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# Prepare a Bank Reconciliation and Journal Entries

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Prepare responses to the following assignments from the e-text, Fundamentals of Financial Accounting 1st ed., by Phillips, Libby, and Libby
b. Chapter 6: Coach Problems CP 6-2
CP 6-2 Identifying Outstanding Checks and Deposits in Transit and Preparing a Bank Reconciliation and Journal Entries: L02
The August 2006 bank statement for Martha Company and the cash T-account for August 2006 follow:
Bank Statement
Date Checks Deposits Other Balance
Aug. 1 \$17,470
2 \$300 17,170
3 \$12,000 29,170
4 400 28,770
5 250 28,520
9 890 27,630
10 310 27,320
15 4,000 31,320
21 400 30,920
24 21,000 9,920
25 7,000 16,920
30 800 16,120
30 Interest earned \$20 16,140
31 Service charge 10 16,130
Outstanding checks at the end of July were for \$250, \$400, and \$300. No deposits were in transit at the end of July.
Required:
1. Identify and list the deposits in transit at the end of August.
2. Identify and list the outstanding checks at the end of August.
3. Prepare a bank reconciliation for August.
4. Give any journal entries that the company should make as a result of the bank reconciliation. Why are they necessary?
5. After the reconciliation journal entries are posted, what balance will be reflected in the Cash account in the ledger?
6. If the company also has \$100 on hand, which is recorded in a different account called Cash on Hand, what total amount of cash should be reported on the August 31, 2006, balance sheet?

#### Solution Preview

See Excel attached.

1. There is a deposit in transit of \$5,000 at the end of August. It is recorded in the books, but not in the bank.
2. There are two ...

#### Solution Summary

The solution presents a bank reconciliation in the dual format view. It is easier to understand, and the explanations help too.

\$2.19

## Prepare a bank reconciliation, journal entries, cash equivalents

The cash account in the general ledger of Hendry Corporation shows a balance of 96900 at December 31 2009 (prior to performing a bank reconciliation). The company's bank statement shows a balance of \$100,560 at the same date. An examination of the bank statement reveals the following:

1. Deposits in transit amount to \$24,600
2. Bank Service charges total \$200.
3. Outstanding checks total \$31,700
4. A \$3,600 check marked 'NSF' from Kent Company (one of Hendry Corporation's customers) was returned to Hendry Corporation by the bank. This was the only NSF check that Hendry Corporation received during 2009.
5. A canceled check (no. 244) written by Hendry Corporation in the amount of \$1,250 for office equipment was incorrectly recorded in the general ledger as a debit to Office Equipment of \$1,520, and a credit to Cash of \$1,520.

In addition to the above information, Hendry Corporation owns the following assets at December 31, 2009: (1) money market accounts totaling \$75,000, (2) \$3,000 of high grade, 90 day commercial paper, and (3) highly liquid stock investments valued at \$86,000 at December 31, 2009 (these investments originally cost Hendry Corporation \$116,000).

On December 1, 2009, Hendry Corporation sold an unused warehouse to Moran Industries for \$100,000. Hendry accepted a six month, \$100,000, 6 percent note receivable from Moran. The note, plus accrued interest, is due in full on My 31, 2010. Hendry Corporation adjusts for accrued interest revenue monthly.

Hendry Corporation uses the income statement approach to compute its uncollectible accounts expense. The general ledger had reported Accounts Receivable of \$2,150,000 at January 1, 2009. At that time, the allowance for doubtful accounts had a credit balance of \$40,000. Throughout 2009, the company wrote off actual accounts receivable of \$140,000 and collected \$21,213,600 on account from credit customers (this amount includes the \$3,600 NSF check received from Kent Company). Credit sales for the year ended December 31, 2009, totaled \$20,000,000. Of these credit sales, 2 percent were estimated to eventually become uncollectible.

Instructions:

A. Prepare Hendry Corporation's bank reconciliation dated December 31, 2009, and provide the journal entry necessary to update the company's general ledger balances.

B. Compute cash and cash equivalents to be reported in Hendry Corporation's balance sheet dated December 31, 2009.

C. Prepare the adjusted entry necessary to account for the note receivable from Moran Industries at December 31 2009.

D. Determine the net realizable value of Hendry Corporations accounts receivable at December 31 2009.

E. Determine the total dollar amount of financial assets to be reported in Hendry Corporation's balance sheet dated December 3, 2009

F. Assume that it is normal for firms similar to Hendry Corporation to take an average of 45 days to collect an outstanding receivable. Is Hendry Corporation's collection performance above or below average?

________________________________________________________________

-This problem must be completed in Excel. You may complete different parts of the problem on different sheets.

-Each part of the question should be appropriately labeled and the individual answers must be fully documented. All supporting calculations must be shown.

Cash and cash equivalents on 12/31/09 (part b) = \$171,460

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