Financial Accounting Questions and Answers

La Casa Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of July 31 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account. BANK RECONCILIATION FOR PRECEDING MONTH (DATED JUNE 30): Cash balance according to bank statement . . . . . . . . . . . . . . . . . . . . . . . . . . $ 9,422.80 Add deposit of June 30, not recorded by bank . . . . . . . . . . . . . . . . . . . . . . . 780.80 $10,203.60 Deduct outstanding checks: No. 580 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $310.10 No. 602 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85.50 No. 612 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....

The cash account for Ambulance Systems at February 29, 2012, indicated a balance of $20,580. The bank statement indicated a balance of $24,750 on February 29, 2012. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items: a. Checks outstanding totaled $9,300. b. A deposit of $12,000, representing receipts of February 29, had been made too late to appear on the bank statement. c. The bank had collected $6,240 on a note left for collection. The face of the note was $6,000. d. A check for $140 returned with the statement had been incorrectly recorded by Ambulance Systems as $410. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account. e. A check drawn for $725 had been incorrectly charged by the bank as $275. f. Bank service charges for February amounted to $90. Instructions 1. Prepare a bank reconciliation. 2. Journalize the necessary entries. The accounts ha...

The cash account for South Bay Sports Co. on April 1, 2012, indicated a balance of $35,025. During April, the total cash deposited was $83,150, and checks written totaled $90,000. The bank statement indicated a balance of $34,345 on April 30, 2012. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: a. Checks outstanding totaled $7,700. b. A deposit of $3,800, representing receipts of April 30, had been made too late to appear on the bank statement. c. A check for $960 had been incorrectly charged by the bank as $690. d. A check for $150 returned with the statement had been recorded by South Bay Sports Co. as $1,500. The check was for the payment of an obligation to Jones Co. on account. e. The bank had collected for South Bay Sports Co. $2,600 on a note left for collection. The face of the note was $2,500. f. Bank service charges for June amounted to $50. g. A check for $1,900 from Valley Schools Acad...

Cedar Springs Company completed the following selected transactions during November 2012: Nov. 1. Established a petty cash fund of $850. 12. The cash sales for the day, according to the cash register records, totaled $16,100. The actual cash received from cash sales was $16,175. 30. Petty cash on hand was $70. Replenished the petty cash fund for the following disbursements, each evidenced by a petty cash receipt: Nov. 2. Store supplies, $100. 10. Express charges on merchandise purchased, $260 (Merchandise Inventory). 14. Office supplies, $125. 15. Office supplies, $80. 18. Postage stamps, $70 (Offi ce Supplies). 20. Repair to fax, $35 (Miscellaneous Administrative Expense). 21. Repair to offi ce door lock, $15 (Miscellaneous Administrative Expense). 22. Postage due on special delivery letter, $40 (Miscellaneous Administrative Expense). 28. Express charges on merchandise purchased, $40 ( Merchandise Inventory). 30. The cash sales for the day, according to the cash register records, tota...

Oneida Furniture Company deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of June 30 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account. CASH ACCOUNT: Balance as of June 1 $9,317.40 CASH RECEIPTS FOR MONTH OF JUNE $9,524.16 DUPLICATE DEPOSIT TICKETS: Date and amount of each deposit in June: Date Amount Date Amount Date Amount June 1 $1,080.50 June 10 $ 896.61 June 22 $ 897.34 3 854.17 15 882.95 24 942.71 8 845.00 17 1,607.64 30 1,517.24 CHECKS WRITTEN: Number and amount of each check issued in June: Check No. Amount Check No. Amount Check No. Amount 740 $237.50 747 Void 754 $ 449.75 741 495.15 748 $450.90 755 272.75 742 501.90 749 640.13 756 113.95 743 671.30 750 276.77 757 407.95 744 560.88 751 299.37 758 259.60 745 117.25 752 537.01 759 901.50 746 298....

The following procedures were recently installed by The Blind Shop: a. At the end of a shift, each cashier counts the cash in his or her cash register, unlocks the cash register record, and compares the amount of cash with the amount on the record to determine cash shortages and overages. b. Checks received through the mail are given daily to the accounts receivable clerk for recording collections on account and for depositing in the bank. c. Each cashier is assigned a separate cash register drawer to which no other cashier has access. d. Vouchers and all supporting documents are perforated with a PAID designation after being paid by the treasurer. e. All sales are rung up on the cash register, and a receipt is given to the customer. All sales are recorded on a record locked inside the cash register. f. Disbursements are made from the petty cash fund only after a petty cash receipt has been completed and signed by the payee. g. The bank reconciliation is prepared by the cashier. Instru...

