Question

1. Samson Wholesale Beverage Company regularly factors its accounts receivable with the Milpitas Finance Company. On April 30, 2021, the company transferred $920,000 of accounts receivable to Milpitas. The transfer was made without recourse. Milpitas remits 85% of the factored amount and retains 15%. When Milpitas collects the receivables, it remits to Samson the retained amount less a 2% fee (2% of the total factored amount). Samson estimates the fair value of the last 15% of its receivables to be $72,000.

Required:
Prepare the journal entry for Samson Wholesale Beverage for the transfer of accounts receivable on April 30, assuming the sale criteria are met. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

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	$	57,303
Deposits		180,800
Checks processed		(193,910	)
Service charges		(40	)
NSF checks		(1,850	)
Monthly payment on note, deducted directly by bank from account (includes $870 in interest)		(3,970	)
Balance, July 31, 2021	$	38,333

The company’s general ledger account had a balance of $40,633 at the end of July. Deposits outstanding totaled $7,600 and all checks written by the company were processed by the bank except for those totaling $8,550. In addition, a $3,300 July deposit from a credit customer was recorded as a $330 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $40 disbursement was incorrectly processed by the bank as a $400 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

Solution 1:

Harrison Company
Bank Reconciliation Statement
Jul'31
Particulars		Amount
Balance on bank statement		$38,333.00
Additions:
Outstanding Deposit	$4,630.00
Bank error	$360.00
Total Additions		$4,990.00
Deductions:
Outstanding checks	$8,550.00
Total Deductions		$8,550.00
Adjusted bank balance		$34,773.00
Balance in books		$40,633.00
Additions:
Incorrect recording of deposit	$2,970.00
Total Additions		$2,970.00
Deductions:
Service Charge	$40.00
NSF Check	$1,850.00
Note payment	$3,970.00
Total Deductions		$5,860.00
Adjusted book balance		$34,773.00

Solution 2:

Journal Entries - Harisson Company
Date	Particulars	Debit	Credit
Jul'31	Cash Dr	$520.00
	To Accounts receivables		$820.00
	(To record correction entry for deposits)
Jul'31	Accounts receivables Dr	$1,850.00
	Notes Payable Dr	$3,100.00
	Interest expense Dr	$870.00
	Miscellaneous Expenses Dr	$40.00
	To Cash		$5,860.00
	(To record decrease in cash due to bank reconcilaiton)