Assignment A-8.1
A local Bakery has a checking account with a Community Bank. The
Bakery's cash balance on July 31 of this year was $30,000. The deposit balance on the bank's books on July 31 was also $30,000. The following transactions occurred during July:
| Date | Check # | Amount | Explanation |
|---|---|---|---|
| 7/1 | 261 | $11,000 | Payment of previously billed fee |
| 7/6 | 262 | 9,000 | Payment of accounts payable |
| 7/10 | 10,000 | Collection of taxes receivable | |
| 7/14 | 263 | 14,000 | Acquisition of equipment for cash |
| 7/17 | 16,000 | Collection of receivables | |
| 7/28 | 264 | 8,000 | Payment of accounts payable |
| 7/30 | 265 | 21,000 | Payment of interest |
| 3/31 | 25,000 | Collection of taxes receivable |
All cash deposits are deposited via a night depository system after the close of the municipal business day. Therefore, the receipts are not recorded by the Bank until the succeeding
day.
On July 31, the Bank charged the Bakery $95 for miscellaneous bank services.
- Prepare the journal entries on the Bank's books for check 262 and the deposit of July 10.
- Prepare the journal entries for all July transactions on the books of the Bakery.
- Post all transactions for July to T-accounts for the Bakery's Cash in Bank account and the bank's Deposit account. Assume that only checks 261 to 263 have been presented to the bank in July, each taking 4 days to clear the bank's records.
- Prepare bank reconciliation for the Bakery, July 31, 20X8. The final three Bakery transaction of July had not affected the bank's records as of July 31. What adjusting entry in the books of the Bakery is required on July 31?
- What would be the cash balance shown on the balance sheet of the Bakery on July 31, 20X8?
Assignment A-8.2
An employee named Elizabeth has a personal bank account. Her employer deposits her weekly paycheck automatically each Friday. The employee's check register (check-book) for August is
summarized as follows:
| Reconciled cash balance, July 31, | $ 100.00 | ||
| Additions | |||
| Weekly payroll deposits | August | ||
| 3 | $ 800.00 | ||
| 10 | $ 800.00 | ||
| 17 | $ 800.00 | ||
| 24 | $ 800.00 | ||
| Deposit of check received for gambling debt | 25 | $ 500.00 | |
| Deposit of check received as winner of cereal contest | 31 | $ 400.00 | |
| Subtotal | $ 4,200.00 | ||
| Deductions | |||
| Checks written No. 352-339 | 1-23 | ||
| Check No. 340 | 26 | ||
| Check No.341 | 30 | ||
| Check No. 342 | 31 | $ 3,800.00 | |
| Cash in bank August 31 | $ 400.00 |
The bank statement is summarized in the next exhibit. (Please note that NSF stands for Not Sufficient Funds). The check deposited on August 25 bounced; by prearrangement with Elizabeth, the bank automatically lends sufficient amounts (in multiples of $100) to ensure that her balance is never negative.
i. Prepare Elizabeth's bank reconciliation, August 31.
ii. Assume that Elizabeth keeps a personal set of books on the accrual basis. Prepare the compound journal entry called by the bank reconciliation.
EXHIBIT
| Bank Statement of Elizabeth | |
|---|---|
| SUMMARY OF YOUR CHECKING ACCOUNTS | |
| Beginning Balance | $ 100.00 |
| Deposits | $ 4,600.00 |
| Withdrawals | $ 3,870.00 |
| Service charges/fees | $ 25.00* |
| Ending balance | $ 805.00 |
| Minimum balance on Aug., 28 | $ (80.00) |
| *$10.00 for returned check; | |
| $15.00 monthly service charge. | |
| CHECKING ACTIVITY | ||
|---|---|---|
| Deposits | ||
| Posted | Amount | Description |
| 3-Aug | $ 800.00 | Payroll deposit |
| 10-Aug | $ 800.00 | Payroll deposit |
| 17-Aug | $ 800.00 | Payroll deposit |
| 24-Aug | $ 800.00 | Payroll deposit |
| 25-Aug | $ 500.00 | Payroll deposit |
| 28-Aug | $ 100.00 | Automatic loan |
| 31-Aug | $ 800.00 | Payroll deposit |
| Withdrawals | ||
| Ck. No. | Paid | Amount |
| 325-339 Various dates in August. These would be shown by specific amounts, but are shown here as a total. | $ 3,300.00 | |
| 340 | 27-Aug | $ 70.00 |
| NSF | 28-Aug | $ 500.00 |
| Total number of checks = 16 | ||
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