Bank Reconciliation Financial Accounting Fundamentals

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.

  1. Outstanding checks as of June 30 total $3,099.
  2. The June 30 bank statement lists a $75 service charge.
  3. 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.
  4. 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$15,351Book balance$14,852
Add:Add:
Deposit of June 30$2,534Error on Ck. No. 919$9
2,5349
17,88514,861
Deduct:Deduct:
Outstanding checks3,099Bank service charge75
3,09975
Adjusted bank balance$14,786Adjusted 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.

  1. Outstanding checks as of June 30 total $3,099.
  2. The June 30 bank statement lists a $75 service charge.
  3. 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.
  4. 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.)
 

NoTransactionGeneral JournalDebitCredit
1a.No journal entry required
2b.Miscellaneous expenses75
Cash75
3c.Cash9
Utilities expense9
4d.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.
 

NoDateGeneral JournalDebitCredit
1Dec 31Bad debts expense7,520
Allowance for doubtful accounts7,520
2Feb 01Allowance for doubtful accounts470
Accounts receivable—P. Park470
3Jun 05Accounts receivable—P. Park470
Allowance for doubtful accounts470
4Jun 05Cash470
Accounts receivable—P. Park470

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.
 

           DaysPastDue 
      Total       01  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 ReceivablePercent Uncollectible (%)
Not due:401,000x3%=$12,030
1 to 30:95,000x4%=3,800
31 to 60:41,000x7%=2,870
61 to 90:23,000x9%=2,070
Over 90:35,000x12%=4,200
Estimated balance of allowance for uncollectibles$24,970credit

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.

NoDateGeneral JournalDebitCredit
1Dec 31Bad debts expense20,870
Allowance for doubtful accounts20,870
2Dec 31Bad debts expense25,570
Allowance for doubtful accounts25,570

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 ThroughRecognized
MaturityDecember 31
Principal$25,000$25,000
Rate (%)8%8%
Time45/36018/360
Total interest$250$100

Complete this question by entering your answers in the tabs below.

Use the calculated value to prepare your journal entries.

NoDateGeneral JournalDebitCredit
1Dec 13, 2016Notes receivable—M. Lee25,000
Accounts receivable—M. Lee25,000
2Dec 31, 2016Interest receivable100
Interest revenue100

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