Question

The the information below about cor corporation atswer the questions 5 and 6. Zehra's 10/31/19 Cash T account shows a balance of $108,000, and its bank statement dated 10/31/19 shows a balance of $102,000 According to the most recent bank statement, Leora has not yet recorded bank fees of $200 and interest income of $500. Zebra has written $3,000 worth of checks that have not yet cleared the bank. Zebra has deposits of S6,700 that do not yet appear on the bank statement. Zebra wrote a check that cleared the bank. Zebra forgot to post the related journal entry to the T accounts. The journal entry that Zebra forgot to post was: Dr. Rent Expense 2,600 and Cr. Cash 2,600. 5. On a bank reconciliation, which of the following reconciling items is ADDED to the bank balance to arrive at the adjusted Cash balance? a. Deposits in transit b. Service charges. c. Outstanding checks. d. NSF checks. 6. The adjusted Cash balance on Zebra Corporation's 10/31/19 bank reconciliation should be: a $108,000 b. $105,700 c. $104,300 d. $102,000 7. The Gap, Inc. purchased a trading investment for $190,000 on October 19, 2017. As of October 31, 2019, the market price of this investment was $180,000. How should this investment be reflected in Gap's October 2019 financial statements? a. The Investment should be reflected on Gap's 10/31/19 Balance Sheet mit 5190,000 cos only b. An Unrealized Loss of $180,000 should be reported on Gap's October 2019 Income c. An Unrealized Gain of $10,000 should be reported on Gap's October 2019 Income d. The Investment should be reflected on Gap's 10/31/19 Balance Sheet at vs S180 it aga stado. The studios st and principal pus s e oue in days. s, how much Interest Revenue will Smart 8. Suppose that Smart Electronics sells a $400,000 machine to a local graphic design studio. The promissory note that has the following terms: 7% interest and principal plus interest are de the studio remits the entire payment to Smart Electronics after 90 days, how much Inter Electronics report on this transaction (360-day year)? a $2,333 b. $7,000 c. $9,333 d. $28,000

Answer 1

Bank Reconciliation
Balance per bank statement		102000
Add: Deposits in transit		6700
		108700
Less: Outstanding checks		3000
Adjusted balance $		105700
Balance per books		108000
Add: Interest income		500
		108500
Less:
Bank fees	200
Unrecorded check	2600	2800
Adjusted balance $		105700

5. Answer: a. Deposits in transit

Outstanding checks is deducted from the bank balance to arrive at the adjusted cash balance hence, option c. is incorrect. Service charges and NSF checks are deducted from the book balance to arrive at the adjusted cash balance hence, options b. and d. are incorrect.

6. Answer: b. $105,700

7. Answer: d. The Investment should be reflected on Gap's 10/31/19 Balance Sheet at its $180,000 fair value.

The Investment should be reported on the balance sheet at the fair value of $180,000 and $190,000 - $180,000 = $10,000 should be reported on the income statement as unrealized loss. Hence, option d. is correct while all others are incorrect.

8. Answer: b. $7,000

Interest revenue = $400,000 x 7% x 90/360 = $7,000.