Question
Youve just been hired as an accountant at the Murdstone Co., a retailer of supplies for arts and crafts. Since the previous accountant left his
Youve just been hired as an accountant at the Murdstone Co., a retailer of supplies for arts and crafts. Since the previous accountant left his position suddenly, the controller of Murdstone Co. has asked for your assistance in filling in some missing data for the companys January accounting records. Youll also be responsible for training the companys new accounting intern
CHART OF ACCOUNTS
Murdstone Co.General Ledger
ASSETS | |
110 | Cash |
111 | Petty Cash |
112 | Accounts Receivable |
115 | Merchandise Inventory |
117 | Office Supplies |
118 | Prepaid Insurance |
120 | Land |
123 | Store Equipment |
124 | Accumulated Depreciation-Store Equipment |
125 | Office Equipment |
126 | Accumulated Depreciation-Office Equipment |
LIABILITIES | |
210 | Accounts Payable |
211 | Salaries Payable |
212 | Unearned Rent |
213 | Customer Refunds Payable |
215 | Notes Payable |
EQUITY | |
310 | Edward Murdstone, Capital |
311 | Edward Murdstone, Drawing |
REVENUE | |
410 | Sales |
610 | Rent Revenue |
EXPENSES | |
510 | Cost of Merchandise Sold |
516 | Cash Short and Over |
520 | Sales Salaries Expense |
521 | Advertising Expense |
522 | Depreciation Expense-Store Equipment |
523 | Delivery Expense |
529 | Miscellaneous Selling Expense |
530 | Office Salaries Expense |
531 | Rent Expense |
532 | Depreciation Expense-Office Equipment |
533 | Insurance Expense |
534 | Office Supplies Expense |
539 | Miscellaneous Administrative Expense |
710 | Interest Expense |
The controller has completed the T accounts for the Cash and Sales accounts as of January 30, but needs to attend an important conference in another city. She has requested that you prepare the T account for the Cash Short and Over account as of January 30 also. You are told that the balance of the account is zero as of the beginning of January, and that all the companys sales are in cash.
Review the following T accounts, and then scroll down to complete the Cash Short and Over T account and answer the associated question that follows it.
Cash | |||
Balance 1/1/Y5 | 5,500 | 1/2/Y5 Establish Petty Cash | 500 |
1/5/Y5 | 2,775 | ||
1/12/Y5 | 6,255 | ||
1/23/Y5 | 3,270 | ||
1/30/Y5 | 4,450 | ||
Balance | 21,750 |
Sales | |||
Balance 1/1/Y5 | 0 | ||
1/5/Y5 | 2,780 | ||
1/12/Y5 | 6,240 | ||
1/23/Y5 | 3,290 | ||
1/30/Y5 | 4,400 | ||
Balance | 16,710 |
Review the T accounts previously shown, and then complete the Cash Short and Over T account and the following associated question.
Balance 1/1/Y5 | 0 | (DROPDOWN) | _________ |
---|---|---|---|
(DROPDOWN) | ______ | (DROPDOWN) | _________ |
(DROPDOWN) | ______ | ||
BALANCE | _______ |
DROPDOWN OPTIONS:
1/30/Y5
1/23/Y5
1/12/Y5
1/5/Y5
_________ = fill in blank
What will happen to the ending balance in the Cash Short and Over account at the end of the accounting period?
a.The discrepancy must be reported on the company website.
b.The discrepancy must be reported to the Securities and Exchange Commission.
c.It will be added to the Other revenue section of the income statement.
d.It will be a miscellaneous expense on the income statement.
Murdstone Co. issued a check on January 2 to establish a petty cash fund of $500. On January 31, the amount of cash in the petty cash fund is $439. The company would like to issue a check to replenish the fund, based on the following summary of petty cash receipts:
Account | Amount on Receipt |
Office Supplies | $32.00 |
Miscellaneous Administrative Expense | 23.00 |
The companys policy is to record any missing funds in the Cash Short and Over account.
The new intern has prepared a proposed journal entry to record the replenishing of the petty cash fund:
PAGE 17
JOURNAL
ACCOUNTING EQUATION
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
---|---|---|---|---|---|---|---|---|
1 | Jan. 31 | Petty Cash | 55.00 | |||||
2 | Cash | 55.00 |
Prepare for your discussion with the intern by creating the corrected journal entry for the replenishment of the petty cash fund. Refer to the Chart of Accounts for exact wording of account titles.
PAGE 17
JOURNAL
ACCOUNTING EQUATION
DATE | DESCRIPTION | POST. REF. | DEBIT | CREDIT | ASSETS | LIABILITIES | EQUITY | |
---|---|---|---|---|---|---|---|---|
1 | ||||||||
2 | ||||||||
3 | ||||||||
4 |
The companys accounting intern has prepared the end-of-January bank reconciliation from the bank statement, and is worried because the Adjusted Balance amounts do not agree. After reviewing the bank reconciliation, scroll down for the next steps in helping the intern.
Murdstone Co. |
Bank Reconciliation |
January 31, 20Y5 |
1 | Cash balance according to bank statement | $23,557.98 | |
2 | Deduct deposit of May 31, not recorded by bank | 12,125.25 | |
3 | $11,432.73 | ||
4 | Add outstanding checks: | ||
5 | No. 124 | $62.00 | |
6 | No. 125 | 57.00 | |
7 | No. 129 | 1,250.00 | 1,369.00 |
8 | Adjusted balance | $12,801.73 | |
9 | |||
10 | Cash balance according to Murdstone Co. | $51,545.88 | |
11 | Add check returned because of insufficient funds | 23,475.40 | |
12 | $75,021.28 | ||
13 | Deduct: Note and interest collected by bank | $15,250.75 | |
14 | Bank service charge | 250.00 | |
15 | Error in recording Check No. 123 | 9,000.00 | 24,500.75 |
16 | Adjusted balance | $50,520.53 |
You assist the intern to check source documents, and find that most of the dollar amounts are correct; however, two dollar amounts are incorrect. After reviewing the following table, scroll down for the next steps in helping the intern.
Item | Correct in Interns Reconciliation? | If No, Corrected Amount |
Cash balance according to bank statement | Yes | |
Deposit of January 31, not recorded by bank | Yes | |
Outstanding check No. 124 | Yes | |
Outstanding check No. 125 | No | $75.00 |
Outstanding check No. 129 | Yes | |
Cash balance according to Murdstone Co. | Yes | |
Amount of check returned because of insufficient funds | Yes | |
Amount of note and interest collected by bank | Yes | |
Bank service charge | No | $25.00 |
Company error in recording Check No. 123 as $12,435.00 rather than the correct amount of $21,435.00 | Yes |
After asking the intern to search for other errors by comparing her reconciliation to prior bank reconciliations prepared by the former accountant, you work together to compute the corrected Adjusted Balance. Enter your answer with two decimal places.
Corrected Adjusted Balance amount:
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