PROBLEM 7-5A
(a)
CAYEMBERG COMPANY
Bank Reconciliation
July 31, 2014
€24,514
7,400
31,914
Cash balance per bank statement...........................
Add: Deposits in transit (1) ...................................
Less: Outstanding checks (2) ................................
Bank error (€255 – €155)...............................
Adjusted cash balance per bank .............................
Cash balance per books ..........................................
Add: Collection of note receivable by bank
(€1,400 note plus €70 interest) .....................
Book error (€320 – €230) ..............................
€8,460
100
€21,850
€1,470
90
Less: Check printing charge ..................................
Adjusted cash balance per books...........................
1,560
23,410
56
€23,354
€81,400
(1) July receipts per books .......................
July deposits per bank ........................
Less: Deposits in transit,
June 30......................................
Deposits in transit, July 31 .................
(2) Disbursements per books
in July ...............................................
Less: Book error .................................
Total disbursements to
be accounted for ..............................
Checks clearing bank
in July ...............................................
Add: Bank error .................................
Less: June 30
outstanding checks ..................
Outstanding checks,
July 31 ..............................................
8,560
€23,354
€81,000
7,000
74,000
€ 7,400
€77,150
90
77,060
€74,700
€ 100
6,200
6,100
68,600
€ 8,460
PROBLEM 7-5A (Continued)
(b) July 31
31
31
Cash ...............................................................
Notes Receivable ...................................
Interest Revenue ....................................
1,470
Cash ...............................................................
Accounts Payable ..................................
90
Miscellaneous Expense ................................
Cash........................................................
56
1,400
70
90
56
PROBLEM 7-4B
(a)
BRASILIA COMPANY
Bank Reconciliation
November 30, 2014
Balance per bank statement ...........................
Add: Deposits in transit ................................
Less: Outstanding checks
No. 2451 ............................................
No. 2472 ............................................
No. 2478 ............................................
No. 2482 ............................................
No. 2484 ............................................
No. 2485 ............................................
No. 2487 ............................................
No. 2488 ............................................
Adjusted cash balance per bank ....................
Balance per books ..........................................
Add: Note collected by bank
(R$1,300 note plus R$91 interest
less R$16 fee) .......................................
R$ 9,100
1,581
10,681
R$700
170
300
350
460
525
340
635
3,480
R$ 7,201
R$ 5,969
1,375
7,344
Less: Check printing charge .........................
Error in recording check No. 2479........
Error in 11-21 deposit
(R$1,642 – R$1,624) ...........................
Adjusted cash balance per books..................
R$ 35
90*
18
143
R$ 7,201
*R$980 – R$890
PROBLEM 7-4B (Continued)
(b) Nov. 30
30
30
30
Cash ...........................................................
Miscellaneous Expense ............................
Notes Receivable ..............................
Interest Revenue ...............................
1,375
16
Miscellaneous Expense ............................
Cash ...................................................
35
Accounts Payable .....................................
Cash ...................................................
90
Accounts Receivable ................................
Cash ...................................................
18
1,300
91
35
90
18
PROBLEM 7-5B
(a)
TIZANI COMPANY
Bank Reconciliation
August 31, 2014
Cash balance per bank statement........................
Add: Deposits in transit (1) ................................
Bank error ($277 – $275) ............................
Less: Outstanding checks (2) .............................
Adjusted cash balance per bank ..........................
$17,146
$ 4,729
2
4,731
21,877
4,456
$17,421
Cash balance per books .......................................
Add: Collection of note receivable by bank
($4,400 note plus $105 interest) ................
Book error ($430 – $340) ...........................
Interest earned ...........................................
$12,815
$ 4,505
90
41
4,636
17,451
30
$17,421
Less: Safety deposit box rent .............................
Adjusted cash balance per books........................
(1) August receipts per books............................
August deposits per bank .............................
Less: Deposits in transit, July 31 ................
Deposits in transit, August 31 ......................
(2) Disbursements per books in
August ......................................
Less: Book error .........................
Total disbursements to be
accounted for ...........................
Checks clearing bank in
August ......................................
Less: Bank error .........................
July 31 outstanding
checks ...........................
Outstanding checks,
August 31 .................................
$50,050
$47,521
2,200
45,321
$ 4,729
$47,794
90
47,704
$46,175
$
2
2,925
2,927
43,248
$ 4,456
PROBLEM 7-5B (Continued)
(b) Aug. 31
31
31
Cash ...............................................................
