Chapter 14
Ex. 1
Foyle Company needs to make adjusting entries for each of the following reconciling items. Identify the account to
be debited and the account to be credited in each case.
1. The bank collected a $1,000 note plus interest of $40 on the company’s behalf. The company had not accrued
.the interest.
2. A check for $47 written to the company by J. Hammond was returned NSF.
3. The monthly service charge by the bank was $30.
Solution 1
1. Debit: Cash
.Credit: Note Receivable, Interest Revenue
2. Debit: Accounts Receivable
Credit: Cash
3. Debit: Miscellaneous Expense Credit: Cash
Ex. 2
The following reconciling items are applicable to the bank reconciliation for the Gunselman Company. Indicate how
each item should be shown on a bank reconciliation.
a. ..Deposit in transit.
b. Outstanding checks.
c. Bank credit memorandum for collecting a note for the depositor.
d. Bank debit memorandum for service charge.
Solution 2
a. Deposits in transit should be added to the balance per bank.
b. Outstanding checks should be deducted from the balance per bank.
c. Bank credit memorandum should be added to the balance per books.
d. Bank debit memorandum should be deducted from the balance per books.
Ex. 3
At August 31 Kiner Company has this bank information: cash balance per bank $9,000; outstanding checks $800;
deposits in transit $1,600; and a bank service charge $25. Determine the adjusted cash balance per bank at August
31, 2012.
Solution 3
Kiner Company
Partial Bank Reconciliation
August 31, 2012
Cash balance per bank
Add: Deposit in transit
Less: Outstanding checks
Adjusted cash balance per bank
$
9,000
1,600
10,600
800
$ 9,800
Ex. 4
Given the following information, determine the adjusted cash balance per books;
Balance per books as of June 30
$9,000
Outstanding checks
$630
NSF check returned with bank statement
$150
Deposit mailed the afternoon of June 30
$320
Check printing charges
$25
Interest earned on checking account
$45
Solution 4
$8,870: (9,000 - 150 - 25 + 45)
Ex. 5
On September 1, 2012, Watkins Company establishes a petty cash fund by issuing a check for $300 to Mike Martz,
the custodian of the petty cash fund. On September 30, 2012, Mike Martz submitted the following paid petty cash
vouchers for replenishment of the petty cash fund when there is $65 cash in the fund:
Freight-in
Office Supplies Expense
Entertainment of Clients
Postage Expense
$36
64
52
83
Prepare the journal entries required to establish the petty cash fund on September 1 and the replenishment of the
fund on September 30.
Solution 5
Sept. 1
Petty Cash Fund ...............................................................
Cash ........................................................................
(To establish a petty cash fund)
30
300
300
Freight-in ...........................................................................
36
Office Supplies Expense ...................................................
64
Entertainment Expense .....................................................
52
Postage Expense ..............................................................
83
Cash ........................................................................
235
(To record expenses for September and to replenish the petty cash fund)