The cash account for Bravo Bike Co. at May 1, 2012, indicated a balance of $15,085. During May, the total cash deposited was $75,100 and checks written totaled $69,750. The bank statement indicated a balance of $25,460 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: a. Checks outstanding totaled $11,360. b. A deposit of $9,200, representing receipts of May 31, had been made too late to appear on the bank statement. c. The bank had collected for Bravo Bike Co. $4,725 on a note left for collection. The face of the note was $4,500. d. A check for $490 returned with the statement had been incorrectly charged by the bank as $940. e. A check for $410 returned with the statement had been recorded by Bravo Bike Co. as $140. The check was for the payment of an obligation to Portage Co. on account. f. Bank service charges for July amounted to $40. g. A check for $1,100 from Elkhart Co. was returne...

Picasso Restoration Company completed the following selected transactions during August 2012: Aug. 1. Established a petty cash fund of $750. 10. The cash sales for the day, according to the cash register records, totaled $9,780. The actual cash received from cash sales was $9,800. 31. Petty cash on hand was $240. Replenished the petty cash fund for the following disbursements, each evidenced by a petty cash receipt: Aug. 3. Store supplies, $251. 7. Express charges on merchandise sold, $60 (Delivery Expense). 9. Office supplies, $20. 13. Office supplies, $30. 19. Postage stamps, $11 (Offi ce Supplies). 21. Repair to office file cabinet lock, $40 (Miscellaneous Administrative Expense). Aug. 22. Postage due on special delivery letter, $18 (Miscellaneous Administrative Expense). 24. Express charges on merchandise sold, $50 (Delivery Expense). 30. Office supplies, $15. 31. The cash sales for the day, according to the cash register records, totaled $11,200. The actual cash received from cash...

The cash account for Online Medical Co. at June 30, 2012, indicated a balance of $9,375. The bank statement indicated a balance of $10,760 on June 30, 2012. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items: a. Checks outstanding totaled $3,900. b. A deposit of $4,000, representing receipts of June 30, had been made too late to appear on the bank statement. c. The bank had collected $2,100 on a note left for collection. The face of the note was $2,000. d. A check for $550 returned with the statement had been incorrectly recorded by Online Medical Co. as $500. The check was for the payment of an obligation to Hirsch Co. for the purchase on account. e. A check drawn for $60 had been erroneously charged by the bank as $600. f. Bank service charges for June amounted to $25. Instructions 1. Prepare a bank reconciliation. 2. Journalize the necessary entries. The accounts have not been closed. 3. If a balance ...

The following procedures were recently installed by Pine Creek Company: a. Along with petty cash expense receipts for postage, office supplies, etc., several postdated employee checks are in the petty cash fund. b. After necessary approvals have been obtained for the payment of a voucher, the treasurer signs and mails the check. The treasurer then stamps the voucher and supporting documentation as paid and returns the voucher and supporting documentation to the accounts payable clerk for filing. c. At the end of each day, all cash receipts are placed in the bank’s night depository. d. The accounts payable clerk prepares a voucher for each disbursement. The voucher along with the supporting documentation is forwarded to the treasurer’s office for approval. e. At the end of each day, an accounting clerk compares the duplicate copy of the daily cash deposit slip with the deposit receipt obtained from the bank. f. The bank reconciliation is prepared by the cashier, who works under the supe...

Delta Air Lines, one of the world’s largest airlines, provides passenger and cargo services throughout the United States and the world.  Delta reported the following financial data (in millions) for the year ended December 31, 2008: Net cash flows from operating activities                  $(1,707) Cash and cash equivalents, December 31, 2008          4,255 a. Determine the monthly cash expenses. Round to one decimal place. b. Determine the ratio of cash to monthly cash expenses. Round to one decimal place. c. Based on your analysis, do you believe that Delta will remain in business? Answer: a. $142.3 ($1,707/12) b. 29.9 months ($4,255/$142.3) c. Delta Air Lines reported a positive cash flow for the first and second quarters of 2009 and a small negative cash flow for the third quarter of 2009. In addition, Delta Air Lines has various financing agreements that allow it to access additional cash as necessary. Thus,...

Allos Therapeutics, Inc., is a biopharmaceutical company that develops drugs for the treatment of cancer. Allos Therapeutics reported the following financial data (in thousands) for the years ending December 31, 2008, 2007, and 2006. For Years Ending December 31 2008 2007 2006 Cash and cash equivalents $ 30,696 $ 16,103 $ 10,437 Net cash fl ows from operations (42,850) (30,823) (25,147) a. Determine the monthly cash expenses for 2008, 2007, and 2006. Round to one decimal place. b. Determine the ratio of cash to monthly cash expenses as of December 31, 2008, 2007, and 2006. Round to one decimal place. c. Based on (a) and (b), comment on Allos Therapeutics’ ratio of cash to monthly operating expenses for 2008, 2007, and 2006. Answer: a. 2008: $3,570.8 ($42,850/12) per month 2007: $2,568.6 ($30,823/12) per month 2006: $2,095.6 ($25,147/12) per month   b. 2008: 8.6 ($30,696/$3,570.8) months 2007: 6.3 ($16,103/$2,568.6) months 2006: 5.0 ($10,437/$2,095.6) months   c. Since 2006, Al...

