Exercise 6-8A Adjustments to the balance per books
Required
Identify which of the following items are added to or subtracted from the unadjusted book balance to arrive at the true cash balance. Distinguish the additions from the subtractions by placing a + beside the items that are added to the unadjusted book balance and a − beside those subtracted from it. The first item is recorded as an example.
| Reconciling Items | Book Balance Adjusted? | Added or Subtracted? |
|---|---|---|
| Credit memo | Yes | + |
| Interest revenue | ||
| Deposits in transit | ||
| Debit memo | ||
| Service charge | ||
| Charge for printing checks | ||
| NSF check from customer | ||
| Note receivable collected by the bank | ||
| Outstanding checks |
Exercise 6-9A Adjustments to the balance per bank
Required
Identify which of the following items are added to or subtracted from the unadjusted bank balance to arrive at the true cash balance. Distinguish the additions from the subtractions by placing a + beside the items that are added to the unadjusted bank balance and a − beside those subtracted from it. The first item is recorded as an example.
| Reconciling Items | Book Balance Adjusted? | Added or Subtracted? |
|---|---|---|
| Bank service charge | No | NA |
| Outstanding checks | ||
| Deposits in transit | ||
| Debit memo | ||
| Credit memo | ||
| Certified checks | ||
| Petty cash voucher | ||
| NSF check from customer | ||
| Interest revenue |
Exercise 6-10A Adjusting the cash account
As of June 30, Year 1, the bank statement showed an ending balance of $19,500. The unadjusted Cash account balance was $15,200. The following information is available:
- Deposit in transit: $2,400.
- Credit memo in bank statement for interest earned in June: $30.
- Outstanding check: $6,690.
- Debit memo for service charge: $20.
Required
a. Determine the true cash balance by preparing a bank reconciliation as of June 30, Year 1, using the preceding information.
b. Record in general journal format the adjusting entries necessary to correct the unadjusted book balance.
Exercise 6-11A Determining the true cash balance, starting with the unadjusted bank balance
The following information is available for Trinkle Company for the month of June:
- The unadjusted balance per the bank statement on June 30 was $81,500.
- Deposits in transit on June 30 were $3,150.
- A debit memo was included with the bank statement for a service charge of $40.
- A $5,611 check written in June had not been paid by the bank.
- The bank statement included a $950 credit memo for the collection of a note. The principal of the note was $900, and the interest collected amounted to $50.
Required
Determine the true cash balance as of June 30. (Hint: It is not necessary to use all of the preceding items to determine the true balance.)
Exercise 6-12A Determining the true cash balance, starting with the unadjusted book balance
Nickleson Company had an unadjusted cash balance of $7,750 as of May 31. The company’s bank statement, also dated May 31, included a $72 NSF check written by one of Nickleson’s customers. There were $800 in outstanding checks and $950 in deposits in transit as of May 31. According to the bank statement, service charges were $50, and the bank collected an $800 note receivable for Nickleson. The bank statement also showed $13 of interest revenue earned by Nickleson.
Required
Determine the true cash balance as of May 31. (Hint: It is not necessary to use all of the preceding items to determine the true balance.)
Exercise 6-13A Effect of establishing a petty cash fund
Chen Company established a $200 petty cash fund on January 1, Year 1.
Required
a. Is the establishment of the petty cash fund an asset source, use, or exchange transaction?
b. Show the establishment of the petty cash fund in a horizontal statements model like the following one:
Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow
Cash + Petty Cash
c. Record the establishment of the fund in general journal format.
Exercise 6-14A Effect of petty cash events on the financial statements
Fresh Foods established a petty cash fund of $100 on January 2. On January 31, the fund contained cash of $9.20 and vouchers for the following cash payments:
Maintenance expense $61.50
Office supplies $12.50
Transportation expense $15.00
The three distinct accounting events affecting the petty cash fund for the period were (1) establishment of the fund, (2) reimbursements made to employees, and (3) recognition of expenses and replenishment of the fund.
Required
a. Show each of the three events in a horizontal statements model like the following one. In the Cash Flow column, indicate whether the item is an operating activity (OA), investing activity (IA), or a financing activity (FA). Use NA to indicate that an account was not affected by the event.
Assets = Liab. + Equity Rev. − Exp. = Net Inc. Cash Flow
Cash + Petty Cash
b. Record the events in general journal format.
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