Bill Jovi is reviewing the cash accounting for Wildhorse, Inc., a local mailing
ID: 2554969 • Letter: B
Question
Bill Jovi is reviewing the cash accounting for Wildhorse, Inc., a local mailing service. Jovi’s review will focus on the petty cash account and the bank reconciliation for the month ended May 31, 2017. He has collected the following information from Wildhorse’s bookkeeper for this task. Petty Cash 1. The petty cash fund was established on May 10, 2017, in the amount of $270.00. 2. Expenditures from the fund by the custodian as of May 31, 2017, were evidenced by approved receipts for the following: Postage expense $35.64 Mailing labels and other supplies 70.20 I.O.U. from employees 32.40 Shipping charges (to customer) 62.05 Newspaper advertising 24.62 Miscellaneous expense 16.58 On May 31, 2017, the petty cash fund was replenished and increased to $324.00; currency and coin in the fund at that time totaled $28.51. Bank Reconciliation THIRD NATIONAL BANK BANK STATEMENT Disbursements Receipts Balance Balance, May 1, 2017 $9,470.52 Deposits $30,240.00 Note payment direct from customer (interest of $32.40) 1,004.40 Checks cleared during May $33,642.00 Bank service charges 29.16 Balance, May 31, 2017 7,043.76 Wildhorse’s Cash Account Balance, May 1, 2017 $ 9,558.00 Deposits during May 2017 33,480.00 Checks written during May 2017 (34,381.80 ) Deposits in transit are determined to be $3,240.00, and checks outstanding at May 31 total $918.00. Cash on hand (besides petty cash) at May 31, 2017, is $265.68. Prepare a bank reconciliation dated May 31, 2017, proceeding to a correct cash balance, and prepare the journal entries necessary to make the books correct and complete.
Explanation / Answer
Answer:
a)
Description
Debit $
Credit $
Petty Cash
270
Cash
270
Postage Expense
35.64
Supplies
70.2
Accounts Receivable (Employees)
32.4
Freight Out
62.05
Advertising Expense
24.62
Misc. Expense
16.58
Cash ($270-28.51)
241.49
Petty Cash
54
Cash
54
b)
Bank reconciliation
Balances per bank:
$7,044
Add:
Cash on hand
$266
Deposit in transit
3,240
3,506
10,549
Deduct: Checks outstanding
918
Correct cash balance, May 31
$9,631
Balance per books:
8656.2*
Add: Note receivable (collected with interest)
1004.4
9,661
Deduct: Bank Service Charges
29.16
Correct cash balance, May 31
$9,631
*($9558+33480-34381.80)
Description
Debit $
Credit $
Cash
1004.4
Notes Receivable
972
Interest Revenue
32.4
Office Expense (Bank Charges)
29.16
Cash
29.16
Description
Debit $
Credit $
Petty Cash
270
Cash
270
Postage Expense
35.64
Supplies
70.2
Accounts Receivable (Employees)
32.4
Freight Out
62.05
Advertising Expense
24.62
Misc. Expense
16.58
Cash ($270-28.51)
241.49
Petty Cash
54
Cash
54
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