Activity #3

Intermediate Accounting 1

Problem 3-1. SASSY COMPANY

Bank Reconciliation-June 30
Book Balance 1,000,000
Add: Credit Memo
Note Collected 300,000
Total 1,300,000
Less: Debit Memo
NSF Check 100,000
Service Charge 4,000 (104,000)
Adjusted Book Balance 1,196,000

Bank Balance 1,650,000

Add: Deposit in Transit 400,000
Total 2,050,000
Less: Outstanding Checks (854,000)
Adjusted Bank Balance 1,196,000

Bank Reconciliation – July 31

Book Balance 1,400,000
Add: Credit Memo
Bank Loan 500,000
Total 1,900,000
Less: Debit Memo
Service Charge (1,000)
Adjusted Book Balance 1,899,000

Bank Balance 2,650,000

Add: Deposit in Transit 1,100,000
Total 3,750,000
Less: Outstanding Checks (1,851,000)
Adjusted Bank Balance 1,899,000

Adjusting Entries, July 31

1. Cash in Bank 500,000
Bank Loan Payable 500,000

2. Bank Service Charge 1,000

 Cash in Bank 1,000

Computation of Deposit in Transit- July 31

Deposit in transit- June 30 400,000
Add: Deposits during July:
Book Debits 4,000,000
Less: June credit memo for note collected (300,000) 3,700,000
Total 4,100,000
Less: Deposits credited by the bank during July:
Bank Credits 3,500,000
Less: July credit memo for bank loan (500,000) (3,000,000)
Deposits in Transit- July 31 1,100,000

Computation of Outstanding Checks – July 31

Outstanding Checks, June 30 854,000
Add: Checks drawn by company during July:
Book Credits 3,600,000
Less: June debit memos for
NSF Check 100,000
Service charge 4,000 104,000 3,496,000
Total 4,350,000
Less: Checks paid by bank during July:
Bank debits 2,500,000
Less: July service charge (1,000) (2,499,000)
Outstanding checks, July 31 1,851,000

Problem 3-2. BEEHIVE COMPANY

Reconciliation – October 31
Adjusted Book Balance 600,000
Bank Balance 400,000
Add: Deposit in Transit 300,000
Total 700,000
Less: Outstanding Checks (100,000)
Adjusted Bank Balance 600,000

Reconciliation – November 30
Book Balance 1,000,000
Add: Understatement of collection from customer 90,000
Total 1,090,000
Less: Understatement of check disbursement (270,000)
Adjusted Book Balance 820,000

Bank Balance 930,000

Add: Deposit in Transit 190,000
Check of Susan Company charged in error 200,000 390,000
Total 1,320,000
Less: Outstanding checks 400,000
Deposit of Susan Company erroneously credited 100,000 500,000
Adjusted Bank Balance 820,000

Adjusting Entries – November 30

1. Cash in Bank 90,000
Accounts Receivable 90,000

2. Accounts Payable 270,000

Cash in Bank 270,000

Computation of outstanding checks – October 31

Outstanding Checks- October 31 (Squeeze) 100,000
Add: Checks issued by depositor:
Book disbursements 1,800,000
Understatement of check paid 270,000 2,070,000
Total 2,170,000
Less: Checks paid by bank:
Bank Disbursements 1,970,000
Less: Check of Susan Company charged in error (200,000) 1,770,000
Outstanding Checks-November 30 400,000

Computation on Deposit in Transit- November 30

Deposit in Transit-October 31 300,000
Add: Cash receipts deposited during November:
Book receipts 2,200,000
Understatement of collection from November 90,000 2,290,000
Total 2,590,000
Less: Deposits credited by bank during November:
Bank receipts 2,500,000
Less: Deposit of Susan Company erroneously credited (100,000) 2,400,000
Deposit in transit – November 30 190,000