Question 1 - The following information is available to reconcile Litner Co.'s book balance of cash with its bank statement cash balance as of April 30. The April 30 cash balance according to the accounting records is $78,356, and the bank statement cash balance for that date is $83,525.
a. The bank erroneously cleared a $480 check against the account in April that was not issued by Litner. The check documentation included with the bank statement indicates the check was actually issued by Lightning Co.
b. On April 30, the bank issued a credit memorandum for $53 interest earned on Litner's account.
c. When the April checks are compared with entries in the accounting records, it is found that Check No. 1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350
d. A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Litner, deducted a $30 collection fee, and credited the balance to the company's Cash account. Litner did not record this transaction before receiving the statement.
e. A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer. The bank assessed a $25 fee for processing it.
f. Litner's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date, but do not appear on the April 30 bank statement.
g. Litner's April 30 cash disbursements journal indicates that Check No. 1837 for $584 and Check No. 1840 for $1,219 were both written and entered in the accounting records, but are not among the canceled checks.
1. Prepare the bank reconciliation for this company as of April 30.
2. Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of April 30.
Question 2 - A company purchased merchandise inventory costing $15,000 with credit terms of 2/10, n/30 on November 7. On November 15, the company paid 1/3 of the amount due. The remaining balance was paid on December 7.
Required:
a. Record the journal entries related to this transaction using the gross method of recording purchases.
b. Record the journal entries related to this transaction using the net method of recording purchases.
Question 3 - A company made the following expenditures in connection with the construction of its new building:
Architect's fee's for new building $12,000
Cash paid for land and run-down building on the land 300,000
Removal of old building $18,000
Salvage from sale of old building materials (4,000)
Construction survey to site the new building $1,500
Legal fees for title search $3,000
Excavation for basement construction $25,000
Machinery purchased for operations $100,000
Storage charges on machinery because building was not ready when machinery was delivered 900
Freight on machinery purchased $1,600
Hauling charges to delivery machinery from storage to new building $300
Construction costs of new building $1,000,000
Landscaping $20,000
Installation of machinery $2,500
Prepare a schedule showing the amounts to be recorded as Land, Buildings, and Machinery.