Notes Receivable ..................................
Interest Revenue ...................................
4,505
Cash ...............................................................
Accounts Payable .................................
90
Cash ...............................................................
Interest Revenue ...................................
41
4,400
105
90
41
31
Miscellaneous Expense ................................
Cash .......................................................
30
30
PROBLEM 7-6B
(a)
STUPENDOUS COMPANY
Bank Reconciliation
October 31, 2014
Balance per bank statement .............................................
Plus: Undeposited receipts .............................................
£15,313.00
3,226.18
18,539.18
Less: Outstanding checks
No.
62
183
284
Amount
£107.74
127.50
215.26
No.
862
863
864
Amount
£132.10
192.78
140.49 ...................
915.87
Adjusted balance per bank ...............................................
£17,623.31
Cash balance per books ...................................................
Add: Bank credit (collection of note receivable) ..........
Adjusted balance per books (before theft) ......................
Less: Theft ........................................................................
Adjusted balance per books .............................................
£18,608.81
460.00
19,068.81
1,445.50*
£17,623.31
*£19,068.81 – £17,623.31
(b) The cashier attempted to cover the theft of £1,445.50 by:
1.
Not listing as outstanding three checks totaling £450.50 (No.
62, £107.74; No. 183, £127.50; and No. 284, £215.26).
2.
Underfooting the outstanding checks listed by £75.00 (The
correct total is £465.37.)
3.
Subtracting the £460 bank credit from the book balance
instead of adding it to the book balance, thereby concealing
£920 of the theft.
PROBLEM 7-6B (Continued)
(c) 1.
The principle of independent internal verification has been
violated because the cashier prepared the bank
reconciliation.
2.
The principle of segregation of duties has been violated
because the cashier had access to the accounting records and
also prepared the bank reconciliation.
PROBLEM 8-3A
(a) Dec. 31
Bad Debt Expense ...................................
Allowance for Doubtful Accounts
($41,730 – $9,000) .........................
32,730
32,730
(a) & (b)
Bad Debt Expense
Date
Explanation
2014
Dec. 31 Adjusting
Allowance for Doubtful Accounts
Date
Explanation
2014
Dec. 31 Balance
31 Adjusting
2015
Mar. 31
May 31
Ref.
Debit
Credit
32,730
Ref.
Debit
Balance
32,730
Credit
Balance
32,730
9,000
41,730
1,000
40,730
41,730
1,000
(b)
Mar. 31
May 31
31
(c)
Dec. 31
2015
(1)
Allowance for Doubtful Accounts...........
Accounts Receivable .......................
(2)
Accounts Receivable ...............................
Allowance for Doubtful Accounts .....
Cash ..........................................................
Accounts Receivable .......................
2015
Bad Debt Expense ...................................
Allowance for Doubtful Accounts
($31,600 + $800) ............................
1,000
1,000
1,000
1,000
1,000
1,000
32,400
32,400
PROBLEM 9-1A
Item
1
2
3
4
5
6
7
8
9
10
Land
(€ 6,000)
Buildings
Other Accounts
€780,000
€ 5,000
Property Taxes Expense
( 145,000)
35,000
10,000
(
2,000)
14,000
(
15,000)
(3,600)
(€164,400)
€825,000
PROBLEM 9-3A
Land Improvements
(a) (1) Purchase price .................................................................. R$ 35,000
Sales tax ............................................................................
1,700
Shipping costs ..................................................................
150
Insurance during shipping ...............................................
80
Installation and testing .....................................................
70
Total cost of machine ............................................... R$ 37,000
Equipment ............................................................
Cash ..............................................................
37,000
37,000
(2) Recorded cost ................................................................... R$ 37,000
Less: Residual value .......................................................
5,000
Depreciable cost ............................................................... R$ 32,000
Years of useful life ............................................................ ÷
5
Annual depreciation .................................................. R$ 6,400
Depreciation Expense .........................................
Accumulated Depreciation—Equipment ....
6,400
6,400
(b) (1) Recorded cost ................................................................... R$ 80,000
Less: Residual value .......................................................
