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1. • CommentAuthorcoolgirl_shan
   • CommentTimeApr 13th 2008

    
   Kelly Company received the following October 31, 2007, bank statement:
   
   Transactions Balance
   Balance, September 30 $18,000
   Deposits recorded during October $40,000 58,000
   Customer note collected for Kelly Company
   (including $120 interest)
   2,520 60,520
   Checks cleared during October (38,300) 22,220
   NSF check (given to Kelly by a customer) (100) 22,120
   Bank service charges (15) 22,105
   Balance, October 31 $22,105
   
   The cash account reflected the following for October:
   
   CASH ACCOUNT
   September 30 balance $20,500 October checks written 38,000
   October cash deposits $38,600
   October 31 balance $19,900
   
   The September 30 bank reconciliation showed:
   Deposits in transit, $3,000, and outstanding checks, $500.
   
   Required:
   (a) What was the amount of the deposits in transit at October 31?
   (b) What was the amount of outstanding checks at October 31?
   (c) Prepare a bank reconciliation for October. Use the following format:
   
   Kelly Company
   Bank Reconciliation as at October 31, 2006
   Depositor’s Books Balance: $ Bank Statement Balance: $
   Additions: Additions:
   
   Deductions: Deductions:
   
   Correct cash balance: $ Correct cash balance: $
   
   (d) Give the journal entries that should be made by Kelly Company based on the bank reconciliation.
   (e) Explain briefly the need for above journal entries.
   
   
   Part II
   
   On December 31, 2006, Colonial Corporation had the following account balances related to credit sales and receivables prior to recording adjusting entries:
   
   Accounts receivable $ 25,000
   Allowance for doubtful accounts 200 (credit)
   Sales revenue (all credit sales) 400,000
   
   Required:
   Present the necessary year-end adjusting entry related to uncollectible accounts for each of the following independent assumptions:
   (a)An aging of accounts receivable is completed. It is estimated that $2,150 of the receivables outstanding at year-end will be uncollectible.
   (b)It is estimated that 1% of credit sales for the year will prove to be uncollectible.
   (c)Assume the same information presented in (a) above except that prior to adjustment, the Allowance for Doubtful Accounts had a debit balance of $200 rather than a credit balance of $200.