QUESTION 1

Computer Company received its bank statement for the month of May 2016 showing a credit balance of$4,188.30 as at 31 May 2016. The cash balance on the companys books at 1 May 2016 was $5,176.40(debit). The progressive totals of the Cash Receipts Journal and the Cash Payments Journal beforeconsidering items 1 to 5 below were $21,475.40 and $22,622.50 respectively. The following reconcilingitems were identified:

1. Unpresented cheques amounted to $501.25.

2. Debits included in the bank statements were:

(a) A $225.00 cheque received from a customer and deposited by Computer Company wasreturned and marked Insufficient Funds.

(b) Service fee for the month was $11.75.

(c) Cheque book charge $12.00.

(d) A credit in the bank statement indicated that a note receivable for the amount of $630 plusinterest of $71 had been collected by the bank. The bank charged a collection fee of $20.00 andcredited the remaining $681.00 to Computer Companys account.

(e) A deposit of $801.50 was in transit on 31 May.

3. The accountant discovered that cheque no. 103 for $225 in payment of insurance premium had beenincorrectly recorded in the cash payments journal as $252.Required:

1. Prepare bank reconciliation for Computer Company as of 31 May 2016 to adjustthe bank and book balance.(30 marks)

2. Prepare required journal entries to adjust the book balance. (12 marks)

Question 2

Pacific Brand Ltd sells portable barbeques on credit. The accounting records at 30 June 2016 (the end offinancial year) reveal the following. Ignore GST.

Credit sales (for year)$1 070 000

Credit sales returns and allowances (for year)$9000

Accounts receivable (balance 30 June 2016) $326 500

Allowance for doubtful debts (debit balance 30 June 2015)$1 500

In the past, the companys yearly bad debts expense had been estimated at 2.5% of net credit salesrevenue. It was decided to compare the current method with an ageing of the accounts receivable method.The following analysis was obtained with respect to the accounts receivable:

Accounts not yet due $175 600 1/2

Accounts overdue: 1030 days $ 61 000 2

3160 days $44 000 10

61120 days $25 400 25

121 days and over $20 500 40

$326 500

Required (ignore GST and narration and show all workings):

(a) Calculate the amount of Provision for Doubtful Debts to be available at 30 June 2016using ageing of accounts receivable method.

(b) Prepare the adjusting entry for estimated bad debts on 30 June 2016 using ageingmethod.

(c) Using the Net Credit Sales method to estimate its bad debts, prepare the adjusting entryfor estimated bad debts on 30 June 2016.

(d) Amosiri Ltd is one of the customers that have been declared to be uncollectible,therefore need to be written off. Show the journal entry to write off Amosiris account inJuly 2016. The amount Amosiri owed was $5,750