Question

1.The following information is available for the Savvy Company for the month of June.
a. On June 30, after all transactions have been recorded, the balance in the company's Cash account has a balance of $17,202.
b. The company's bank statement shows a balance on June 30 of $19,279.
c. Outstanding checks at June 30 total $2,984.
d. A credit memo included with the bank statement indicates that the bank collected $770 on a note receivable for Savvy.
e. A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Maroon.
f. A deposit placed in the bank's night depository on June 30 totaling $1,675 did not appear on the bank statement.
g. Comparing the checks on the bank statement with the entries in the accounting records reveals that check #3445 for the payment of an account payable was correctly written for $2,450, but was recorded in the accounting records as $2,540.
h. Included with the bank statement was a debit memorandum in the amount of $25 for bank service charges. It has not been recorded on the company's books.

1. Prepare the June bank reconciliation for the Savvy Company.
2. Prepare the general journal entries to bring the company's book balance of cash into conformity with the reconciled balance as of June 30.

2.On January 1 of the current year, a company purchased and placed in service some equipment with a cost of $240,000. The company estimated the machine's useful life to be four years or 60,000 units of output with an estimated salvage value of $60,000. During the second year, 12,000 units were produced.

What is the depreciation for the second year of the machine’s useful life, assuming the company uses:

a. The straight-line method of depreciation
b. The units-of-production method of depreciation
c. The double-declining balance method of depreciation

Answer 1

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Savvy Company
Answer a
Bank reconciliation statement	Amount $			Amount $
Balance as per books	17,202.00		Balance as per bank	19,279.00
Add:			Add:
g. Cash paid to accounts payable recorded incorrectly (2540-2450)	90.00		f. Deposit in transit	1,675.00
d. Bank credit memorandum for note collected	770.00
Less:			Less:
e. Bank debit memorandum for NSF	25.00		c. Outstanding cheque	2,984.00
h. Bank debit memorandum for service charges	67.00
Reconciled balance as per books	17,970.00		Reconciled balance as per bank	17,970.00

Answer b
Adjusting journal entries
Event	Account	Debit $	Credit $
d.	Cash	770.00
	Note Receivable		770.00
e.	Bank charges	25.00
	Cash		25.00
g.	Cash	90.00
	Accounts Payable		90.00
h.	Service charges	67.00
	Cash		67.00

A Company
Answer a
Straight Line Method		Note
Cost of equipment	240,000.00	A
Residual Value	60,000.00	B
Depreciable Value	180,000.00	C=A-B
Life (Years)	4.00	D
Depreciation per year	45,000.00	E=C/D
Depreciation for 2nd year	45,000.00
Answer b
Units of Activity Method		Note
Cost of equipment	240,000.00	Q
Residual Value	60,000.00	R
Depreciable Value	180,000.00	S=Q-R
Total activity (units)	60,000.00	T
Depreciation per unit	3.00	U=S/T
	V	W=U*V
	Units produced	Depreciation
Depreciation for year 2	12,000.00	36,000.00
Answer c
Double Declining Method		Note
Cost of Equipment	240,000.00	F
Life	4.00	G
Annual depreciation	60,000.00	H=F/G
Depreciation rate	25.00%	I=H/F
Double Depreciation %	50.00%	J=I*2
Depreciation for Year 1	120,000.00	K=F*J
Book Value at the end of year 1	120,000.00	L=F-K
Depreciation for Year 2	60,000.00	M=L*J