Question

The Cash account in the general ledger of Lyco Corporation showed a balance of $21,749 at December 31 (but prior to performing a bank reconciliation). The company's bank statement showed a balance of $22,000 at the same date. The only reconciling items consisted of: (1) a $5,000 deposit in transit, (2) a bank service charge of $200, (3) outstanding checks totaling $9,000, (4) a $3,000 check marked "NSF" from Susque Company, one of Lyco's customers, and (5) a check written for office supplies in the amount of $1,832, recorded by the company's bookkeeper as a debit to Office Supplies of $1,283, and a credit to Cash of $1,283.

  

In addition to the above information, Lyco owned the following financial assets at December 31: (1) a money market account of $60,000, (2) $3,000 of high-grade, 120-day commercial paper, and (3) $5,000 of highly liquid investments.

  

a.	Prepare the company's December 31 bank reconciliation. (Amounts to be deducted should be indicated by a minus sign. Items to be added should be selected first and followed by the items to be deducted. Omit the "$" sign in your response.)

   

(Click to select)Accounts payableIncome summaryBank service chargeError correctionsCash balance per bank statementCash balance per general ledger	$
(Click to select)Less: Bank service chargeAdd: Bank service chargeLess: NSF check from Susque CompanyLess: Error corrections, office suppliesAdd: Error corrections, office suppliesAdd: NSF check from Susque Company
(Click to select)Less: Error corrections, office suppliesLess: Bank service chargeAdd: Bank service chargeAdd: Error corrections, office suppliesLess: NSF check from Susque CompanyAdd: NSF check from Susque Company
(Click to select)Less: Error corrections, office suppliesLess: NSF check from Susque CompanyLess: Bank service chargeAdd: NSF check from Susque CompanyAdd: Error corrections, office suppliesAdd: Bank service charge
Adjusted cash balance, December	$
(Click to select)Error correctionsCash balance per general ledgerCash balance per bank statementAccounts payableBank service chargeIncome summary	$
(Click to select)Add: Error corrections, office suppliesAdd: Deposits in transitLess: Error corrections, office suppliesAdd: NSF check from Susque CompanyLess: NSF check from Susque CompanyLess: Deposits in transit
(Click to select)Add: Outstanding checksLess: Bank service chargeLess: Outstanding checksLess: Error corrections, office suppliesAdd: Error corrections, office suppliesAdd: Bank service charge
Adjusted cash balance, December 31	$

  

b.	Determine the amount at which cash and cash equivalents will be reported in the company's statement of financial position dated December 31. (Omit the "$" sign in your response.)

  

Cash and cash equivalents

$

  

c.	Prepare the necessary journal entry to update the accounting records. (Omit the "$" sign in your response.)

  

General Journal	Debit	Credit
(Click to select)Bank service chargesOffice suppliesCashAccounts receivableAccounts payableDeposits in transitSalesOutstanding checks
(Click to select)Outstanding checksDeposits in transitCashSalesOffice suppliesAccounts payableAccounts receivableBank service charges
(Click to select)Deposits in transitBank service chargesCashSalesOffice suppliesAccounts payableAccounts receivableOutstanding checks
(Click to select)Accounts payableBank service chargesOffice suppliesDeposits in transitCashOutstanding checksSalesAccounts receivable

Answer 1

ASNWER :

a.       BANK RECONCILATION AS ON 31 st DECEMBER LYCO CORPOTATION

Cash Accout Balance as Per General Ledger                                                            21,749

Add:

    1. Out standing Cheques                                                                                      9,000

                                                                              Total                                      30,749

Less :

1. Deposit in transit                                           5,000

2. Bank Service charges                                      200

3. Cheque Marked NSF                                      3,000

4. Cheque amoun wrongly entered.

      ( 1832- 1283 )                                               549

                                                                ____________                                     8,749

                                                                                                                   -------------------

           BALANCE AS PER BANK BOOK    22,000

   =========

b.    CASH AND CASH EQUIVALENTS AS ON 31 ST DECEMBER

   1. CASH BALANCE 21,200

           2. BANK BALANCE                                                                       22,000

          3. MONEY MARKET A/C                                                                   6,000

          4. HIGHLY LIQUID INVESTMENTS                                                   5,000

                                                                                                          -----------------

                                                                          TOTAL    54,200

                                                                                                          =========

Note : Cash and cash equivalents means the line item in the Balance Sheet that reports the value of a company's assets that are Cash or can be converted into cash immediately. Cash equivanent includes bank accounts and marketable securities, which are debt securities with maturities of less than 90 days, and highly liquid investments. Since the its is not considerd since it is mentioned that it is a120 day commercial paper .

c. JOURNAL ENTRIES FOR RECTIVICATION

                

1. Office Supplies Account DR                                 549

         Cash Account                   CR                                   549

   ( Being the transposition error made in entering the cheque

     amount correctly .(1832 - 1283 = 549 )

2. Bank Sercice Charges Account DR 200

   Bank Account    CR 200

   ( Bank charges not accounted now accounted )

3. Accouts Receivable ( Susque Company )   DR     3000

         Bank Account                             CR                       3000

( The cheques returned Marked NSF adjusted )

4. Cheque Deposited in Transit        DR         5000

       Bank Account                               CR                  5000

    ( Being the cheque deposited not credited in bank adjusted)

5. Bank Account                           DR         9000

      Cheque Deposited In transit ( Customer Account)                CR                 9000

   ( Being the cheques deposited not credit in bank adjusted )