors an advantage
May result in risk of financial failure
B-06.02

Worksheet-B-6.02

Instructions: Pick from the drop down
Borrowing money
May result in risk of financial failure
Attempting to accelerate customer collections
Delaying payments
Writing checks against future receipts not yet deposited
Slowing expansion plans
Establishing bank overdraft protection or a line of credit
Issuing additional capital stock
Planning full utilization of cash flows, with no reserves

B-6.03

Dine-Corp International publishes ratings and reviews of the world's finest restaurants. Following are facts you need to prepare Dine-Corp's March bank reconciliation:
Balance per company records at end of month 72644.12
Bank service charge for the month 44
NSF check returned with bank statement 1440.66
Note collected by the bank during the month 45000
Outstanding checks at month end 31553.57
Interest on note collected during the month 4500
Balance per bank at end of month 144223.99
Deposit in transit at month end 7989.04

Worksheet-B-6.03

Ending balance per bank statement $ 144,223.99
Add:
- 0
Deduct:
- 0
Correct cash balance $ - 0
Ending balance per company records $ 72,644.12
Add:
$ - 0
- 0 - 0
Deduct:
- 0
- 0 - 0
Correct cash balance $ - 0
B-06.03

B-6.04

Daniel Scott is an audit manager with the accounting firm of Nelson & Riley, CPAs. As part of the routine audit procedures for one of the firm's clients, Daniel instructed Wanda Mullins, a newly hired staff auditor, to obtain a bank statement directly from the client's bank and prepare an independent reconciliation of the Cash account. Wanda did a great job and presented Daniel with the following reconciliation. Daniel has now forwarded this document directly to you, with a request that you prepare proposed adjusting entries that need to be recorded by the client.
Ending balance per bank statement $ 67,700.98
Add: Deposits in transit 13,444.12
Deduct: Outstanding checks
#12221 $ 16,887.34
#12327 8,550.50
#12329 132.74 (25,570.58)
Correct cash balance $ 55,574.52
Ending balance per company records $ 52,148.55
Add:
Payment from customer via ETF* $ 3,445.99
Interest earnings 566.88 4,012.87
Deduct:
Reject customer credit card/charge back 466.90
Service charges 120.00 (586.90)
Correct cash balance $ 55,574.52
* This payment has yet to be recorded as revenue by the company.
B-06.04

Worksheet-B-6.04

GENERAL JOURNAL
Date Accounts Debit Credit
To record adjustments necessitated by bank reconciliation

B-6.05

Biscay Bay Boats established a petty cash fund for minor day-to-day expenses. Following are activities related to this fund. Prepare the necessary journal entries for petty cash.
(1) Established a $500 petty cash fund by writing a check to "cash," cashing the check, and placing the proceeds in a petty cash box entrusted to Herman Jones as custodian.
(2) At the end of the month, the petty cash fund contained remaining cash of $127, and receipts for $65 postage, $123 office supplies, and $180 gasoline for company vehicles. Herman is not sure why the fund is short $5. A check payable to cash in the amount of $373 was prepared, and the funds were placed into the box.
(3) At the end of the next month, the petty cash fund contained remaining cash of $35, and receipts for $265 postage, $160 office supplies, and $40 gasoline for company vehicles. A check payable to cash in the amount of $715 was prepared, and the funds were placed into the box. This amount reimburses the fund and increases its balance to $750.
B-06.05

Worksheet-B-6.05

GENERAL JOURNAL
Date Accounts Debit Credit
#1
To establish a $500 petty cash fund
#2
To record expenses and replenishment of petty cash
#3
To record expenses and replenishment/increase to petty cash

