ACC 111, Principles of Accounting I Group Project I for Chapters 7 and 8 Instructor: Mark Johnston Names ______________________________ Problem 1, Chapter 7 (45) points Supreme Company’s bookkeeper prepared the bank reconciliation for May 31, 2003. The bookkeeper had the following responsibilities: All bookkeeping, the handling of cash receipts, the preparation of the monthly bank reconciliation and the deposit at the bank. Assume that the bookkeeper prepared all of the checks which were signed by the owner. The owner, on a daily basis verified and signed all checks that were written, counted all cash and verified the debit to cash receipts journal and the credit to cash in the cash payments journal. May 31 Bank Statement Balance of previous bank statement on 4/30 Six deposits and other credits totaling Eleven checks and other debits totaling Current balance as of this statement $ 12, 760 7,596 4,977 $ 15, 379 Checking Account Transactions – From Bank Statement Date 5/1 5/2 5/5 5/14 5/21 5/28 5/28 5/31 5/31 Amount $ 915 $ 1,000 $ 737 $ 850 $ 729 $ 815 $ (581) $ (11) $ 2,550 Trans. Type Deposit Deposit Deposit Deposit Deposit Deposit NSF Check Service Charge Cr Memo Date 5/1 5/1 5/2 5/3 5/4 5/13 5/17 5/27 5/28 5/29 5/31 Ck. No 386 387 388 392 394 398 399 400 401 402 403 Amount $ 125 $ 112 $ 500 $ 215 $ 100 $ 750 $ 1,000 $ 543 $ 450 $ 175 $ 415 Document1 SEE DUPLICATE DEPOSIT SLIPS –PAGE 2 (Collection on note, principal $2,500) SEE CARBON COPY OF CHECKS ISSUED PAGES 3-5 Page 1 Deposit Slip Date 4/30/03 Currency Coins List of Checks Gilly Date 5/1/03 Deposit Slip Date 5/4/03 Deposit Slip Date 5/13/03 Document1 Date 5/20/03 915 00 915 00 Currency Coins List of Checks Jones 750 00 Deposit Slip 250 00 Date 5/27/03 Total 1000 00 Currency Coins List of Checks Slade 156 00 Deposit Slip 581 00 Date 5/31/03 Total 737 00 Currency Coins List of Checks Luce 500 00 350 00 Total 850 00 Total Deposit Slip Deposit Slip Cash Cash Cash Cash Cash Currency Coins List of Checks Pyle 600 00 129 00 729 00 Currency Coins List of Checks Dudley 445 00 370 00 Total 815 00 Total Page 2 Cash Cash Currency Coins List of Checks Gilly 0 00 915 00 Total 915 00 Carbon copy of all checks issued between 4/15/03 to 5/31/03 = Check Was Paid in April Date Supreme Company Pay to the Order of 4/15/03 386 Jones & Company $ 125.00 One Hundred Twenty-Five and NBT BANK Memo Supplies Supreme Company Pay to the Order of no cents Date 4/22/03 Jones & Company $ 229.00 Two hundred twenty-nine and NBT BANK Memo Supplies Jill Supreme 390 no cents Jill Supreme Date Supreme Company Pay to the Order of 4/17/03 Jordon 387 $ One hundred twelve and NBT BANK Jill Memo Invoice 2324 Supreme Company 112.00 no cents Supreme Pay to the Order of Date 4/22/03 Jordon 391 $ 331.00 Three hundred thirty-one and no cents NBT BANK Jill Supreme Memo Invoice 2340 Date 4/21/03 Supreme Company Pay to the Order of Jones & Company 388 $ Five Hundred and NBT BANK Memo Invoice 5132 Supreme Company Pay to the Order of 500.00 4/21/03 King & Company 389 $ 4/24/03 King & Company 570.00 Date 215.00 no cents 4/25/03 Jill Supreme 393 $ Four hundred fifty and NBT BANK Memo Drawing Page 3 $ Jill Supreme Pay to the Order of no cents Jill Supreme 392 Two hundred fifteen and Supreme Company Document1 Date NBT BANK Memo Invoice 700 Jill Supreme Date Pay to the Order of no cents Five Hundred Seventy and NBT BANK Memo Invoice 678 Supreme Company 415.00 no cents Jill Supreme Carbon copy of all checks issued between 4/15/03 to 5/31/03 = Check Was Paid in April Date Supreme Company Pay to the Order of 4/28/03 Jones & Company 394 $ 100.00 One Hundred and NBT BANK Memo Invoice 2360 Pay to the Order of Date 4/29/03 Parton $ 4/30/03 Carr Office Supplies Date Pay to the Order of no cents 750.00 no cents 5/12/03 Jill Supreme 399 $ One Thousand and NBT BANK Memo Withdrawal Jill Supreme $ Jill Supreme Supreme Company 150.00 398 Seven hundred fifty and NBT BANK Memo Invoice 870 395 One hundred fifty and NBT BANK Memo Invoice 5002 Pay to the Order of no cents Jill Supreme Supreme Company Date Supreme Company 1,000.00 no cents Jill Supreme Supreme Company Pay to the Order of