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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

Solutions

Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

Susan Panera is preparing the June 30 bank reconciliation for Panera Bakery. She discovers the following items that explain the difference between the cash balance on her books and the balance as reported by Lawrence Bank:

  1. 1. An ATM withdrawal of $200 for personal use was not recorded by Susan.
  2. 2. A deposit of $850 was recorded by Susan but has not been received by Lawrence Bank as of June 30.
  3. 3. A check written in payment on account to Jayhawk Supply for $340 was recorded by Susan as $430 and by Lawrence Bank as $530.
  4. 4. An ATM deposit of $350 was recorded twice by Lawrence Bank.
  5. 5. An electronic funds transfer of $260 to Sunflower Mills as a payment on account was not recorded by Susan.
  6. 6. Checks No. 103 for $235 and No. 110 for $127 had not cleared Lawrence Bank as of June 30.

Required

  1. 1. Prepare the journal entries required to correct Panera Bakery’s books as of June 30.
  2. 2. Prepare the journal entries required to correct Lawrence Bank’s books as of June 30.

1.

To determine

Prepare necessary journal entry that makes the Bakery P’s books as of June to be correct.

Explanation

Bank reconciliation:

Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare journal entry that makes the Bakery P’s books as of June to be correct.

DateAccount Titles and explanationDebit ($)Credit ($)
June 30Person  S, Drawing200 
      Cash 200
 (To record the unrecorded ATM withdrawal)  

(Table 1)

  • Person S, drawings is a component of stockholder’s equity and there is a decrease in the value of stockholders equity. Hence, debit the Person S, drawings by $200.
  • Cash is an asset and there is a decrease in the value of an asset. Hence, credit the cash by $200.
DateAccount Titles and explanationDebit ($)Credit ($)
June 30No entry for deposit in transit  
    

(Table 2)

DateAccount Titles and explanationDebit ($)Credit ($)
June 30Cash90 
      Accounts payable 90
 (To record the error in recording check)  

(Table 3)

  • Cash is an asset and there is an increase in the value of an asset...

2.

To determine

Prepare necessary journal entry that makes the Bank L’s books as of June to be correct.

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