ACCT1501 2011 Final Exam Practice Answers - ACCT1501...

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ACCT1501 Practice Exam Questions & Solutions 2012S11QUESTION 1 – Bank Reconciliation ASB Ltd. received its bank statement for the month ending 30 June, and reconciled the statement balance to the 30 June balance in the Cash account. The reconciled balance was determined to be $4800. The reconciliation recognised the following items: 1.Deposits in transit were $2100. 2.Outstanding cheques totalled $3000. 3.Bank service charges shown as a deduction on the bank statement were $50. 4.An NSF cheque from a customer for $400 was included with the bank statement. The firm had not been previously notified that the cheque had been returned non-sufficient funds (NSF). 5.In dealing with the review of cheques that have been paid out, there was a cheque actually written for $890, which has been mistakenly recorded as a disbursement of $980. Part A: What was the balance in ASB Ltd’s cash account before recognising any of the above reconciling items? (Show all the necessary steps.) Solution approach:Set up a bank reconciliation in the usual format, enter the known information, and then work backwards to solve for the beginning balances in the company’s Cash account and on the bank statement.Indicated balance (per books) $ 5160Add: Cheque recording error Less: NSF cheque90 (400)Bank service charge (50)Reconciled balance$4 800Balance per Cash account before reconciliation = $4 800 – 90 + 400 + 50 = $5 160Key: Solve for the unadjusted cash account balance as the missing item given the reconciled balance and, reconciling items. Part B: What was the balance shown on the bank statement before recognising any of the above reconciling items? (Show all the necessary steps.) Indicated balance (per bank) $ 5700Less: Outstanding cheques (3 000)Add: Deposits in transit 2 100 Reconciled balance$4 800Again, solve the bank statement balance as the missing item given the reconciled balance and reconciling items. Balance per bank before reconciliation = $4 800 – 2 100 + 3000 =$5 700 Part C: Prepare any necessary adjusting journal entries. Debit Credit Bank charges (Interest expense) Cash Accounts Receivable Cash Cash Miscellaneous Expense 50 400 90 50 400 90
ACCT1501 Practice Exam Questions & Solutions 2012S12QUESTION 2 ACCOUNTS RECEIVABLES On 1st July, 2007, one of SSS’s customers, BBB, went bankrupt. BBB owes SSS $2,500 and there is no hope for recovering this amount. On 1stOctober 2007, SSS collected $85,000 from outstanding accounts. SSS Company’s financial year ends on 31stDecember. During the year to 31 December 2007, SSS sold goods for cash for $22,000, and on credit for $80,000. On 1stJanuary 2007, SSS Ltd. has a debit balance of $30,000 in Accounts Receivable and a credit balance of $ 4,500 in the Allowance for Doubtful Debts. Required:Part A (i)If bad debts expense for 2007 is recognised based on 2% of credit sales, prepare the entry to record bad debts expense.

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