Problem 1 (12 points)

GT Co.s accountant observes the following related to GT Co.s Cash account balance as of 10/31/21. Use this information to prepare a bank reconciliation for GT Co.

• GT Co.s 10/31/21 Cash T account shows a balance of $82,000.
• GT Co.s bank statement dated 10/31/21 shows a balance of $74,000.
• GT Co. has not yet recorded bank fees of $500.
• The bank twice recorded a $700 deposit made by GT Co.
• GT Co. has not yet recorded $800 of interest revenue related to the bank account.
• GT Co. has written $1,700 worth of checks that have not yet cleared the bank.
• The bank reports that one of GT Co.s customers check was returned as NSF. The check totaled $440.
• GT Co. received a check but forgot to post the related journal entry to the T accounts. The journal entry that GT Co. forgot to post was: Dr. Cash 9,000 and Cr. Service Revenue 9,000.
• GT Co. incorrectly recorded a debit to Cash for $1,400 on a check that was received for $140.
• GT Co. has deposits of $18,000 that do not yet appear on the bank statement.

GT Co. Bank Reconciliation As of 10/31/21
Balance per bank, 10/31/21				Balance per books, 10/31/21
Adjusted bank balance, 10/31/21				Adjusted books balance, 10/31/21

Problem 2 (11 points)

The accounts receivable balance for Hawk Corporation is $6,400,000 as of October 31, 2021. Before calculating and recording the months bad debt expense, there is a credit balance in the Allowance for Doubtful Accounts of $100,000. October 2021 net sales were $48,000,000. In the past several years, 1% of net sales have proven uncollectible. An aging of accounts receivable results in a $520,000 estimate for the Allowance for Doubtful Accounts as of October 31, 2021.

PART A: PERCENT OF SALES METHOD

Assume that Hawk Corporation uses the percent of sales method to estimate future uncollectible accounts.

• What adjusting entry does Hawk make to record October 2021 Bad Debt Expense?

• What is Accounts Receivable, net on Hawks October 31, 2021 Balance Sheet? $___________

• What is Bad Debt Expense on Hawks October 2021 Income Statement? $___________

PART B: ANALYSIS OF RECEIVABLES METHOD

Assume that Hawk Corporation instead uses the analysis of receivables method to estimate future uncollectible accounts.

• What adjusting entry does Hawk make to record October 2021 Bad Debt Expense?

• What is Accounts Receivable, net on Hawks October 31, 2021 Balance Sheet? $___________

• What is Bad Debt Expense on Hawks October 2021 Income Statement? $__________