Bank Reconciliation

Bank Reconciliation


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Bank reconciliation: use the following information to prepare a bank reconciliation for Dillion Company at April 30:

1.       balance per cash account, April 30, $6042.10

2.       balance per bank statement, April 30, $6300.28

3.       deposit is not reflected on bank statement, $650

4.       outstanding checks, April 30, $1140.18

5.       service charge on bank statement not recorded in books, $12

6.       error by bank – Dillard company check charged on Dillion companies bank statement, $400

7.       check for advertising expenses, $130, incorrectly recorded on books as $310


Internal control: Regent Company encountered the following situations:

a.       The person who opens the mail for Regent, Bill Stevens, stole a check from a customer and cashed it. The cover-up theft, he debited sales returns and allowances and credited Accounts Receivable in the general ledger. He also posted the amount to the customer’s account in the Accounts Receivable subsidiary ledger.

b.       The purchasing agent, Susan Martin, used a company purchase order to order building materials from builders marked. Later, she telephoned builders marked and changed the delivery address to her home address. She told builders marked to charge the materials to the company. At month end, she approved the invoice from builders marked for payment.

c.       Nashville Supply Company sent to invoices for the same order: the first on June 10 and the second on July 20. The accountant authorized payment for both invoices and both were paid.

d.       On January 1, Jack Monte, a junior accountant for Regent, was given the responsibility of recording all general journal entries. At the end of the year, the auditors discovered that Monty had made 150 serious errors in recording transactions. The chief accountant was unaware that Monty had been making mistakes.


For each situation, describe any violation of good internal control procedures and identify the steps that you would take to prevent each situation.



Credit losses based on credit sales: Highland company uses the allowance method of handling credit losses. It estimates losses at 1% of credit sales, which were $1,200,000 during the year. On December 31, the accounts receivable balance was $280,000 in the allowance for doubtful accounts had a credit balance of $1700 before adjustment.

a.       Prepare the adjusting entry to record credit losses for the year.

b.       Show how the accounts receivable account and the allowance for doubtful accounts would appear on the December 31 balance sheet.


credit losses based on Accounts Receivable: Maxwell Inc. analyzed its accounts receivable balances on December 31 and arrived at the age to balances listed below, along with the percentage that is estimated to be uncollectible:

age group                                                                                            balance                probability of non-collection

0 – 30 days past due                                                                        $100,000                              1

31 to 60 days past due                                                                   $18,000                                 3

61 to 120 days past due                                                                $20,000                                 6

121 to 180 days past due                                                              $7000                                    10

over 180 days past due                                                                  $2000                                    20



The company handles credit losses with the allowance method. The credit balance of the allowance to doubtful accounts is $840 on December 31, before any adjustments.

a.       Prepare the adjusting entry for estimated credit losses on December 31

b.       prepare the journal entry to write off Porter company’s account on the following May 12 in the amount of $480



allowance method: Fullerton company, which has been in business for three years, makes all of its sales on account and does not offer cash discounts. This firms credit sales, collections from customers, and write-offs of uncollectible accounts for the three-year period are summarized below:

year                                       sales                                      collections                                           accounts written off

2012                                       $300,000                              $287,000                                              $2100

2013                                       $385,000                              $380,000                                              $3350

2014                                       $420,000                              $407,000                                              $3650


a.       if Fullerton company had used the allowance method for recognizing credit losses and had provided for such losses at the rate of 1.2% of credit sales, what amounts in accounts receivable and the allowance for doubtful accounts would appear on the firm’s balance sheet at the end of 2014? What total amount of bad debts expense would have appeared on the firm’s income statement during the three year period?


b.       Comment on the use of the 1.2% rate to provide for credit losses in part a