Lesson%206%20Solutions

Lesson%206%20Solutions - Suggested Solutions for ACCT 351...

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Unformatted text preview: Suggested Solutions for ACCT 351 Adapted from Beechy, T. H., & Conrod, J. E. D. (2005). Solutions manual to accompany intermediate accounting, volume 1 (3 rd Can. ed.). Toronto: McGraw-Hill Ryerson. Reproduced with permission. Page 1 of 10 Lesson 6, Chapter 7 Assignment 7-1 (text, p. 382) a) Post-dated cheque—report as accounts receivable because it is not negotiable until the date on the cheque. b) Report as an account receivable because it is not a negotiable instrument at this time. Debit Accounts Receivable, and credit Cash. If ultimately not collectible, write off as a bad debt. c) This amount is a cash equivalent and may be shown as part of cash on the balance sheet if cash is re-named, “cash and cash equivalents.” Components of cash and cash equivalents must be disclosed. d) Include the $300 balance in petty cash in the balance reported as cash. e) Report the $30 of postage stamps as prepaid postage—stamps are not cash. f) Include the money order in the cash balance because it will be accepted by banks for immediate deposit. g) These “held” cheques were not, and should not be, recorded as 20X5 payments because the company still has full control of them. They have been accounted for correctly. The amounts are still payable to suppliers. h) The bank account with the $86,000 is clearly a cash balance, subject to adjustments above. The overdraft is a current liability and cannot be offset because it is at a different financial institution. Suggested Solutions for ACCT 351 Page 2 of 10 Assignment 7-2 (text, pp. 382–383) Analysis of the bank statement and cash account shows the following: a) Deposit in transit, 30 June .............................................. $2,700 b) Cheques outstanding: #62 .................................................................................. $ 900 #68 .................................................................................. 1,300 $2,200 c) Interest earned on bank balance...................................... $ 100 Bank Book Bank Reconciliation, 30 June Ending June balance $22,580 Ending June balance $22,980 Deposits in transit 2,700 Interest earned 100 #62 (900) #68 ( 1,300 ) Correct cash balance $23,080 $23,080 The following journal entry must be made by Jones Company: Cash................................................................................................................. 100 Interest revenue........................................................................................ 100 Suggested Solutions for ACCT 351 Page 3 of 10 Assignment 7-14 (text, p. 389) Requirement 1 This transaction is a sale of the receivable with passage of control and known consideration. The carrying (i.e., book) value of the receivables should be removed from the accounts of XCourt Company. The without recourse provision means that XCourt has no liability related to the transfer. The following sale entry is appropriate: Cash....................................................................................................... 64,200 Cash....
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Lesson%206%20Solutions - Suggested Solutions for ACCT 351...

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