During 2012, Pierport Inc. has monthly cash expenses of $400,000. On December 31, 2012, the cash balance is $3,600,000. a. Compute the ratio of cash to monthly cash expenses. b. Based on (a), what are the implications for Pierport Inc.? Answer: a. 9 months ($3,600,000/$400,000) b. At the current rate of operations, Pierport has 9 months of cash remaining. Pierport should either restructure its operations or begin planning on raising additional financing in order to continue in business.

Lasting Impressions Co. records all cash receipts on the basis of its cash register tapes. Lasting Impressions Co. discovered during April 2012 that one of its sales clerks had stolen an undetermined amount of cash receipts when she took the daily deposits to the bank. The following data have been gathered for April: Cash in bank according to the general ledger                             $  8,900 Cash according to the April 30, 2012, bank statement                 20,500 Outstanding checks as of April 30, 2012                                        6,800 Bank service charge for April                                                       ...

Journalize the entries to record the following: a. Check No. 6300 is issued to establish a petty cash fund of $1,200. b. The amount of cash in the petty cash fund is now $200. Check No. 6527 is issued to replenish the fund, based on the following summary of petty cash receipts: office supplies, $650; miscellaneous selling expense, $230; miscellaneous administrative expense, $90. (Since the amount of the check to replenish the fund plus the balance in the fund do not equal $1,200, record the discrepancy in the cash short and over account.) Answer: a. Petty Cash....................... 1,200   Cash .............................................  1,200 b. Office Supplies ...................... 650 Miscellaneous Selling Expense......... 230 Miscellaneous Administrative Expense .. 90 Cash Short and Over.................... 30   Cash ...........................................................................  1,000

Mattel, Inc., designs, manufactures, and markets toy products worldwide. Mattel’s toys include Barbie™ fashion dolls and accessories, Hot Wheels™, and Fisher-Price brands. For a recent year, Mattel reported the following net cash flows from operating activities (in thousands): First quarter ending March 31           $ (214,807) Second quarter ending June 30             (135,003) Third quarter ending September 30           31,003 Fourth quarter December 31               1,102,915 Explain why Mattel reported negative net cash flows from operating activities during the first two quarters, a small positive net cash flow in the third quarter, and a large positive cash flow for the fourth quarter with overall net positive cash flow for the year. Answer: Toy manufacturers and retailers experience a seasonal trend in cash flows from operating activities. Mattel, Inc., experiences n...

Identify the errors in the following bank reconciliation: Alma Co. Bank Reconciliation For the Month Ended November 30, 2012 Cash balance according to bank statement. . . . . . . . . . . . . . . . . . . . . . . . . . $12,090 Add outstanding checks: No. 915. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $  850   960. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 615   964. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 850   965. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .       775     3,090 $15,180 Deduct deposit of November 30, not recorded by bank  . . . . . . . . . . . . . . 4,000 Adjusted balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...

An accounting clerk for Muskegon Co. prepared the following bank reconciliation: Muskegon Co. Bank Reconciliation May 31, 2012 Cash balance according to company’s records . . . . . . . . . . . . . . . . . . . . . . . $ 5,110 Add: Outstanding checks  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $2,500 Error by Muskegon Co. in recording Check  No. 2219 as $810 instead of $180. . . . . . . . . . . . . . . . . . . . . . . . . . . . 630 Note for $8,000 collected by bank, including interest. . . . . . . . . . . .   8,320  11,450 $16,560 Deduct: Deposit in transit on May 31  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $5,200 Bank service charges  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .         60 5,260 Cash balance according to bank statement. . . . . . . . . . . . . . . . . . . . . . . . . . $11,300  a. From the data in the above bank reconciliati...

Accompanying a bank statement for O’Fallon Company is a credit memo for $21,200, representing the principal ($20,000) and interest ($1,200) on a note that had been collected by the bank. The company had been notified by the bank at the time of the collection, but had made no entries. Journalize the entry that should be made by the company to bring the accounting records up to date. Answer: Cash .................................. 21,200 Notes Receivable.......................................  20,000 Interest Revenue........................................  1,200

The following data were accumulated for use in reconciling the bank account of Maplewood Co. for July: 1. Cash balance according to the company’s records at July 31, $15,600. 2. Cash balance according to the bank statement at July 31, $16,230. 3. Checks outstanding, $3,180. 4. Deposit in transit, not recorded by bank, $2,950. 5. A check for $270 in payment of an account was erroneously recorded in the check register as $720. 6. Bank debit memo for service charges, $50. a.  Prepare a bank reconciliation, using the format shown in Exhibit 7. b.   If the balance sheet were prepared for Maplewood Co. on July 31, what amount should be reported for cash? c.  Must a bank reconciliation always balance (reconcile)? Answer: a.  MAPLEWOOD CO. Bank Reconciliation July 31, 20—  Cash balance according to bank statement........................... $16,230 Add deposit in transit, not recorded by bank ........................   2,950    $19,180 Deduct outstanding c...