ACC 122, Principles of Accounting II

ACC 111, Principles of Accounting I

Group Project I for Chapters 7 and 8

Instructor: Mark JohnstonNames ______

Problem 1, Chapter 7(45) points

Supreme Company’s bookkeeper prepared the bank reconciliation for May 31, 2003. The bookkeeper had the following responsibilities: All bookkeeping, the handling of cash receipts, the preparation of the monthly bank reconciliation and the deposit at the bank. Assume that the bookkeeper prepared all of the checks which were signed by the owner. The owner, on a daily basis verified and signed all checks that were written, counted all cash and verified the debit to cash receipts journal and the credit to cash in the cash payments journal.

May 31 Bank Statement

Balance of previous bank statement on 4/30$ 12, 760

Six deposits and other credits totaling7,596

Eleven checks and other debits totaling4,977

Current balance as of this statement$ 15, 379

Checking Account Transactions – From Bank Statement

DateAmountTrans. Type

5/1$915DepositSee Duplicate Deposit Slips –Page 2

5/2$ 1,000Deposit

5/5$ 737Deposit

5/14$ 850Deposit

5/21$ 729Deposit

5/28$ 815Deposit

5/28$ (581)NSF Check

5/31$ (11)Service Charge

5/31$ 2,550Cr Memo (Collection on note, principal $2,500)

DateCk. NoAmount

5/1386$ 125See Carbon Copy of Checks Issued Pages 3-5

5/1387$ 112

5/2388$ 500

5/3392$ 215

5/4394$ 100

5/13398$ 750

5/17399$ 1,000

5/27400$ 543

5/28401$ 450

5/29402$175

5/31403$ 415

Deposit Slip / Cash / Currency Coins
Date
4/30/03 / List of Checks
Gilly / 915 / 00
Total / 915 / 00
/ Deposit Slip / Cash / Currency Coins / 600 / 00
Date
5/20/03 / List of Checks
Pyle / 129 / 00
Total / 729 / 00
Deposit Slip / Cash / Currency Coins / 750 / 00
Date
5/1/03 / List of Checks
Jones / 250 / 00
Total / 1000 / 00
/ Deposit Slip / Cash / Currency Coins / 445 / 00
Date
5/27/03 / List of Checks
Dudley / 370 / 00
Total / 815 / 00
Deposit Slip / Cash / Currency Coins / 156 / 00
Date
5/4/03 / List of Checks
Slade / 581 / 00
Total / 737 / 00
/ Deposit Slip / Cash / Currency Coins / 0 / 00
Date
5/31/03 / List of Checks
Gilly / 915 / 00
Total / 915 / 00
Deposit Slip / Cash / Currency Coins / 500 / 00
Date
5/13/03 / List of Checks
Luce / 350 / 00
Total / 850 / 00

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Carbon copy of all checks issued between 4/15/03 to 5/31/03

 = Check Was Paid in April

Supreme Company / Date 4/15/03 / 386
Pay to the Order of / Jones & Company / $ / 125.00
One Hundred Twenty-Five and / no cents
NBT Bank
Memo / Supplies / Jill Supreme
/ Supreme Company / Date 4/22/03 / 390
Pay to the Order of / Jones & Company / $ / 229.00
Two hundred twenty-nine and / no cents
NBT Bank
Memo / Supplies / Jill Supreme

Supreme Company / Date 4/17/03 / 387
Pay to the Order of / Jordon / $ / 112.00
One hundred twelve and / no cents
NBT Bank
Memo / Invoice 2324 / Jill Supreme
/ Supreme Company / Date 4/22/03 / 391
Pay to the Order of / Jordon / $ / 331.00
Three hundred thirty-one and / no cents
NBT Bank
Memo / Invoice 2340 / Jill Supreme

Supreme Company / Date 4/21/03 / 388
Pay to the Order of / Jones & Company / $ / 500.00
Five Hundred and / no cents
NBT Bank
Memo / Invoice 5132 / Jill Supreme
/ Supreme Company / Date 4/24/03 / 392
Pay to the Order of / King & Company / $ / 215.00
Two hundred fifteen and / no cents
NBT Bank
Memo / Invoice 700 / Jill Supreme
Supreme Company / Date 4/21/03 / 389
Pay to the Order of / King & Company / $ / 570.00
Five Hundred Seventy and / no cents
NBT Bank
Memo / Invoice 678 / Jill Supreme

/ Supreme Company / Date 4/25/03 / 393
Pay to the Order of / Jill Supreme / $ / 415.00
Four hundred fifty and / no cents
NBT Bank
Memo / Drawing / Jill Supreme