Date 4/30/03 Al Kazam leisure Man 396 $ Five Hundred fourteen and NBT BANK Memo Invoice 010 Supreme Company Pay to the Order of 514.00 4/30/03 Jones International $ 5/20/03 Hooyah 400 $ 543.00 Five hundred forty-three and no cents NBT BANK Jill Supreme Memo Invoice 571 397 Supreme Company 771.00 Seven hundred seventy-one and no cents NBT BANK Jill Supreme Memo Invoice 556 Document1 Pay to the Order of Date no cents Jill Supreme Date Supreme Company Page 4 Pay to the Order of Date 5/22/03 King & Company Four hundred fifty and NBT BANK Memo Invoice 556 401 $ 450.00 no cents Jill Supreme Carbon copy of all checks issued between 4/15/03 to 5/31/03 Date Supreme Company Pay to the Order of 5/24/03 Utility Company 402 $ 175.00 One hundred seventy-five and no cents NBT BANK Jill Supreme Memo May Electric bill Date Supreme Company Pay to the Order of 5/27/03 Ollyoop 403 $ Four hundred fifteen and NBT BANK Memo Invoice 5002 Date Pay to the Order of 5/28/03 Gardiner Co. $ no cents Jill Supreme Supreme Company Pay to the Order of Date 5/30/03 Father and Sons 405 $ One hundred sixty and Document1 300.00 160.00 no cents Jill Supreme Page 5 5/31/03 Thomson Learning 406 $ Five hundred fourteen and NBT BANK Memo books 514.00 no cents Jill Supreme Date Supreme Company Pay to the Order of 5/31/03 Ollyoop 407 $ Eight hundred and NBT BANK Memo Invoice 5020 404 Three hundred and NBT BANK Memo Invoice 444 Pay to the Order of no cents Jill Supreme Supreme Company NBT BANK Memo Invoice 123 415.00 Date Supreme Company 800.00 no cents Jill Supreme Cash Receipts Recorded in Cash Receipts Journal Date 5/1 5/4 5/9 5/13 5/20 5/27 5/31 $ $ $ $ $ $ $ $ Cash Debit 1,000 737 1,285 850 729 815 915 6,331 Cash Payments Recorded In Cash Payments Journal Check No. 398 399 400 401 402 403 404 405 406 407 *JS *JS *JS *JS *JS *JS *JS See duplicate deposit slips on page 2. See duplicate carbon copies of checks on pages 3 through 5. Cash Credit $ 750 $ 1,000 $ 345 $ 450 $ 175 $ 415 $ 300 $ 160 $ 514 $ 800 $ 4,909 * Assume that all cash receipts were counted by owner-Jill Supreme, and she verified the debit in the cash receipts journal and the bookkeeper deposited in bank on the same day. * Assume that all deposits cleared the bank the day after they were recorded in the cash receipts journal and deposited. (i.e. 5/4 deposit cleared on 5/5 – see page 1). Assume that any cash receipt that did not clear the bank by the next day was never deposited in the bank. Cash General Ledger Date 4/30 5/31 5/31 Explanation Debit Balance Cash Receipts 6,331 Cash Payments Credit Balance 11,338 4,909 12,760 Balance The NSF check returned with the bank statement was received from customer, Pat Slade in payment of his accounts receivable. The NSF check has not been recorded in the general ledger. Document1 Page 6 The following is the bank reconciliation prepared by the bookkeeper for April 30, 2003. April 30, 2003 Cash balance according to bank statement Add: Additions by depositor not on bank statement 4/30 $12, 760 915 915 $13,675 Deductions by depositor not on bank statement Outstanding checks: 386 $125 387 112 388 500 392 215 394 100 396 514 397 771 Adjusted balance Document1 Cash balance according depositors records Add: Additions by bank not recorded by depositor Proceeds from collection of notePrincipal Interest Error in recording check 389 $2,500 50 180 Deductions by bank not recorded by depositor: Check returned NSF Bank Service Charge 581 11 2,337 $ 11,338 Page 7 $9,200 2,730 $11,930 $ 592 Adjusted balance $ 11,338 . May 31, 2003 Cash balance according to the bank statement Additions by depositor not on bank statement 5/31 $ 15,379 915 915 $ 16, 294 Cash balance according depositors records Add: Additions by bank not recorded by depositor Proceeds from collection of note Principal Interest $ 12,760 $ 2,500 50 2,550 $ 15,310 Deductions by depositor not on bank statement Outstanding checks No. 404 No. 405 No. 406 No. 407 Deductions by bank not recorded by depositor: Check returned NSF Bank service charge Error in recording check 400 300 160 514 800 581 11 198 $ 790 1,774 Adjusted balance Required: 1. 2. 