Question

You have been recruited as Senior Accounts Supervisor in Holman Groceries Company and your first task is to report on the below two issues at a meeting of managers within the next three days. Show your financial solutions to the below problems. (Treat each question as separate and exclusive.)

(Maximum ten (10) points are available for presentation)

1. Given the following selected adjusted balances of the accounts from the books of Holman Groceries Company, as at 12/31/2017.

Sales                             $185,620                      Sales discount                                $3,100

Transportation-in                          7,425                     Purchases returns/allowances                    1,820

Purchases                         61,180                      Transportation-out                           5,060

Beginning inventory                  38,250                      Sales returns/allowance                    4,645

Purchase discount                        8,300                      Sales salaries expenses         18,740

Warehouse rent                  9,600                      Office rent                          18,000

Insurance expense                      4,800                       Lighting and heating             9,600

Admin salaries expense             8,300                       Advertising expense                        8,400

Supplies expense               6,600                       Miscellaneous expense         12,900

Income from investment          49,000                       Loss on sale of fixed asset             25,000

Dividends paid             12,000                       Retained earnings                          53,000

Note: The value of closing inventory, after physical count, was $32,100.

Required:

a. Journalize the closing entries for the company.                                                             

b. Prepare the multi-step income statement, in proper form, for period ended 12/31/2017. 30 points

(The joint costs identified are allocated in percentage of selling 55% and administration 45%.)

c. Calculate the gross profit ratio and the operating profit ratio?                                        

2. The following information is available for Holman Groceries Company for the month of December 2018:
a. On December 31, after all transactions have been recorded, the balance in the company's Cash account has a balance of $27,202.
b. The company's bank statement shows a balance on December 31 of $29,279.
c. Check #3030 in the amount of $1,525 was found to be outstanding in the November 2017 reconciliation, and check #3556 in the amount of $1,459 was issued in December, 2017. Both checks are not amongst the batch of cancelled checks received from the Bank with the December, 2017 bank statement.
d. A credit memo included with the bank statement indicates that the bank collected $780 on a noninterest-bearing note receivable for Holman. The bank deducted a $10 collection fee and credited the remainder of $770 to Holman's account.
e. A debit memo included with the bank statement shows a $67 NSF check from a customer, J. Brown.
f. A deposit placed in the bank's night depository on December 31 totaled $1,675 and did not appear on the bank statement.
g. Examination of 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 in the company's books.                                                                                  

Required: Prepare the December bank reconciliation for Holman Groceries Company and update the cash book balance.     

Answer 1

1.a.

Holman Groceries Company
1. To Close the purchase accounts to inventory
Date	Account Title	Debit	credit
Dec.31, 2017	Cost of goods sold *	57210
	Purchase discounts	8300
	Purchase returns and allowances	1820
	Inventory		6150
	Purchases		61180
2. To revenue and and expenses to income summary
Date	Account Title	Debit	credit
Dec.31, 2017	Sales	185620
	Income from investments	49000
	Cost of goods sold
	Sales returns and allowances		4645
	Sales Discounts		3100
	Transportation out		5060
	Warehouse Rent		9600
	Insurance Expense		4800
	Admin. Salaries		8300
	Supplies Expense		6600
	Office Rent		18000
	Lighting and hearing		9600
	Advertising expense		8400
	Miscellaneous Expense		12900
	Loss on sale of fixed assets		25000
	Income Summary		118615
3. To close income summary to retained earnings
Date	Account Title	Debit	credit
Dec.31, 2017	Income Summary	118615
	Retained Earnings		118615
4. To close dividend account to retained earnings
Date	Account Title	Debit	credit
Dec.31, 2017	Retained earnings	12000
	Dividends		12000
	Beginning inventory		38250
	Add: Purchases	61180
	Add: Transportaion in	7425
	Less: purchase discounts	-8300
	Less: purchase returns and allowances	-1820
	Net purchases		58485
	Goods available for sale		96735
	Less: Ending inventory		32100
	Cost of goods sold *		64635

1.b.

Holman Groceries Company
Income Statement
for the year ended December 31, 2017
Sales Revenue			185620
Less: Sales discounts		3100
Sales returns and allowances		4645	7745
Net sales revenue			177875
Selling and admn. Expenses
Selling expenses:
Adertiseing expense	8400
Warehouse rent	9600
Supplies Expense	3630
Insurance Expense	2640
Transportation out	5060
Lighting and heating	5280
Miscellaneous expenses	7095
Total selling expenses		41705
Administrative expenses
Office Rent	18000
Supplies Expense	2970
Insurance Expense	2160
Admn. Salaries	8300
Lighting and heating	4320
Miscellaneous expenses	5805
Total administrative exepnses		41555
Selling and administrative expenses			83260
Income from operations			94615
Other incomes (expenses)
Income from investment		49000
Loss on sale of fixed assets		-25000	24000
Net income			118615

2.

Holman Groceries Company
Bank reconciliation
for the month of December 31, 2018
Balance as per bank	29279	Balance as per cash book	27202
Additions:		Additions:
Collection fee	10	Check # 3030	1525
NSF check of J.Brown	67	Check # 3056	1459
Night deposit dt.Dec.31	1675	Note receivable collected by bank	780
Service charges	25	Wrong entry for check #3445	90
Total Additions	1777	Total Additions	3854
Deductions:		Deductions:
Check # 3030	1525	Collection fee	10
Check # 3056	1459	NSF check of J.Brown	67
Note receivable collected by bank	780	Night deposit dt.Dec.31	1675
Wrong entry for check #3445	90	Service charges	25
Total Deductions	3854	Total Deductions	1777
Balance as per cash book	27202	Balance as per bank	29279

Corrected cash book balance :
Balance as per books		27202
Add: Note receivable collected by bank	780
Add: Correction for check # 3445	90	870
		28072
Less:NSF check of J.Brown	67
Less: Collection fee for note payable	10
Less: Bank service charges	25	102
Corrected cash book balance		27970

After making the above mentioned adjustments, the bank reconciliation will be as follows.

Holman Groceries Company
Bank reconciliation
for the month of December 31, 2018
Balance as per bank	29279	Balance as per cash book	27970
Additions:		Additions:
Night deposit dt.Dec.31	1675	Check # 3030	1525
		Check # 3056	1459
Total Additions	1675	Total Additions	2984
Deductions:		Deductions:
Check # 3030	1525	Night deposit dt.Dec.31	1675
Check # 3056	1459
Total Deductions	2984	Total Deductions	1675
Balance as per cash book	27970	Balance as per bank	29279