Problem 1

Bow Corp.s auditor observes the following related to Bow Corp.s Cash account balance as of 1/31/21. Use this information to prepare a bank reconciliation for Bow Corp.

• Bow Corp.s 1/31/21 Cash T account shows a balance of $85,000.
• Bow Corp.s bank statement dated 1/31/21 shows a balance of $75,000.
• Bow Corp. wrote a check and forgot to post the related journal entry to the T accounts. The journal entry that Bow Corp. forgot to post was: Dr. Rent Expense 5,000 and Cr. Cash 5,000.
• The bank reports that Bow Corp.s customers check was returned as NSF check. The check was for $600. Bow Corp. has not yet reflected this NSF check in its Cash balance.
• Bow Corp. incorrectly recorded a debit to Cash for $200 on a check that was received for $2,000.
• Bow Corp. has deposits of $9,800 that do not yet appear on the bank statement.
• Bow Corp. has not yet recorded bank fees of $500.
• The bank forgot to record a $900 deposit made by Bow Corp.
• Bow Corp. has written $4,000 worth of checks that have not yet cleared the bank.
• Bow Corp. has not yet recorded $1,000 of interest income related to the bank account.

Bow Corp. Bank Reconciliation As of 1/31/21
Balance per bank, 1/31/21				Balance per books, 1/31/21
Adjusted bank balance, 1/31/21				Adjusted books balance, 1/31/21

Problem 2

The Accounts Receivable balance for Knight Consulting is $1,400,000 as of March 31, 2021. Before calculating and recording the months bad debt expense, there is a credit balance in the Allowance for Doubtful Accounts of $17,500. The March 2021 net sales were $19,000,000. In the past several years, 1% of net sales have proven uncollectible. An aging of accounts receivable results in a $203,000 estimate for the Allowance for Doubtful Accounts as of March 31, 2021.

PART A: PERCENT OF SALES METHOD

Assume that Knight Consulting uses the percent of sales method to estimate future uncollectible accounts.

• What adjusting entry does Knight make to record March 2021 Bad Debt Expense?

• What is Accounts Receivable, net on Knights March 31, 2021 Balance Sheet? $___________

• What is Bad Debt Expense on Knights March 2021 Income Statement? $___________

PART B: ANALYSIS OF RECEIVABLES METHOD

Assume that Knight Consulting instead uses the analysis of receivables method to estimate future uncollectible accounts.

• What adjusting entry does Knight make to record March 2021 Bad Debt Expense?

• What is Accounts Receivable, net on Knights March 31, 2021 Balance Sheet? $___________

• What is Bad Debt Expense on Knights March 2021 Income Statement? $___________