B-6.06

Piven Mining Corporation holds significant limestone deposits. One of its key customers, Kuai Oil, produces crude oil from shale deposits. This production process requires limestone, and Piven is seeing a large increase in order flow from Kuai and other shale companies. Piven's management believes Kuai's stock is undervalued, and has decided to invest excess cash in the stock of Kuai Oil. The intent of this investment is for "trading" purposes only. Following are detailed facts about the Kuai investment. You should prepare journal entries to record the investment, and necessary end-of-month adjusting entries to reflect changes for each month.
May 7 Purchased 500,000 shares of Kuai Oil at $7 per share.
May 31 The fair value of Kuai's stock was $9 per share.
June 30 The fair value of Kuai's stock was $5 per share.
July 15 Received a dividend from Kuai of $0.10 per share.
July 31 The fair value of Kuai's stock was $8 per share.
B-06.06

Worksheet-B-6.06

GENERAL JOURNAL  
Date Accounts Debit Credit
7-May
To record the purchase of 500,000 shares of Kuai stock at $7 per share
31-May
To record a $_ per share increase in the value of 500,000 shares of Kuai stock
30-Jun
To record a $_ per share decrease in the value of 500,000 shares of Kuai stock
15-Jul
To record a $0.10 per share cash dividend on the investment in Kuai stock
31-Jul
To record a $_ per share increase in the value of 500,000 shares of Kuai stock

I-6.02

Manahan Corporation received its August 31 bank statement showing total funds on deposit of $288,090.09. This amount was $149,158.22 in excess of the balance in the general ledger Cash account. Additional information consists of the following:
The company has a 1-year, $100,000, certificate of deposit. This amount is included in the total funds listed on the bank statement. Manahan classifies this security in a separate investment account in its general ledger.
Interest earned on the CD was $475 during the month. This interest is free for withdrawal and is automatically posted to the regular checking account. Manahan's first notification of the amount of interest for the month is via the bank statement, and the interest income has not yet been recorded in the general ledger Cash account.
Manahan Corporation received a $50,000 draft for an oil and gas lease from XTX Exploration. This draft was presented to the bank in early July. Drafts are not cash until the maker (XTX) honors them (at their option), and this process can take as long as several weeks. The bank statement included notification that XTX had honored and funded the draft in mid August. This is the first notification to Manahan of actual funding, and Manahan has not previously recorded this transaction.
Manahan made a deposit late in the afternoon of August 31. The amount of the deposit was $3,666.04, but this amount did not appear on the August 31 bank statement. The bank has a sign in its lobby that says "Deposits after 3 pm will be processed on the next following business day."
Manahan has authorized automatic payments to its utility company for monthly charges. Withdrawals of $1,445.99 appear in the bank statement for such utilities. This is the first notification to Manahan, and Manahan has not previously recorded this transaction.
Late in August, Manahan did an online authorization for a credit card company payment. Due to a timing issue, the bank statement does not yet reflect the payment for $4,446.09. Manahan has appropriately recorded the reduction in cash in the general ledger.
Manahan prepared a $3,000 payment to Sims via check #12234. Due to a bookkeeping error, Sims reported that it had not received payment. Manahan issued a $3,000 replacement check #12257. Both checks cleared the bank in August, and Sims has admitted its error. Sims will be returning $3,000 to Manahan.
The bank statement included monthly service charges of $125. Manahan has not previously recorded these charges.
At the end of July, three checks were outstanding (#12170, $245.55; #12200, $1,889.66; and #12202, $75). At the end of August, three checks were outstanding (#12170, $245.55; #12290, $1,333.07, and #12291, $1,117.54).
A review of deposits clearing the bank revealed that Manahan had recorded a $2,000.22 deposit as $2,222.22 in the general ledger Cash and Revenue accounts.
(a) Prepare Manahan's bank reconciliation as of August 31, 20X5.
(b) What is the correct balance for Cash in the August 31 balance sheet?
(c) Prepare the journal entry suggested by the reconciliation.
I-06.02

Worksheet I-6.02

(b) The corect Cash balance is
(a) Ending balance per bank statement $288,090.09
Add: (c) GENERAL JOURNAL  
Date Accounts Debit Credit
Deduct:
To record adjustments necessitated by bank reconciliation
Correct cash balance
Ending balance per company records
Add:
Deduct:
Correct cash balance
I-06.02(a)
I-06.02(b)(c)

