Bank Reconciliation Financial Accounting Fundamentals – Practice 6 Week 3
In this week 3 financial accounting lesson, we will learn and practice ” preparing a bank reconciliation ”.
Required information
[The following information applies to the questions displayed below.]
Del Gato Clinic deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on June 30, 2017, its Cash account shows an $14,852 debit balance. Del Gato Clinic’s June 30 bank statement shows $15,351 on deposit in the bank.
- Outstanding checks as of June 30 total $3,099.
- The June 30 bank statement lists a $75 service charge.
- Check No. 919, listed with the canceled checks, was correctly drawn for $389 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $398.
- The June 30 cash receipts of $2,534 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement.
Exercise Bank reconciliation
Prepare a bank reconciliation for Del Gato Clinic using the above information:
| DEL GATO CLINIC | |||||
| Bank Reconciliation | |||||
| June 30, 2017 | |||||
| Bank statement balance | $15,351 | Book balance | $14,852 | ||
| Add: | Add: | ||||
| Deposit of June 30 | $2,534 | Error on Ck. No. 919 | $9 | ||
| 2,534 | 9 | ||||
| 17,885 | 14,861 | ||||
| Deduct: | Deduct: | ||||
| Outstanding checks | 3,099 | Bank service charge | 75 | ||
| 3,099 | 75 | ||||
| Adjusted bank balance | $14,786 | Adjusted book balance | $14,786 |
Required information
[The following information applies to the questions displayed below.]
Del Gato Clinic deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on June 30, 2017, its Cash account shows an $14,852 debit balance. Del Gato Clinic’s June 30 bank statement shows $15,351 on deposit in the bank.
- Outstanding checks as of June 30 total $3,099.
- The June 30 bank statement lists a $75 service charge.
- Check No. 919, listed with the canceled checks, was correctly drawn for $389 in payment of a utility bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of $398.
- The June 30 cash receipts of $2,534 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement.
Exercise Adjusting entries from bank reconciliation
Prepare the adjusting journal entries that Del Gato Clinic must record as a result of preparing the bank reconciliation. (If no entry is required for a transaction/event, select “No journal entry required” in the first account field.)
| No | Transaction | General Journal | Debit | Credit |
| 1 | a. | No journal entry required | ||
| 2 | b. | Miscellaneous expenses | 75 | |
| Cash | 75 | |||
| 3 | c. | Cash | 9 | |
| Utilities expense | 9 | |||
| 4 | d. | No journal entry required |
Exercise Percent of sales method; write-off
At year-end (December 31), Chan Company estimates its bad debts as 0.80% of its annual credit sales of $940,000. Chan records its Bad Debts Expense for that estimate. On the following February 1, Chan decides that the $470 account of P. Park is uncollectible and writes it off as a bad debt. On June 5, Park unexpectedly pays the amount previously written off.
Prepare the journal entries for these transactions.
| No | Date | General Journal | Debit | Credit |
| 1 | Dec 31 | Bad debts expense | 7,520 | |
| Allowance for doubtful accounts | 7,520 | |||
| 2 | Feb 01 | Allowance for doubtful accounts | 470 | |
| Accounts receivable—P. Park | 470 | |||
| 3 | Jun 05 | Accounts receivable—P. Park | 470 | |
| Allowance for doubtful accounts | 470 | |||
| 4 | Jun 05 | Cash | 470 | |
| Accounts receivable—P. Park | 470 |
Exercise Aging of receivables method
Daley Company estimates uncollectible accounts using the allowance method at December 31. It prepared the following aging of receivables analysis.
| Days | Past | Due | ||||
| Total | 0 | 1 to 30 | 31 to 60 | 61 to 90 | Over 90 | |
| Accounts receivable | $ 595,000 | $ 401,000 | $ 95,000 | $ 41,000 | $ 23,000 | $ 35,000 |
| Percent uncollectible | 3% | 4% | 7% | 9% | 12% |
a. Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method.
b. Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $4,100 credit.
c. Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $600 debit.
Complete this question by entering your answers in the tabs below.
Complete the below table to calculate the estimated balance of Allowance for Doubtful Accounts using the aging of accounts receivable method.
| Accounts Receivable | Percent Uncollectible (%) | |||||
| Not due: | 401,000 | x | 3% | = | $12,030 | |
| 1 to 30: | 95,000 | x | 4% | = | 3,800 | |
| 31 to 60: | 41,000 | x | 7% | = | 2,870 | |
| 61 to 90: | 23,000 | x | 9% | = | 2,070 | |
| Over 90: | 35,000 | x | 12% | = | 4,200 | |
| Estimated balance of allowance for uncollectibles | $24,970 | credit |
Complete this question by entering your answers in the tabs below.
Prepare the adjusting entry to record Bad Debts Expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $4,100 credit.
Prepare the adjusting entry to record bad debts expense using the estimate from part a. Assume the unadjusted balance in the Allowance for Doubtful Accounts is a $600 debit.
| No | Date | General Journal | Debit | Credit |
| 1 | Dec 31 | Bad debts expense | 20,870 | |
| Allowance for doubtful accounts | 20,870 | |||
| 2 | Dec 31 | Bad debts expense | 25,570 | |
| Allowance for doubtful accounts | 25,570 |
Bank Reconciliation Financial Accounting Fundamentals
Exercise Notes receivable transactions
Following are selected transactions of Danica Company for 2016.
| Dec. | 13 | Accepted a $25,000, 45-day, 8% note dated December 13 in granting Miranda Lee a time extension on her past-due account receivable. | ||
| 31 | Prepared an adjusting entry to record the accrued interest on the Lee note. |
Complete the table to calculate the interest amounts at December 31st and use the calculated value to prepare your journal entries. (Do not round your intermediate calculations. Use 360 days a year.)
Complete this question by entering your answers in the tabs below.
Complete the table to calculate the interest amounts at December 31st.
| Interest | ||
| Total Through | Recognized | |
| Maturity | December 31 | |
| Principal | $25,000 | $25,000 |
| Rate (%) | 8% | 8% |
| Time | 45/360 | 18/360 |
| Total interest | $250 | $100 |
Complete this question by entering your answers in the tabs below.
Use the calculated value to prepare your journal entries.
| No | Date | General Journal | Debit | Credit |
| 1 | Dec 13, 2016 | Notes receivable—M. Lee | 25,000 | |
| Accounts receivable—M. Lee | 25,000 | |||
| 2 | Dec 31, 2016 | Interest receivable | 100 | |
| Interest revenue | 100 |