Question
In: Accounting
Challenge Exercise 3- Chapter 7 Expands on: E7-11 LO: 3 The following information pertains to Two Guys...
Challenge Exercise 3- Chapter 7
Expands on: E7-11
LO: 3
The following information pertains to Two Guys Video Company.
1. Cash balance per bank, July 31, $7,363.
2. July bank service charge not recorded by the depositor $22.
3. The bank erroneously charged another company’s $700 check against Two Guys’ account.
4. Cash balance per books, July 31, $8,784.
5. The bank charged Two Guys account $350 for a customer’s NSF check.
6. Deposits in transit, July 31, $2,200.
7. Two Guys recorded a cash receipt from a customer as $32. The bank correctly recorded it at $23.
8. Bank collected a $1,250 note for Two Guys in July, plus interest $36, less fee $20. The collection has not been recorded by Two Guys and no interest has been accrued.
9. Outstanding checks, July 31, $594.
Instructions:
(a) Prepare a bank reconciliation for July 31.
(b) Journalize the adjusting entries for July 31 on the books of Two Guys Video Company.
Solutions
Expert Solution
| a) | ||
| TWO GUYS COMPANY | ||
| Bank Reconciliation | ||
| 31-Jul | ||
| Cash balance per bank statement | $ 7,363.00 | |
| Add: | ||
| Deposit in trasit | $ 2,200.00 | |
| Bank Error | $ 700.00 | $ 2,900.00 |
| $ 10,263.00 | ||
| Less: Outstanding checks | $ (594.00) | |
| Adjusted cash balance per bank | $ 9,669.00 | |
| Cash balance per books | $ 8,784.00 | |
| Add: Collection of note receivable ($1,250 + $36 accrued interest - $20 collection fee) | $ 1,266.00 | |
| $ 10,050.00 | ||
| Less: Bank service charge | $ 22.00 | |
| NSF Cheque | $ 350.00 | |
| Book error (32-23) | $ 9.00 | $ (381.00) |
| Adjusted cash balance per books | $ 9,669.00 | |
| b) | ||
| Account Titles and Explanation | Debit | Credit |
| Cash | 1266 | |
| Miscellaneous Expense (collection fee) | 20 | |
| Notes Receivable | 1250 | |
| Interest Revenue | 36 | |
| Miscellaneous Expense (Bank service charge) | $ 22.00 | |
| Cash | $ 22.00 | |
| Accounts Receivable | $ 350.00 | |
| Cash | $ 350.00 | |
| Rent Revenue | $ 9.00 | |
| Cash | $ 9.00 |
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