Task: Bank Reconciliation
Question 1: The following information is available for Unique Globe, as of May 31, 2011:
a: cash on the books as of May 31, amounted to $43,784.16. cash on the bank statement for the same date was $53,451.46.
b: A deposit of $5,220.94. Representing cash recipient of May 31, did not appear on the bank statement.
c: outstanding checks totaled $3,936.80
d: a check for $1,920.00 returned with the statement was recorded incorrectly in the check register as 1,380.00 the check was for a cash purchase of merchandise
e: the bank service charge for may amounted to $30
f: the bank collected $12,200.00 for Unique Globe, on a note. The face value of the note was $12,200.00
g: an NSF check for $178.56 from a customer, Eve Lay, was returned with the statement
h: the bank mistakenly charged to the company account a check for $750.00 drawn for another company
i: the bank reported that it had credited the account for $250.00 in interest on the average balance for May.
Required:
1. Prepare a bank reconciliation for Unique Globe, Inc., as of May 31,2011.
2. Prepare the entries in journal form necessary to adjust the accounts.
3. What amount of cash should appear on Unique Globe's balance sheet as of May 31?
4. Why a bank reconciliation considered an important control over cash?
Task: Methods of Estimating Uncollectible Accounts and Receivables Analysis
Question 2: Moore Company had an Accounts Receivable balance of $640,000 and a credit balance in Allowance for Uncollectible Accounts of $33,400 at January 1, 2011. During the year, the company recorded the following transaction:
a: sales on account, $2,104,000
b: sales return and allowances by credit customers, $106,800
c: collections from customers, $1,986,000
d: worthless accounts written off, $39,600
The company's past history indicates that 2.5 percent of its net credit sales will not be collected.
Required:
1. Prepare T accounts Receivable and Allowance for Uncollectible Accounts. Enter the beginning balances, and show the effects on these accounts of the items listed above, summarizing the year's activity. Determine the ending balance of each account.
2. Compute Uncollectible Accounts Expense and determine the ending balance of Allowance for uncollectible Accounts under (a) the percentage of net sales method and (b) the account receivable aging method, assuming an aging of the accounts receivable shows that $48,000 may be uncollectible.
3. Compute the receivable turnover and days' sales uncollected, using the data from the accounts receivable aging method in requirement 2.
4. How do you explain that the two methods used in requirement 2 results in different amounts for Uncollectible Accounts Expense? What rationale underlies each method?