5,000
Depreciable cost ............................................................... R$ 75,000
Years of useful life ............................................................ ÷
4
Annual depreciation .................................................. R$ 18,750
(2)
Year
2014
2015
2016
2017
Book Value at
Beginning
of Year
R$80,000
40,000
20,000
10,000
DDB
Rate
*50%*
*50%*
*50%*
*50%*
Annual
Depreciation
Expense
R$40,000
20,000
10,000
** 5,000
**100% ÷ 4-year useful life = 25% X 2 = 50%.
PROBLEM 9-3A (Continued)
Accumulated
Depreciation
R$40,000
60,000
70,000
75,000
(3) Depreciation cost per unit = (R$80,000 – R$5,000)/125,000
units = R$.60 per unit.
Annual Depreciation Expense
2014: R$.60 X 42,000 = R$25,200
2015:
.60 X 35,000 = 21,000
2016:
.60 X 28,000 = 16,800
2017:
.60 X 20,000 = 12,000
(c) The declining-balance method reports the highest amount of
depreciation expense the first year while the straight-line method
reports the lowest. In the fourth year, the straight-line method
reports the highest amount of depreciation expense while the
declining-balance method reports the lowest.
These facts occur because the declining-balance method is an
accelerated depreciation method in which the largest amount of
depreciation is recognized in the early years of the asset’s life. If
the straight-line method is used, the same amount of depreciation
expense is recognized each year. Therefore, in the early years less
depreciation expense will be recognized under this method than
under the declining-balance method while more will be recognized
in the later years.
The amount of depreciation expense recognized using the units-ofactivity method is dependent on production, so this method could
recognize more or less depreciation expense than the other two
methods in any year depending on output.
No matter which of the three methods is used, the same total
amount of depreciation expense will be recognized over the fouryear period.
PROBLEM 9-5A
(a) Apr. 1
May 1
1
Land .................................................
Cash .........................................
2,200,000
Depreciation Expense ....................
Accumulated Depreciation—
Equipment
(€750,000 X 1/10 X 4/12) ......
25,000
Cash .................................................
Accumulated Depreciation—
Equipment ...................................
Equipment ...............................
Gain on Disposal of
Plant Assets.........................
460,000
2,200,000
25,000
325,000
750,000
35,000
Cost
€750,000
Accum. depreciation—
equipment
325,000
[(€750,000 X 1/10 X 4) +
€25,000]
Book value
425,000
Cash proceeds
460,000
Gain on disposal
€ 35,000
June 1
July 1
Dec. 31
31
Cash .................................................
Land .........................................
Gain on Disposal of
Plant Assets.........................
1,800,000
Equipment .......................................
Cash .........................................
2,400,000
Depreciation Expense ....................
Accumulated Depreciation—
Equipment
(€500,000 X 1/10)..................
50,000
Accumulated Depreciation—
300,000
1,500,000
2,400,000
50,000
Equipment ...................................
Equipment ...............................
500,000
500,000
PROBLEM 9-5A (Continued)
Cost
€500,000
Accum. depreciation—
equipment
500,000
(€500,000 X 1/10 X 10)
Book value
€
0
(b) Dec. 31
31
Depreciation Expense ....................
Accumulated Depreciation—
Buildings ..............................
(€26,500,000 X 1/50)
530,000
Depreciation Expense ....................
Accumulated Depreciation—
Equipment............................
3,995,000
530,000
3,995,000
(€38,750,000* X 1/10)
€3,875,000
[(€2,400,000 X 1/10) X 6/12]
120,000
€3,995,000
*(€40,000,000 – €750,000 – €500,000)
(c)
JIMENEZ COMPANY
Partial Statement of Financial Position
December 31, 2014
Plant Assets*
Land .....................................................
Buildings .............................................
Less: Accumulated depreciation—
buildings ..................................
Equipment ...........................................
Less: Accumulated depreciation—
equipment ................................
Total plant assets ........................
€ 4,900,000
€26,500,000
12,630,000
41,150,000
13,870,000
8,245,000
32,905,000
€51,675,000
*See T-accounts which follow.
PROBLEM 9-5A (Continued)
Bal.
Apr. 1
Bal.
Land
3,000,000 June 1
2,200,000
4,900,000
300,000
Buildings
26,500,000
26,500,000
Bal.
Bal.
Accumulated Depreciation—Buildings
Bal.
12,100,000
Dec. 31 adj.
530,000
Bal.
12,630,000
Bal.
July 1
Bal.
Equipment
40,000,000 May 1
2,400,000 Dec. 31
41,150,000
750,000
500,000
Accumulated Depreciation—Equipment
May 1
325,000 Bal.
5,000,000
Dec. 31
500,000 May 1
25,000
Dec. 31
50,000
Dec. 31 adj. 3,995,000
Bal.
8,245,000