I-6.03

Following is the September 30, 20X4 bank reconciliation for the Quiet Moose Lodge. You are also provided with the October check register and bank statement. Utilize this information to prepare October's bank reconciliation and related adjusting entry. You may assume that any discrepancies between the check register and bank statement relate to recording errors in the accounts of the Quiet Moose, and not the bank.
Ending balance per bank statement $ 18,344.07
Add:
Deposits in transit 2,505.55
Deduct:
Outstanding checks
#3444 $ 175.00
#3446 1,908.09 (2,083.09)
Correct cash balance $ 18,766.53
Ending balance per company records $ 18,696.53
Add:
Interest earnings 80.00
Deduct:
Service charges (10.00)
Correct cash balance $ 18,766.53
I-06.03

Worksheet I-6.03

DATE PARTY REF # CHECK DEPOSIT Balance Mountain Home Bank Statement date: October 1, 20X4 through October 31, 20X4
Statement for: Quiet Moose Lodge Ending balance per bank statement
1-Oct Balance $ 18,766.53 121 Main Street 13 River Street
2-Oct Gomez 3448 $ 145.99 - 0 18,620.54 P.O. Box 5566 Patawa Township Add:
5-Oct Deposit - 0 $ 3,400.00 22,020.54 Account # 474784
7-Oct Bryers 3449 387.97 - 0 21,632.57
7-Oct Morton 3450 1,204.67 - 0 20,427.90 CHECKING SUMMARY Deduct:
7-Oct Lee 3451 4,664.50 - 0 15,763.40 Previous statement balance on 9-30-X4 18,344.07
10-Oct Morici 3452 43.23 - 0 15,720.17 Total of 5 deposits for + 19,339.09
10-Oct LaCorx 3453 2,990.44 - 0 12,729.73 Total of 14 withdrawals for - 14,887.45
11-Oct Benson 3454 1,100.31 - 0 11,629.42 Interest earnings for + 65.66
12-Oct Void 3455 - 0 - 0 11,629.42 Service charges for - 35.00
13-Oct Morgan 3456 695.77 - 0 10,933.65 New balance 22,826.37 Correct cash balance
13-Oct Russell 3457 788.87 - 0 10,144.78
14-Oct Deposit - 0 3,476.88 13,621.66
17-Oct Lowen 3458 3,664.34 - 0 9,957.32 CHECKS AND OTHER DEBITS Ending balance per company records
19-Oct Post Office 3459 45.45 - 0 9,911.87
20-Oct Nguen 3460 677.21 - 0 9,234.66 Check Date Paid Amount Check Date Paid Amount Add:
30-Oct Behn 3461 499.00 - 0 8,735.66 3446 3-Oct 1908.09 3454 12-Oct 1100.31
31-Oct Deposit - 0 8,131.21 16,866.87 *3448* 5-Oct 145.99 *3456* 13-Oct 695.77
$ 16,907.75 $ 15,008.09 3449 7-Oct 387.97 3457 14-Oct 788.87
3450 7-Oct 1204.67 3458 18-Oct 3664.34
*3452* 10-Oct 43.23 3459 20-Oct 54.45 Deduct:
3453 11-Oct 2990.44 3460 21-Oct 677.21
Electronic funds tranfer - Patawa Water Co-op 25-Oct 237.34
NSF returned check - maker Stacey 28-Oct 988.77
NSF fee 28-Oct 25.00
Monthly service fee 31-Oct 10.00 Correct cash balance
DEPOSITS AND OTHER CREDITS
Date Posted Amount
Customer deposit 1-Oct 2505.55
Customer deposit 5-Oct 3400.00
Collection item -- note receivable ($6500 + interest) 11-Oct 6774.33
Customer deposit 14-Oct 3476.88
Credit card sales posting 28-Oct 3182.33
Interest earnings 31-Oct 65.66
I-06.03
I-06.03
I-06.03

Worksheet I-6.03 part 2

GENERAL JOURNAL  
Date Accounts Debit Credit
To record adjustments necessitated by bank reconciliation
I-06.03