Question

Assignment #2

Problem #1 The following selected transactions were completed during June between Frank Company and Johnson Company: 1. June 6 – Frank Company sold merchandise on account to Johnson Company, $15,000, terms FOB destination, 1/15, n/eom. The cost of the merchandise sold was $12,000. 2. June 6 – Frank Company paid transportations costs of$ 100 for delivery of merchandise sold to Johnson Company on June 8. 3. June 12 – Johnson Company returned $4,000 of merchandise purchased on account on June 6th from Frank Company. The cost of the merchandise returned was $3,000. 4. June 20 – Johnson Company paid Frank Company for the purchase of June 8th, less discount and less return of June 12th.

Instructions: Illustrate the effects of each of the preceding transactions on the balance sheets of (1) Frank Company and (2) Johnson Company. Identify each transaction by date.

Problem #2 The cash account for Leisure Systems at Feb 29 2012, indicated a balance of $4,720. The bank statement indicated a balance of $18,650 on Feb 29, 2012. Comparing the bank statements and accompanying cancelled checks and memos with records reveals the following reconciling items: 1. Checks outstanding totaled $13,960. 2. Deposits of $9,350 representing receipts of February 29 had been made too late to appear on the bank statement. 3. The bank had collected $ 8,560 on a note left for collection. The face of the note was $8,000. 4. Bank service charge for February amounted $50. 5. A check drawn for $930 had been incorrectly charged by the bank as $390 6. A check for $520 had been incorrectly recorded by Leisure Systems as $790.The check had been for payment for supplies from Taft Co on account (actual amount owed was in fact $790).

Instructions: 1. Prepare the bank reconciliation. 2. Illustrate the effects on the accounts and financial statements of the bank reconciliation.

Answer 1

As per policy, only one question is allowed to answer at a time, so answering Prob 1 :

Prob. 1:

transactions	Effect on Frank Balance sheet
	Assets	Liabilities
6-Jun	AR +15000
	Exp -12000	Inc. +3000
8-Jun	Cash-100	Inc. -100
12-Jun	AR -4000
	Exp +3000	Inc. -1000
20-Jun	Cash +10890
	AR - 11000
	Exp. + 110
transactions	Effect on Johnson Balance sheet
	Assets	Liabilities
6-Jun	Inv +15000	AP +15000
8-Jun	No entry
12-Jun	Inv. -4000	AP -4000
20-Jun	Cash -10890	AP - 11000
		Inc. + 110