Question

P7-27A Preparing a bank reconciliation and journal entries The December cash records of Davidson Insurance for Learning Objective 1. Adved Balance 5 Cash Receipts Date Cash Debit Dec 4 $4,240 Cash Payments Check No. $ 810 1417 Cash Credit 1416 630 1.900 1,860 1418 1419 1420 1421 1422 1,390 1,490 700 600 Davidson's Cash account shows a balance of $17.450 at December 31. On December 31. Davidson Insurance received the following bank statement NSF PIZ $ 14,100 550 9.040 Bank Statement for December Reginning Balance Deposits and other Credits: Dec. 1 EFT $350 Dec. 5 4240 Dec 10 Dec. 15 600 Dec. 18 1,900 Dec. 22 1,400 Checks and other Debits: Dec. 8 Dec. 11 (check no. 1416) -810 Dec. 19 Dec. 22 (check no. 1417) 180 Dec. 29 (check no. 1418) 630 Dec 31 (check no. 1419) 1,930 Dec. 31 SC 10 Ending Balance NSF 400 EFT 225 (4,185) $ 18,955 Explanations: BC-bank collection, EFT-electronic funds transfer; NSF-nonsufficient funds checks: SC-service charge Additional data for the bank reconciliation follow: a. The EFT credit was a receipt of rent. The EFT debit was an insurance payment. b. The NSF check was received from a customer. c. The $1,400 bank collection was for a note receivable. d. The correct amount of check no. 1419, for rent expense, is $1,930. Davidson's controller mistakenly recorded the check for $1,390.

Answer 1

Solution 1:

Davidson Insurance
Bank Reconciliation - December 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$18,955.00	Ending Balance as per cash books	$17,450.00
Additions:		Additions:
Outstanding Deposits	$1,860.00	Rent receipt	$350.00
		Note collection	$1,400.00
Deductions:		Deductions:
Outstanding Checks (Check 1420, 1421 and 1422)	$2,790.00	NSF Cheque	$400.00
		Incorrect recording of check 1419	$540.00
		EFT Payment	$225.00
		Service Charge	$10.00
Up to date cash balance as per bank	$18,025.00	Up to date cash balance as per books	$18,025.00

solution 2:

Journal Entries - Davidson Insurance
Date	Particulars	Debit	Credit
31-Dec	Cash Dr	$350.00
	To Rent revenue		$350.00
	(To record rent revenue)
31-Dec	Cash Dr	$1,400.00
	To Note receivables		$1,400.00
	(To record note collection)
31-Dec	Accounts receivables Dr	$400.00
	To Cash		$400.00
	(To record NSF check from customer)
31-Dec	Rent expense Dr	$540.00
	To Cash		$540.00
	(Correction entry for check 1419)
31-Dec	Accounts payable Dr	$225.00
	To Cash		$225.00
	(To record EFT Payment)
31-Mar	Miscellenaeous expense Dr	$25.00
	To Cash		$25.00
	(Being service charge debited by bank)