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Concept explainers
(a)
Owner withdrawals:
Owner withdrawals refer to the withdrawals of money by the owner from the business for his/her personal use. This decreases the owner’s equity account. As owner’s drawing account is increased by debits, and decreased by credits, it has a normal debit balance.
To discuss: The cause of the unusual balance of the cash account with a credit balance of $1,850, assuming that no errors have occurred during journalizing, and posting.
(b)
To identify: Whether the credit balance of $1,850 in the cash account is an asset, a liability, owner’s equity, revenue, or an expense.
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Chapter 2 Solutions
Bundle: Financial & Managerial Accounting, Loose-leaf Version, 13th + CengageNOWv2, 1 term (6 months) Printed Access Card Corporate Financial ... Access Card for Managerial Accounting, 13th
- Requirement 1: ABC Company adheres to a policy of depositing all cash receipts in a bank account and making all payments by check. The cash account as of December 31 has a credit balance of $1,850, and there is no undeposited cash on hand. (a) Assuming that no errors occurred during journalizing or posting, what caused this unusual balance? (b) Is the $1,850 credit balance in the cash account an asset, a liability, owner's equity, a revenue, or an expense? Requirement 2: Assume that DEF Company erroneously recorded the payment of $7,500 of owner withdrawals as a debit to Salary Expense. (a) How would this error affect the equality of the trial balance? (b) How would this error affect the income statement, statement of owner's equity, and balance sheet?arrow_forwardFrank Kane company adheres to a policy of depositing all cash receipts in a bank account and making all payments by check. The accounts as of July 31 has a credit balance of K225 and there is no undeposited cash on hand. a) Assuming that there were no errors in journalizing or posting, what is the explanation of this unusual balance? b) Is the K225 credit balance in the cash account an asset, a liability, capital, a revenue or an expense?arrow_forwardThe bank mistakenly recorded the collection of $385 on a customer account as $358 in the bank statement. The cheque was written in the correct amount and was correctly recorded in the company’s accounting system. The journal entry required to correct this error would be: Select one: a. debit Accounts Receivable, $385; credit Cash, $385 b. debit Cash, $27; credit Accounts Receivable, $27 c. debit Cash, $385; credit Accounts Receivable, $385 d. debit Accounts Receivable, $27; credit Cash, $27 e. no journal entry is requiredarrow_forward
- Analyze the following errors that appeared on Black Electric’s bank statement and in the accounting records: a. The bank recorded a deposit of $30 as $300. b. The company’s bookkeeper mistakenly recorded a deposit of $250 as $520. c. The company’s bookkeeper mistakenly recorded a payment of $450 received from a customer as $540 on the bank deposit slip. The bank caught the error and made the deposit for the correct amount. d. The bank statement shows a check that was written by the company for $392 was erroneously paid (cleared the account) as $329. e. The bookkeeper wrote a check for $275 but erroneously wrote down $257 as the cash disbursement in the company’s records. Requirement For each error, describe how the correction would be shown on the company’s bank reconciliation.arrow_forwardRyan Company deposits all cash receipts on the day they are received and makes all cash payments by check. Ryan's June bank statement shows a $29,361 balance in the bank. Ryan's comparison of the bank statement to its cash account revealed the following: Deposit in transit Outstanding checks Multiple Choice Additionally, a $49 check written and recorded by the company was incorrectly recorded by the bank as a $94 deduction. The adjusted cash balance per the bank records should be: O O $31,580 $31,535 $34,487 $31,625 3,650 1,431 $24.325 H Seved Oarrow_forwardNolan Company's cash account shows a $26,426 debit balance and its bank statement shows $25,694 on deposit at the close of business on June 30. a. Outstanding checks as of June 30 total $2,907. b. The June 30 bank statement lists $32 in bank service charges; the company has not yet recorded the cost of these services. c. In reviewing the bank statement, a $80 check written by the company was mistakenly recorded in the company's books as $89. d. June 30 cash receipts of $3,656 were placed in the bank's night depository after banking hours and were not recorded on the June 30 bank statement. e. The bank statement included a $40 credit for interest earned on the company's cash in the bank. The company has not yet recorded interest earned. Prepare a bank reconciliation using the above information. Bank statement balance Add: Deduct: Adjusted bank balance NOLAN COMPANY Bank Reconciliation June 30 Book balance Add: Deduct: Adjusted book balancearrow_forward
- Nolan Company's cash account shows a $29,193 debit balance and its bank statement shows $28,152 on deposit at the close of business on June 30. a. Outstanding checks as of June 30 total $2,801. b. The June 30 bank statement lists $32 in bank service charges; the company has not yet recorded the cost of these services. c. In reviewing the bank statement, a $80 check written by the company was mistakenly recorded in the company's books as $89. d. June 30 cash receipts of $3,853 were placed in the bank's night depository after banking hours and were not recorded on the June 30 bank statement. e. The bank statement included a $34 credit for interest earned on the company's cash in the bank. The company has not yet recorded interest earned. Prepare a bank reconciliation using the above information. NOLAN COMPANY Bank Reconciliation June 30 Bank statement balance Book balance Add: Add: Deduct: Deduct: Adjusted bank balance Adjusted book balancearrow_forwardThe Cash account of Ranger Corp. reported a balance of $2,480 at August 31. Included were outstanding cheques totaling s600 and an August 31 deposit of $380 that did not appear on the bank statement. The bank statement, which came from Turkay Bank, listed an August 31 balance of $3,297. Included in the bank balance was an August 30 collection of $624 on account from a customer who pays the bank directly. The bank statement also shows a $17 service charge, $20 of interest revenue that Ranger earned on its bank balance, and an NSF cheque for $30. Prepare a bank reconciliation to determine how much cash Ranger actually has at August 31. (Include the balances at August 31 in each of the addition subtotal calculations.) Ranger Corp. Bank Reconciliation August 31 Bank Books Balance, August 31 Balance, August 31 Add: Add: Subtotal Subtotal Less: Less: Choose from any list or enter any number in the input fields and then continue to the next question.arrow_forward
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