E7.

1 (Determine Cash Balance) The controller for Wallaby plc is attempting to determine the amount
of cash and cash equivalents to be reported on its December 31, 2019, statement of financial
position. The following information is provided

1. Commercial savings account of £600,000 and a commercial checking account balance of

£800,000 are held at First National Bank of Olathe.
2. Money market fund account held at Volonte Co. (a mutual fund organization) permits Wallaby to
write checks on this balance, £5,000,000.
3. Travel advances of £180,000 for executive travel for the first quarter of next year (employee to
reimburse through salary reduction).
4. A separate cash fund in the amount of £1,500,000 is restricted for the retirement of long-term
debt.
5. Petty cash fund of £1,000.
6. An I.O.U. from Marianne Koch, a company customer, in the amount of £150,000.
7. A bank overdraft of £110,000 has occurred at one of the banks the company uses to deposit its
cash receipts. At the present time, the company has no deposits at this bank.
8. The company has two certificates of deposit, each totaling £500,000. These CDs have a maturity
of 120 days.
9. Wallaby has received a check that is dated January 12, 2020, in the amount of £125,000.
10. Wallaby has agreed to maintain a cash balance of £500,000 at all times at First National Bank of
Olathe to ensure future credit availability.
11. Wallaby has purchased £2,100,000 of commercial paper of Sergio Leone Co. which is due in 60
days.
12. Currency and coin on hand amounted to £7,700.

Instructions

a. Compute the amount of cash (and cash equivalents) to be reported on Wallaby plc's statement of
financial position at December 31, 2019.
b. Indicate the proper reporting for items that are not reported as cash on the December 31, 2019,
statement of financial position

E7.2 (Determine Cash Balance) Presented below are a number of independent situations.

Instructions

For each individual situation, determine the amount that should be reported as cash. If the item(s) is
not reported as cash, explain the rationale.

1. Checking account balance $925,000; certificate of deposit $1,400,000; cash advance to

subsidiary of $980,000; utility deposit paid to gas company $180.
2. Checking account balance $500,000; an overdraft in special checking account at same bank as
normal checking account of $17,000; cash held in a bond sinking fund $200,000; petty cash fund
$300; coins and currency on hand $1,350.
3. Checking account balance $590,000; postdated check from customer $11,000; cash restricted
due to maintaining compensating balance requirement of $100,000; certified check from customer
$9,800; postage stamps on hand $620.
4. Checking account balance at bank $42,000; money market balance at mutual fund (has checking
privileges) $48,000; NSF check received from customer $800.
5. Checking account balance $700,000; cash restricted for future plant expansion $500,000; short-
term Treasury bills $180,000; cash advance received from customer $900 (not included in

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 checking account balance); cash advance of $7,000 to company executive, payable on demand;
refundable deposit of $26,000 paid to the government to guarantee performance on construction
contract.

*E7.22 (Petty Cash) McMann, Inc. decided to establish a petty cash fund to help ensure internal
control over its small cash expenditures. The following information is available for the month of April.
1. On April 1, it established a petty cash fund in the amount of $200.
2. A summary of the petty cash expenditures made by the petty cash custodian as of April 10 is as
follows.
Delivery charges paid on merchandise purchased $60
Supplies purchased and used 25
Postage expense 40
I.O.U. from employees 17
Miscellaneous expense 36

3. The petty cash fund was replenished on April 10. The balance in the fund was $12.
4. The petty cash fund balance was increased $100 to $300 on April 20.
Instructions
Prepare the journal entries to record transactions related to petty cash for the month of April.

*E7.23 (Petty Cash) The petty cash fund of Teasdale's Auto Repair Service, a sole proprietorship,
contains the following

Coins and currency $10.20

Postage stamps 170.00
An I.O.U. from Richie Cunningham, an employee, for cash advance 7.90
Check payable to Teasdale's Auto Repair from Pottsie Weber, an 40.00 204.35
employee, marked NSF
Vouchers for the following:
Stamps 34.00
Two Premier Cup tickets for Nick Teasdale 20.00
Printer cleaning 14.35 $296.45

The general ledger account Petty Cash has a balance of $300.

Instructions

Prepare the journal entry to record the reimbursement of the petty cash fund.

*E7.24 (Bank Reconciliation and Adjusting Entries) Kipling plc deposits all receipts and makes all
payments by check. The following information is available from the cash records.

