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9-10.

Bank Reconciliation Based on Bank Statement and Cash Account


You have been assigned the audit of cash of Jonas Company. The
following information were uncovered in the course of your examination.
a. Jonas Company received its June 30 bank statement:
Statement Summary:
Balance June 1 .
P23,000
Deposits and other credits ....
11,600
Checks and other debits ..
(12,120)
Interest earned on this statement
100
Ending balance, June 30 .. P22,580
Accounts transactions:
Deposits

Checks

6-1 .. P2,000
P
400
6-8 ..
3,000
1,100
6-17
4,500
2,100
6-22
2,100
1,100
Total . P11,600
P12,120

6-2

#61 P1,000

6-17 #65

6-7

#63

2,000

6-23 #60

6-9

#66

3,000

6-27 #67

6-14 #64

1,420

6-28 #59

b. A
Cash Account
Balance June 1
Deposits
400
1,000
6-17
4,500
2,100
6-22
2,100
1,300
6-30
2,700

P23,900
12,300
66

Checks
60 P1,000
6-8 P3,000
3,000
62
900
63

2,000

64

1,420

P13,220
65

P
61

67
68

c. Bank reconciliation at May31:


Bank balance, P23,000, add deposit outstanding, P2,000,
deduct check #59 outstanding, P1,100,
book balance, P23,900.
REQUIRED:
Prepare the June bank reconciliation and give any entries required. Use
the bank and book balance to correct cash balance format.

ANSWER:
a. Deposit in-transit, June 30:............

P2,700

b. Checks outstanding:
# 62..............................................
# 68..............................................

P 900
1,300 P2,200

c. Interest earned on bank balance...

P 100

Bank Reconciliation, June 30


Bank
Book
Ending
June P22,5 Ending
June P22,9
balance..................
80 balance..................
80
Deposits in-transit. 2,700 Interest earned......
100
Checks
outstanding:
#62................... (900)
#68...................
(1,3
00)
Correct
cash
P23,0
balance.................. P23,0
80
80
The following journal entry must be made by Jonas Company:
Cash...................................................
Interest revenue

100
100

10-7. Your regular annual audit of North, Inc., included the confirmation of
accounts receivable. You decided to use the positive form of confirmation
request. Satisfactory replies were received from all but one of the large
accounts. You sent a second and third request to this customer, but received
no reply. At this point an employee of the client company informed you that a
check had been received for the full amount of the receivable. Would you
regard this as a satisfactory disposition of the matter? Explain.

ANSWER:
No, the matter remains unresolved. First, oral evidence from the client
is never in itself sufficient; the auditors must follow up to determine
the reliability of the oral evidence. Second, payment of an account
receivable is not confirmation; the account might be fictitious, and the
payment could have been made by a dishonest employee who had
created the fictitious account to conceal a cash shortage. The auditors
must examine the customer purchase order or contract, and copies of
the sales invoice and shipping document, in support of the
unconfirmed receivable. They should also determine the genuineness
of the customer by reference to the telephone directory or to credit
agency reports.
10-24. Journal Entry to Separate Receivables
An examination of the accounting records for the Amy Corporation
indicates that all receivables are being recorded in a single account entitled
Receivables. An analysis of the account reveals the following:
Accounts receivable (trade)
P15,500
Accounts receivable (officers)
3,600
Ordinary shares subscriptions receivable (current)
12,000
Advances to employees
1,800
Notes receivable (trade), due in 3 years
6,000
Deposit to guarantee contract performance
5,000
Utility deposit
500
Total
P44,400
REQUIRED:

1. Prepare a journal entry to separate the preceding items into their


proper accounts.
2. How would each of the preceding items normally be reflected on
Amys statements of financial position?

ANSWER:
Requirement 1
Accounts Receivable (Trade)
15,500
Accounts Receivable (Officer)
3,600
Ordinary Shares Subscriptions Receivable 12,000
Advances to Employees
1,800
Notes Receivable (Trade)
6,000
Deposit to Guarantee Contract Performance
5,000
Utility Deposit
500
Receivables
44,400
Requirement 2
Accounts receivable (trade)--current asset, trade
receivable
Accounts receivable (officer)--normally current
nontrade receivable
Ordinary shares subscription receivable--current or
noncurrent asset, depending on due date; nontrade
receivable
Advances to employees--current asset, nontrade
receivable
Notes receivable (trade)--noncurrent asset, trade
receivable
Deposit to guarantee contract performance-separately classify, could be current or noncurrent

asset, depending on the length of the contract;


nontrade receivable
Utility deposit--separately classify, probably noncurrent
nontrade receivable