September 28, 2025 Claire B 0 Comments

In
June, Billcommented to you that he could never figure out his bank statement,
“it never matches the balance in my accounting records” he tells you.
So you explain that a bank reconciliation is a tool used to balance the bank
statement to the accounting books. He gives you his bank statement for
June, 2014 (shown below). The general ledger shows a balance for the
account cash of $14,319.00 on June 30, 2014 (detail transactions below).
Bill’s business only has one checking account and no other cash accounts.
Bill
has begun to have problems collecting some of his credit accounts and is
considering writing off a couple of customer account balances. He asks
you how these bad debts should be recorded and has asked you to begin
recording bad debt using the allowance method for June, 2014. Selected
account balances at the end of June, 2014 are:
Sales
$7,200
Sales
on Credit $2,900
Accounts
Receivable $3,200
As a
result of increased focus on collecting accounts receivable, Bill has decided
to extend credit for one customer, Alan Jones, who owes Bill’s Lawn Care
$500. Bill and Alan have agreed to a 90-day 6% note for $500 issued on
June 5, 2014.
Instructions:
1. Using
the bank statement and the general ledger, prepare a bank reconciliation for
Bill’s Lawn Care as of June 30, 2014. Record the necessary journal entries to
adjust the books for the appropriate reconciling items. Start
withPage 6 for
the journal entries. Explanations are optional.
2. Using
the information given above, calculate the amount of bad debt using:
a. Percentage
of Sales on Credit = 1.5%
b. Percentage
of Accounts Receivable = 1%
Using
the chart of accounts, record the journal entry for bad debt expense for
Bill’s Lawn Care using the percentage of sales on
credit method.
3. Using
the note receivable information above and the chart of accounts, record the
following entries in the general journal (continue these entries onPage 6):
a. Receipt
of the note in payment of the accounts receivable balance.
b. Adjusting
entry at the end of June, 2014 for the note receivable. (Round interest
calculations to two decimals)
c. Assume
that Alan pays the note and interest in full on the due date, record the
necessary journal entry. Assume that interest has been accrued at the
end of each month.
d. Assume
that Alan defaults on the note and interest on the due date, record the
necessary journal entry. Assume that interest has been accrued at the
end of each month.
Please
note that the calculation pages in the Excel template are required and
graded. Please show your work on those pages.
CHECKING
ACCOUNT DETAIL:
DATE TRANSACTION AMOUNT BALANCE
TYPE
& NUMBER
BEGINNING
BALANCE		 $12,850.00
06-02-2014 CHECK #1570 226 12,624.00
06-05-2014 CHECK #1571 83 12,541.00
06-06-2014 EFT #43 127 12,414.00
06-10-2014 DEPOSIT #104 1,550.00 13,964.00
6/15/2014 CHECK #1572 145 13,819.00
6/15/2014 CHECK #1573 185 13,634.00
6/20/2014 DEPOSIT #105 885 14,519.00
6/24/2014 EFT #44 143 14,376.00
6/28/2014 CHECK #1574 87 14,289.00
6/28/2014 CHECK #1575 95 14,194.00
6/30/2014 DEPOSIT #106 425 14,619.00
6/30/2014 CHECK #1576 155 14,464.00
6/30/2014 CHECK #1577 145 $14,319.00
BANK
STATEMENT:
FIRST
NATIONAL BANK
ACCOUNT
SUMMARY JUNE 30, 2014
BEGINNING
BALANCE		 $12,850.00
PAYMENTS $1,021.00
DEPOSITS 2,440.00
FEES 20
ENDING
BALANCE		 $14,249.00
PAYMENTS
DATE REFERENCE AMOUNT
06-05-2014 1570 $266.00
06-09-2014 1571 83
06-10-2014 43 127
6/19/2014 1572 145
6/28/2014 1573 185
6/28/2014 NSF 120
6/30/2014 1575 95
TOTAL
PAYMENTS		 $1,021.00
DEPOSITS
DATE REFERENCE AMOUNT
06-11-2014 104 $1,550.00
6/23/2014 105 885
6/30/2014 INTEREST 5
TOTAL
DEPOSITS		 $2,440.00
FEES
6/30/2014 SVC CHG $20.00
TOTAL
FEES		 $20.00
Additional
Information: Check #1570 was written for
$266.00, but wasrecorded incorrectly in the general ledger. The check was for fuel.
Bill’s
Lawn Care
Chart of
Accounts
Classification Account Number Account Name
ASSETS 101 Cash
110 Accounts Receivable
112 Allowance for Doubtful Accounts
115 Notes Receivable
116 Interest Receivable
120 Supplies
130 Prepaid Insurance
140 Inventory
150 Equipment
155 Accumulated Depreciation –
Equipment
LIABILITIES 201 Accounts Payable
220 Notes Payable
225 Interest Payable
OWNER’S
EQUITY		 301 Owner’s Capital
305 Owner’s Drawings
310 Income Summary
REVENUES 401 Lawn Service Revenue
410 Sales Revenue
415 Sales Returns and Allowances
420 Interest Income
COST OF
GOODS SOLD		 501 Purchases
505 Purchase Returns and Allowances
EXPENSES 620 Supplies Expense
630 Fuel Expense
640 Repair and Maintenance Expense
650 Advertising Expense
660 Insurance Expense
670 Depreciation Expense
680 Interest Expense
690 Bad Debt Expense
695 Miscellaneous Expense

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