Chapter 1 Problem 4-14
a. Reconciliation – October 31
Adjusted book balance 600,000
Bank balance 400,000
Add: Deposit in transit 300,000
Total 700,000
Less: Outstanding checks 100,000
Adjusted bank balance 600,000
Reconciliation – November 30
Book balance 1,000,000
Add: Understatement of collection from customer 90,000
Total 1,090,000
Less: Understatement of check disbursement 270,000
Adjusted book balance 820,000
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Bank balance 930,000
Add: Deposit in transit 190,000
Check of Susan Company charged in error 200,000 390,000
Total 1,320,000
Less: Outstanding checks 400,000
Deposit of Susan Company erroneously credited 100,000 500,000
Adjusted bank balance 820,000
b. Adjusting entries – November 30
1. Cash in bank 90,000
Accounts receivable 90,000
2. Accounts payable 270,000
Cash in bank 270,000
Computation of outstanding checks – October 31
Outstanding checks – October 31 (squeeze) 100,000
Add: Checks issued by depositor:
Book disbursements 1,800,000
Understatement of check paid 270,000 2,070,000
Total 2,170,000
Less: Checks paid by bank:
Bank disbursements 1,970,000
Check of Susan Company charged in error ( 200,000) 1,770,000
Outstanding checks – November 30 400,000
Computation of deposit in transit – November 30
Deposit in transit – October 31 300,000
Add: Cash receipts deposited during November:
Book receipts 2,200,000
Understatement of collection from customer 90,000 2,290,000
Total 2,590,000
Less: Deposits credited by bank during November:
Bank receipts 2,500,000
Deposit of Susan Company erroneously credited ( 100,000) 2,400,000
Deposit in transit – November 30 190,000
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