3. Document1 $ 14,520 Adjusted balance $14,520 Review the Bank Reconciliation prepared by your employee on May 31 above and prepare a corrected bank reconciliation. Explain why you think your corrected bank reconciliation does not balance. How did the employee conceal the embezzlement? Recommend any improvements to internal controls to prevent this discrepancy from occurring again. Record all required journal entries for May 31, 2003 related to the bank reconciliation including a journal entry for the bank reconciliation discrepancy. Assume the bank reconciliation discrepancy was a result of embezzlement by the employee preparing the bank reconciliation. Assume the embezzlement was never recovered. Page 8 Document1 Page 9 Problem 2 (30) points The transactions, adjusting entries, and closing entries described below are related to uncollectible accounts for the Summer Company. All were completed during the current year ended December 31, 2002. Other transactions affecting accounts receivable are shown in the Accounts Receivable General Ledger (T) account. See page below. Jan. 30 Recovered the account of C.L. Linke and Sons that had been written off in the preceding year and received $1,250 cash in full payment. June 27 Wrote off the $2,375 balance owed by Miller Corp., which has no assets. Oct. 5 Received 25% of the $12,000 balance owed by F.M. Knox Co., a bankrupt, and wrote off the remainder as uncollectible. Dec. 31 Based on an analysis of the $257,724 of accounts receivable, it was estimated that $14,500 will be uncollectible. Record the adjusting entry. Record the adjusting entry using the Aging method. Dec. 31 Record the entry to close the appropriate account into income summary. Required: 1. Open the following selected accounts recording the opening balances as of January 1 of the current year. (see below ) 114.1 313 718 Allowance for doubtful accounts Income summary Uncollectible accounts expense 12,200 Credit _______________ _______________ 2. Record in general journal form the transactions and the adjusting and closing entries described above. After each entry, post to the three selected accounts above and to the accounts receivable and enter the ending balances. (Page 10 and 11) 3. Determine the expected realizable value of the accounts receivable as of December 31. 4. Compute the accounts receivable turnover and the number of days sales in receivables for the year. Assume that all sales are on account. Show your computations. How is Summer Company doing with collection compared to the industry, assuming the industry average is an accounts receivable turnover of 11 and a number of days in receivables is 37 days? Accounts Receivable A/C 114 1/1 bal. (1) 172,099 1,800,000 Allow. For Uncollectible A/C’S 114.1 1/1 Bal. 1,700,000.0 (2) 1. Represents all of the sales on account for the year. 2. Represents other collections from customers on account for the year. Income Summary A/C 313 Document1 Uncollectible A/C Expense A/C 718 Page 10 Journal Date Document1 Description Post Ref. Debit Credit 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 Page 11 Problem 3 (25) points Apr 1 07 Accepted a $20,000, one-year, 8% note dated April 1 from Bruce Hanson for the sale of inventory; Cost of Goods Sold was $16,500. Dec 31 07 Record the adjusting entry for interest accrued on the Bruce Hanson note Dec. 31 07 Record the entry to close the appropriate account into income summary. Apr 01 08 Bruce Hanson dishonored the note dated April 1, 2007. May 01 08 Received from Bruce Hanson the amount owed on the dishonored note, plus interest for 30 days at 10% computed on the maturity value of note. Oct. 20 08 Loaned $8,000 cash to Bower Company and accepted a $8,000, 60-day, 9% note dated October 20. Dec 19 08 Received from Bower Company the amount owed on October 20 note. Required: Record the above transactions in general journal form. (Show your computations) Document1 Page 12 Journal Date Document1 Description Post Ref. Debit Credit 1 1 2 2 3 3 4 4 5 5 6 6 7 7 8 8 9 9 10 10 11 11 12 12 13 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 26 26 27 27 28 28 29 29 30 30 31 31 Page 13 Document1 Page 14