2293 Chapter 6 Textbook Solutions 292

2293 Chapter 6 Textbook Solutions 292 - Chapter 6 Textbook...

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Unformatted text preview: Chapter 6 Textbook Solutions 6-19 a) Kinte Products Limited Bank Reconciliation October 31, 2008 Balance per bank statement $42,301 Add: Outstanding deposit 2,650 Bank Error 27 2,677 $44,978 Less: Outstanding cheques (1,991) (1,336) (2,286) (5,613) Adjusted cash balance $39,365 Balance per general ledger $38,755 Add: Collection of note receivable 1,200 CRA Tax refund 420 1,620 40,375 Less: Service charge 34 NSF cheque 376 Deposit Correction 600 (1,010) Adjusted cash balance $39,365 b) Bank service charges (SE) 34 Cash (A) 34 Cash (A) 1,200 Note receivable (A) 1,000 Interest revenue 200 Cash (A) 420 CRA Tax Refund(A) 420 Accounts Receivable (A) 376 Cash (A) 376 Accounts Receivable (A) 600 Cash (A) 600 6-20 a) Sanchez Company Bank Reconciliation November 30, 2008 Balance per bank statement $8,525 Add: Outstanding deposit $803 Bank Error 45 848 $9,373 Less: Outstanding cheques (3,575) Bank Error (540) (4,115) Adjusted cash balance $5,258 Balance per general ledger $3,430 Add: Collection of note receivable 2,048 5,478 Less: Service charge $60 NSF cheque 110 Cheque charge 50 (220) Adjusted cash balance $5,258 b) Should have reported $ 5,258 6-21 a) Investment Cost Market Green Company $10,000 $9,500 White Company 10,000 11,000 $20,000 $20,500 The investments will be reported on the balance sheet at their fair market value of $20,500. b) On the income statement, an unrealized gain of $500 will be reported, due to the increase in the value of the investments. 6.22 a) Dividend revenue = (100 x $4) + (200 x $1.50) = $700 b) Looking at dividends only, the return on investments = $700 / $20,000 = 3.5%. This represents the return for a 4-month period, which produces an annualized return of approximately 10.5%. In many cases, however, dividends are distributed only once per year. If that is the case, then over a twelve-month period, the company will not meet its objectives. Looking at the total return on the investments, including the change in the value of the investments (i.e., the capital gain or loss) as well as the dividends received, the company had a return of $1,200. The $500 gain from the increase in the market value of the investments (in 6-21 above) combined with the $700 of dividend revenue results in an overall return of $1,200 on these investments during the period. This equates to a return of 6%, or approximately 18% on an annualized basis....
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2293 Chapter 6 Textbook Solutions 292 - Chapter 6 Textbook...

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