Prepare the bank reconciliation for company

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Reference no: EM13683

The following information is available to reconcile Clark Company's book balance of cash with its bank statement cash balance as of July 31, 2011.

a. On July 31, the company's Cash account has a $25,644 debit balance, but its July bank statement shows a $27,284 cash balance.

b. Check No. 3031 for $1,250 and Check No. 3040 for $617 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $401 and Check No. 3069 for $2,018, both written in July, are not among the canceled checks on the July 31 statement.

c. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent was correctly written and drawn for $1,210 but was erroneously entered in the accounting records as $1,200.

d. A credit memorandum enclosed with the July bank statement indicates the bank collected $9,500 cash on a non-interest-bearing note for Clark, deducted a $48 collection fee, and credited the remainder to its account. Clark had not recorded this event before receiving the statement.

e. A debit memorandum for $805 lists a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Jim Shaw. Clark has not yet recorded this check as NSF.

f. Enclosed with the July statement is a $14 debit memorandum for bank services. It has not yet been recorded because no previous notification had been received.

g. Clark's July 31 daily cash receipts of $10,652 were placed in the bank's night depository on that date, but do not appear on the July 31 bank statement.

Required:

1. Prepare the bank reconciliation for this company as of July 31, 2011.

2. Prepare the journal entries necessary to bring the company's book balance of cash into conformity with the reconciled cash balance as of July 31, 2011.

Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2011, balance sheet given the facts in part 1a. (Amounts to be deducted should be indicated with minus sign.

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2011, balance sheet given the facts in part 1c.

At December 31, 2011, Ethan Company reports the following results for its calendar-year.

 

 

 

  Cash sales

$

1,266,090  

  Credit sales

 

3,601,000  


In addition, its unadjusted trial balance includes the following items.

 

 

 

 

  Accounts receivable

$

1,091,103  

debit

  Allowance for doubtful accounts

 

16,780  

debit


Required:

1.

Prepare the adjusting entry for this company to recognize bad debts under each of the following independent assumptions.

a.

Bad debts are estimated to be 4% of credit sales.

b.

Bad debts are estimated to be 3% of total sales.

c.

An aging analysis estimates that 7% of year-end accounts receivable are uncollectible.

Adjusting entries (all dated December 31, 2011).

2. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2011, balance sheet given the facts in part 1a. (Amounts to be deducted should be indicated with minus sign. Omit the "3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2011, balance sheet given the facts in part 1c.

3. Show how Accounts Receivable and the Allowance for Doubtful Accounts appear on its December 31, 2011, balance sheet given the facts in part 1c.

Reference no: EM13683

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