AC7&8 – Intermediate Accounting

Activity 3A– Cash and cash Equivalents

The December 31, 2019 bank statement for Gardenia Corporation showed balance of P199,925. On this
date, the company’s cash account reflected an overdraft of P32,560. In recording these amounts, the
following information is discovered:
a. Cash on hand for un deposited sales receipts, December 31, 2019, P13,025.
b. Customer’s NSF check returned with bank statement, P42,040.
c. Cash sales of P64,025 for the week ended December 18, 2019 were recorded in the books. The
cashier reports this amount missing, and it was not deposited in the bank.
d. Note receivable of P250,000 and interest of P2,500 were collected by the bank and not recorded
in the books.
e. Deposit in transit December 31, 2019, P35,000.
f. A customer’s check for P29,040 in payment of its account was recorded in the books at P94,020.
g. Outstanding checks, P204,055, include a duplicate check of P7,085 to C. Santos, whom notified
Gardenia that the original check was lost. Gardenia stopped payment on the original check and
has already adjusted the cash account in its accounting records for this amount.
h. The cash account includes petty cash fun in the amount of P5,000. When the fund is counted on
December 31, it was found to include paid petty cash vouchers totaling P1,800.

REQUIRED:
(a) Prepare a bank reconciliation at December 31, 2019 that brings both the bank and book
balances to a corrected figure.
(b) Prepare adjusting entries for the foregoing.
Source: Intermediate Accounting Part 1 – Robles and Empleo

Activity 3B– Cash and cash Equivalents

The accountant of Burns Company gathered the following data in his attempt to reconcile its records
with the data from the bank statements sent by Silver (SB) for the months of March and April.

March April
Cash in SB per ledger 2,055,300 3,002,500
Balances per bank statement 2,203,500 3,097,250
Credits to Cash in SB account 4,619,800
Deposits and credit memos per bank statement 5,251,500
Outstanding checks 275,000 580,000
Deposits in transit 125,000 670,000
Erroneous bank credit 20,000
Note collected by bank 17,000
Bank service charge 1,800
Burns Company discounted its own note for P200,000 with the bank in April at the discount rate of 12%.
The note is due in 6 months. The net proceeds was credited by the bank in April but has not yet
been recorded in the books.

Book receipts for April is understated by P4,500.

Book disbursement for April is overstated by P2,700.

Loan amortization for April amounting P45,000 was covered by a check payment but a debit memo for
the same amount was issued by bank in April.

REQUIRED:

Prepare a four-column reconciliation for Burns Company.

Source: Intermediate Accounting Part 1 – Robles and Empleo