Carbon copy of all checks issued between 4/15/03 to 5/31/03

 = Check Was Paid in April

Supreme Company / Date 4/28/03 / 394
Pay to the Order of / Jones & Company / $ / 100.00
One Hundred and / no cents
NBT Bank
Memo / Invoice 2360 / Jill Supreme
/ Supreme Company / Date 4/30/03 / 398
Pay to the Order of / Carr Office Supplies / $ / 750.00
Seven hundred fifty and / no cents
NBT Bank
Memo / Invoice 870 / Jill Supreme
Supreme Company / Date 4/29/03 / 395
Pay to the Order of / Parton / $ / 150.00
One hundred fifty and / no cents
NBT Bank
Memo / Invoice 5002 / Jill Supreme

/ Supreme Company / Date 5/12/03 / 399
Pay to the Order of / Jill Supreme / $ / 1,000.00
One Thousand and / no cents
NBT Bank
Memo / Withdrawal / Jill Supreme
Supreme Company / Date 4/30/03 / 396
Pay to the Order of / Al Kazam leisure Man / $ / 514.00
Five Hundred fourteen and / no cents
NBT Bank
Memo / Invoice 010 / Jill Supreme
/ Supreme Company / Date 5/20/03 / 400
Pay to the Order of / Hooyah / $ / 543.00
Five hundred forty-three and / no cents
NBT Bank
Memo / Invoice 571 / Jill Supreme
Supreme Company / Date 4/30/03 / 397
Pay to the Order of / Jones International / $ / 771.00
Seven hundred seventy-one and / no cents
NBT Bank
Memo / Invoice 556 / Jill Supreme
/ Supreme Company / Date 5/22/03 / 401
Pay to the Order of / King & Company / $ / 450.00
Four hundred fifty and / no cents
NBT Bank
Memo / Invoice 556 / Jill Supreme

Carbon copy of all checks issued between 4/15/03 to 5/31/03

Supreme Company / Date 5/24/03 / 402
Pay to the Order of / Utility Company / $ / 175.00
One hundred seventy-five and / no cents
NBT Bank
Memo / May Electric bill / Jill Supreme
/ Supreme Company / Date 5/31/03 / 406
Pay to the Order of / Thomson Learning / $ / 514.00
Five hundred fourteen and / no cents
NBT Bank
Memo / books / Jill Supreme
Supreme Company / Date 5/27/03 / 403
Pay to the Order of / Ollyoop / $ / 415.00
Four hundred fifteen and / no cents
NBT Bank
Memo / Invoice 5002 / Jill Supreme
/ Supreme Company / Date 5/31/03 / 407
Pay to the Order of / Ollyoop / $ / 800.00
Eight hundred and / no cents
NBT Bank
Memo / Invoice 5020 / Jill Supreme
Supreme Company / Date 5/28/03 / 404
Pay to the Order of / Gardiner Co. / $ / 300.00
Three hundred and / no cents
NBT Bank
Memo / Invoice 444 / Jill Supreme
Supreme Company / Date 5/30/03 / 405
Pay to the Order of / Father and Sons / $ / 160.00
One hundred sixty and / no cents
NBT Bank
Memo / Invoice 123 / Jill Supreme

Cash Receipts Recorded Cash Payments Recorded
in Cash Receipts Journal In Cash Payments Journal

Date Cash DebitCheck No. Cash Credit

5/1$1,000*JS398$750

5/4$ 737*JS399$1,000

5/9$1,285*JS400$345

5/13$850*JS401$450

5/20$729*JS402$175

5/27$815*JS403$415

5/31$915*JS404$300

$ 6,331405$160

406$514

See duplicate deposit slips on page 2.407$800

See duplicate carbon copies of checks on $4,909

pages 3 through 5.

* Assume that all cash receipts were counted by owner-Jill Supreme, and she verified the debit in the cash receipts journal and the bookkeeper deposited in bank on the same day.

*Assume that all deposits cleared the bank the day after they were recorded in the cash receipts journal and deposited. (i.e. 5/4 deposit cleared on 5/5 – see page 1). Assume that any cash receipt that did not clear the bank by the next day was never deposited in the bank.

Cash General Ledger

DateExplanationDebitCreditBalance

4/30Balance11,338

5/31Cash Receipts6,331

5/31Cash Payments4,90912,760Balance

The NSF check returned with the bank statement was received from customer, Pat Slade in payment of his accounts receivable. The NSF check has not been recorded in the general ledger.

The following is the bank reconciliation prepared by the bookkeeper for April 30, 2003.