June 30 Bank Reconciliation

Balance per bank £7,000
Add: Deposits in transit 1,540
Deduct: Outstanding checks 2,000
Balance per books £6,540

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Month of July Results

Per Bank Per Books

Balance July 31 £8,650 £9,250
July deposits 4,500 5,810
July checks 4,000 3,100
July note collected (not included in July deposits) 1,500 —
July bank service charge 15 —
July NSF check from a customer, returned by the 335 —
bank (recorded by bank as a charge)

Instructions

a. Prepare a bank reconciliation going from balance per bank and balance per book to correct the
cash balance.
b. Prepare the general journal entry or entries to correct the Cash account.

P7.1 (Determine Proper Cash Balance) Francis Equipment AG closes its books regularly on
December 31, but at the end of 2019 it held its cash book open so that a more favorable statement of
financial position could be prepared for credit purposes. Cash receipts and disbursements for the first
10 days of January were recorded as December transactions. The information is given below.

1. January cash receipts recorded in the December cash book totaled €45,640, of which €28,000
represents cash sales, and €17,640 represents collections on account for which cash discounts of
€360 were given.
2. January cash disbursements recorded in the December check register liquidated accounts
payable of €22,450 on which discounts of €250 were taken.
3. The ledger has not been closed for 2019.
4. The amount shown as inventory was determined by physical count on December 31, 2019.

The company uses the periodic method of inventory.

Instructions
a. Prepare any entries you consider necessary to correct Francis's accounts at December 31.
b. To what extent was Francis Equipment AG able to show a more favorable statement of financial
position at December 31 by holding its cash book open? (Compute working capital and the
current ratio.) Assume that the statement of financial position that was prepared by the company
showed the following amounts:
Dr. Cr.
Cash €39,000
Accounts receivable 42,000
Inventory 67,000
Accounts payable €45,000
Other current liabilities 14,200

*P7.12 (Petty Cash, Bank Reconciliation) Bill Jovi is reviewing the cash accounting for Nottleman, plc,
a local mailing service. Jovi's review will focus on the petty cash account and the bank reconciliation
for the month ended May 31, 2019. He has collected the following information from Nottleman's
bookkeeper for this task.

Petty Cash
1. The petty cash fund was established on May 10, 2019, in the amount of £250.
2. Expenditures from the fund by the custodian as of May 31, 2019, were evidenced by approved
receipts for the following.

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 Postage expense £33.00
Mailing labels and other supplies 65.00
I.O.U. from employees 30.00
Shipping charges 57.45
Newspaper advertising 22.80
Miscellaneous expense 15.3

On May 31, 2019, the petty cash fund was replenished and increased to £300; currency and coin in
the fund at that time totaled £26.40.

Bank Reconciliation
Shire Bank
BANK STATEMENT
Disbursements Receipts Balance
Balance, May 1, 2019 £8,769
Deposits £28,000
Note payment direct from customer (interest of 930
£30)
Checks cleared during May £31,150
Bank service charges 27
Balance, May 31, 2019 6,522

Nottleman's Cash Account

Balance, May 1, 2019 £8,850
Deposits during May 2019 31,000
Checks written during May 2019 (31,835)

Deposits in transit are determined to be £3,000, and checks outstanding at May 31 total £850. Cash
on hand (besides petty cash) at May 31, 2019, is £246.

Instructions

a. Prepare the journal entries to record the transactions related to the petty cash fund for May.
b. Prepare a bank reconciliation dated May 31, 2019, proceeding to a correct cash balance, and
prepare the journal entries necessary to make the books correct and complete.
c. What amount of cash should be reported in the May 31, 2019, statement of financial position?

*P7.13 (Bank Reconciliation and Adjusting Entries) The Cash account of Aguilar Co. showed a ledger
balance of $3,969.85 on June 30, 2019. The bank statement as of that date showed a balance of
$4,150. Upon comparing the statement with the cash records, the following facts were determined.
1. There were bank service charges for June of $25.
2. A bank memo stated that Bao Dai's note for $1,200 and interest of $36 had been collected on
June 29, and the bank had made a charge of $5.50 on the collection. (No entry had been made
on Aguilar's books when Bao Dai's note was sent to the bank for collection.)
3. Receipts for June 30 for $3,390 were not deposited until July 2.
4. Checks outstanding on June 30 totaled $2,136.05.
5. The bank had charged the Aguilar Co.'s account for a customer's uncollectible check amounting
to $253.20 on June 29.
6. A customer's check for $90 (payment on account) had been entered as $60 in the cash receipts
journal by Aguilar on June 15.
7. Check no. 742 in the amount of $491 had been entered in the cash journal as $419, and check
no. 747 in the amount of $58.20 had been entered as $582. Both checks had been issued to pay
for purchases of equipment.

