Question

Arctic Cat sold Seneca Motor Sports a shipment of snowmobiles that have a fair market value of $38,300. Seneca paid for the snowmobiles on January 1, 2021, with delivery to occur subsequently. Unless informed otherwise, assume that Arctic views the time value of money component of this arrangement to be significant, and that the relevant interest rate is 11%. (FV of $1, PV of $1, FVA of $1, PVA of $1, FVAD of $1 and PVAD of $1) (Use appropriate factor(s) from the tables provided.) Required: Assume that, on January 1, 2021, Seneca prepays Arctic for a December 31, 2021 delivery of the snowmobiles. Prepare the journal entry for Arctic to record collection on January 1, 2021, assuming Seneca prepays the present value of the snowmobiles. Prepare the journal entry for Arctic to record delivery of the snowmobiles on December 31, 2021. Assume instead that delivery is to occur on December 31, 2022. Prepare the journal entry for Arctic to record collection on January 1, 2021, assuming Seneca prepays the present value of the snowmobiles. Assume instead that Arctic does not view the time value of money component of this arrangement to be significant. Also assume that, on January 1, 2021, Seneca prepays Arctic for a December 31, 2021 delivery of the snowmobiles, and that Seneca prepays the present value of the snowmobiles. Prepare the journal entry for Arctic to record collection on January 1, 2021.

2. Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2021 bank statement included the following information:

Balance, July 1, 2021	$	56,053
Deposits		179,800
Checks processed		(192,910	)
Service charges		(45	)
NSF checks		(1,350	)
Monthly payment on note, deducted directly by bank from account (includes $570 in interest)		(3,470	)
Balance, July 31, 2021	$	38,078

The company’s general ledger account had a balance of $39,428 at the end of July. Deposits outstanding totaled $6,600 and all checks written by the company were processed by the bank except for those totaling $8,450. In addition, a $2,300 July deposit from a credit customer was recorded as a $230 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $45 disbursement was incorrectly processed by the bank as a $450 disbursement.

Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Answer 1

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