April 30, 2003

Cash balance according to bank statement / $12, 760 / Cash balance according depositors records / $9,200
Add: Additions by depositor not on bank statement 4/30 / 915 / Add:
Additions by bank not recorded by depositor
915 / Proceeds from collection of note-
Principal / $2,500
$13,675 / Interest / 50
Error in recording check 389 / 180 / 2,730
$11,930
Deductions by depositor not on bank statement / Deductions by bank not recorded by
Outstanding checks: / depositor: Check returned NSF / 581
386 / $125 / Bank Service Charge / 11
387 / 112
388 / 500
392 / 215
394 / 100
396 / 514
397 / 771 / 2,337 / $ 592
Adjusted balance / $ 11,338 / Adjusted balance / $ 11,338

May 31, 2003

Cash balance according to the bank statement / $ 15,379 / Cash balance according depositors records / $ 12,760
Additions by depositor not on bank / Add: Additions by bank not recorded by depositor
statement 5/31 / 915 / Proceeds from collection of note -
915 / Principal / $ 2,500
$ 16, 294 / Interest / 50
2,550
$ 15,310
Deductions by depositor not on bank statement / Deductions by bank not recorded by depositor:
Outstanding checks / Check returned NSF / 581
No. 404 / 300 / Bank service charge / 11
No. 405 / 160 / Error in recording check 400 / 198
No. 406 / 514 / $ 790
No. 407 / 800
1,774
Adjusted balance / $ 14,520 / Adjusted balance / $14,520

Required:1.Review the Bank Reconciliation prepared by your employee on May 31 above and prepare a corrected bank reconciliation.

2.Explain why you think your corrected bank reconciliation does not balance. How did the employee conceal the embezzlement? Recommend any improvements to internal controls to prevent this discrepancy from occurring again.

3.Record all required journal entries for May 31, 2003 related to the bank reconciliation including a journal entry for the bank reconciliation discrepancy. Assume the bank reconciliation discrepancy was a result of embezzlement by the employee preparing the bank reconciliation. Assume the embezzlement was never recovered.

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Problem 2 (30) points

The transactions, adjusting entries, and closing entries described below are related to uncollectible accounts for the Summer Company. All were completed during the current year ended December 31, 2002. Other transactions affecting accounts receivable are shown in the Accounts Receivable General Ledger (T) account. See page below.

Jan. 30...... Recovered the account of C.L. Linke and Sons that had been written off in the preceding year and received $1,250 cash in full payment.

June 27Wrote off the $2,375 balance owed by Miller Corp., which has no assets.

Oct. 5Received 25% of the $12,000 balance owed by F.M. Knox Co., a bankrupt, and wrote off the remainder as uncollectible.

Dec. 31Based on an analysis of the $257,724 of accounts receivable, it was estimated that $14,500 will be uncollectible. Record the adjusting entry. Record the adjusting entry using the Aging method.

Dec. 31Record the entry to close the appropriate account into income summary.

Required:

1.Open the following selected accounts recording the opening balances as of January 1 of the current year. (see below )

114.1Allowance for doubtful accounts 12,200 Credit
313Income summary______
718Uncollectible accounts expense______

2.Record in general journal form the transactions and the adjusting and closing entries described above. After each entry, post to the three selected accounts above and to the accounts receivable and enter the ending balances. (Page 10 and 11)

3.Determine the expected realizable value of the accounts receivable as of December 31.

4.Compute the accounts receivable turnover and the number of days sales in receivables for the year. Assume that all sales are on account. Show your computations. How is Summer Company doing with collection compared to the industry, assuming the industry average is an accounts receivable turnover of 11 and a number of days in receivables is 37 days?

Accounts Receivable A/C 114Allow. For Uncollectible A/C’S 114.1

1/1 bal. 172,099 / 1/1 Bal.
(1) 1,800,000 / 1,700,000.0 (2)
1. Represents all of the sales on account for the year.
2. Represents other collections from customers on account for the year.
Income Summary A/C 313 / Uncollectible A/C Expense A/C 718

Journal

Date / Description / Post Ref. / Debit / Credit
1 / 1
2 / 2
3 / 3
4 / 4
5 / 5
6 / 6
7 / 7
8 / 8
9 / 9
10 / 10
11 / 11
12 / 12
13 / 13
14 / 14
15 / 15
16 / 16
17 / 17
18 / 18
19 / 19
20 / 20
21 / 21
22 / 22
23 / 23
24 / 24
25 / 25
26 / 26
27 / 27
28 / 28
29 / 29
30 / 30
31 / 31

Problem 3(25) points

Apr 1 07Accepted a $20,000, one-year, 8% note dated April 1 from Bruce Hanson for the sale of inventory; Cost of Goods Sold was $16,500.

Dec 31 07Record the adjusting entry for interest accrued on the Bruce Hanson note

Dec. 31 07 Record the entry to close the appropriate account into income summary.

Apr 01 08 Bruce Hanson dishonored the note dated April 1, 2007.

May 01 08Received from Bruce Hanson the amount owed on the dishonored note, plus interest for

30 days at 10% computed on the maturity value of note.

Oct. 20 08Loaned $8,000 cash to Bower Company and accepted a $8,000, 60-day, 9% note dated October 20.

Dec 19 08Received from Bower Company the amount owed on October 20 note.

Required:Record the above transactions in general journal form. (Show your computations)

Journal

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