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Instructions
a. Prepare a bank reconciliation dated June 30, 2019, proceeding to a correct cash balance.
b. Prepare any entries necessary to make the books correct and complete.

*P7.14 (Bank Reconciliation and Adjusting Entries) Presented below is information related to Haselhof
Inc.

Balance per books at October 31, $41,847.85; November receipts $173,523.91; November
disbursements $164,893.54. Balance per bank statement November 30, $56,274.20.

The following checks were outstanding at November 30.

1224 $1,635.29
1230 2,468.30
1232 2,125.15
1233 482.17

Included with the November bank statement and not recorded by the company were a bank debit
memo for $27.40 covering bank charges for the month, a debit memo for $372.13 for a customer's
check returned and marked NSF, and a credit memo for $1,400 representing bond interest collected
by the bank in the name of Haselhof Inc. Cash on hand at November 30 recorded and awaiting
deposit amounted to $1,915.40.

Instructions
a. Prepare a bank reconciliation (to the correct balance) at November 30, for Haselhof Inc. from the
information above.
b. Prepare any journal entries required to adjust the cash account at November 30.

Ex 8-41 (Four-column bank reconciliation). Tyler Corporation began doing business with Security
Bank on October 1. On that date the correct cash balance was $4,000. All cash transactions are
cleared through the bank account. Subsequent transactions during October and November relating to
the records of Tyler and Security are summarized below:

Tyler Corporation Security Bank

Books Books
October deposits $ 7,360 $ 7,110
October checks 6,290 6,130
October service charge - 10
October 31 balance 5,070 4,970
November deposits 8,220 8,280
November checks 9,410 9,220
November service charge - 15
Note collected by bank in November (included $15 interest) - 1,015
October service charge recorded in November 10 -
November 30 balance 3,870 5,030

Instructions
On the basis of the foregoing data: (1) prepare a four-column reconciliation for the month-ended
November 30, reconciling both bank and book balances to a corrected balance, and (2) give entries
that would be required on Tyler’s books to adjust the cash account as of November 30.

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Ex 8-61 (Four-column bank reconciliation). The following data are applicable to the Morgan Building
Co.:
a. The July 31 bank statement balance of $74,875 included a bank service charge of $235 not
previously reported to the company but recorded in the company’s books in August.
b. The cash account balance in the general ledger on July 31 was $66,715.
c. Outstanding checks at July 31 totaled $13,475. Deposits in transit on July 31 were $5,080.
d. The bank statement on August 31 had a balance of $78,265, recognizing deposits of $105,360
and withdrawals of $101,970. The withdrawals included a service charge for August of $270 not
yet reported to Morgan Building Co.
e. The cash account balance in the general ledger on August 31 was $80,435, recognizing receipts
of $104,405 for August and checks written during August of $90,450. Deposits in transit on
August 31 were $4,125, and checks of $2,225 were outstanding as of that date.
Instructions
1. Prepare a four-column bank reconciliation as of August 31.
2. Give any entroes at August 31 that may be required on the company’s books.

Ex 8-62 (Four-column bank reconciliation). The following information is related to Downtown

Company:

August September
Bank statement balance – at month end $ 2,412 2,782
Cash account balance – at month end 1,975 2,296
Bank charges for NSF check returned (normally written off in the month 38 80
following return)
Outstanding checks – at month end 600 865
Deposit in transit – at month end 300 470
Bank service charges (normally recorded in month following bank 25 29
charge)
Drafts collected by bank (not recorded by company until month following 200 150
collection)
Total credits to cash account 14,853 17,979
Total credits on bank statement ? 18,080

Check #411 was erroneously recorded in the company checkbook and journal as $286. The correct
amount is $236. (This check was not outstanding on September 30). All disbursements were made
by check.
Instructions
Prepare a four-column bank reconciliation for the month of September.