E7.

11 Prepare bank reconciliation and adjusting entries

The following information pertains to Lance Company.
1. Cash balance per bank, July 31, $8,732.
2. July bank service charge not recorded by the depositor $45.
3. Cash balance per books, July 31, $8,768.
4. Deposits in transit, July 31, $3,500.
5. $2,023 collected for Lance Company in July by the bank through electronic funds transfer.
The collection has not been recorded by Lance Company.
6. Outstanding checks, July 31, $1,486.

Instructions
(a) Prepare a bank reconciliation at July 31, 2022.
(b) Journalize the adjusting entries at July 31 on the books of Lance Company.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a

(a) LANCE COMPANY

Bank Reconciliation
July 31, 2022

Cash balance per bank statement $8,732

Add: Deposits in transit 3,500
12,232
Less: Outstanding checks 1,486
Adjusted cash balance per bank $10,746

Cash balance per books $8,768

Add: Electronic funds transfer received 2,023
10,791
Less: Bank service charge 45
Adjusted cash balance per books $10,746

(b) July 31 Cash 2,023

Accounts Receivable 2,023

July 31 Bank Charges 45

Cash 45

After you have completed E7.11, consider the following additonal question.
1. Assume that deposit in transit, outstanding checks and cash balance per books changed to
$3,600, $886 and $9,468 respectively. Show the impact of these changes on the bank
reconciliation.

LANCE COMPANY
Bank Reconciliation
July 31, 2022

Cash balance per bank statement $8,732

Add: Deposits in transit 3,600
12,332
Less: Outstanding checks 886
Adjusted cash balance per bank $11,446

Cash balance per books $9,468

Add: Electronic funds transfer received 2,023
11,491
Less: Bank service charge 45
Adjusted cash balance per books $11,446
 funds transfer.

a formula in cells with a "?" .

ooks changed to
on the bank
E7.12 Prepare bank reconciliation and adjusting entries
This information relates to the Cash account in the ledger of Howard Company.
Balance September 1 - $16,400; Cash deposited - $64,000
Balance September 30 - $17,600; Checks written - $62,800

The September bank statement shows a balance of $16,500 at September 30 and the
following memoranda.

Credits Debits
Collection of electronic funds transfer $1,830 NSF checks: H. Kane
Interest earned on checking account 45 Safety deposit box rent

At September 30, deposits in transit were $4,738 and outstanding checks totaled $2,383.

Instructions
(a) Prepare the bank reconciliation at September 30, 2022.
(b) Prepare the adjusting entries at September 30, assuming the NSF check was from a
customer on account.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a

(a) HOWARD COMPANY

Bank Reconciliation
September 30, 2022
Cash balance per bank statement $16,500
Add: Deposits in transit 4,738
21,238
Less: Outstanding checks 2,383
Adjusted cash balance per bank 18,855

Cash balance per books

Add: Collection of note receivable $1,830
Interest earned 45 1,875
19,475
Less: NSF check $560
Safety deposit box rent 60 620
Adjusted cash balance per books 18,855

(b) Sept. 30 Cash $1,830

 Accounts Receivable $1,830

30 Cash 45
Interest Revenue 45

30 Accounts Receivable $560

Cash $560

30 Bank Charges 60
Cash 60

After you have completed E7.12, consider the following additional question
1. Assume that the note, interest on the note and the NSF check changed to $2,000, $50 and
$800 respectively. Outstanding checks also changed to $2,448. Show the impact of these
changes on the bank reconciliation and on the adjusting entries.

(a) HOWARD COMPANY

Bank Reconciliation
September 30, 2022
Cash balance per bank statement $16,500
Add: Deposits in transit 4,738
21,238
Less: Outstanding checks 2,448
Adjusted cash balance per bank 18,790

Cash balance per books

Add: Collection of note receivable $2,000
Interest earned 50 2,050
19,650
Less: NSF check $800
Safety deposit box rent 60 860
Adjusted cash balance per books 18,790
30 and the

ebits
$ 560
60

taled $2,383.

ck was from a

er or a formula in cells with a "?" .

d to $2,000, $50 and
w the impact of these
E7.17 Prepare a cash budget for two months
Rigley Company expects to have a cash balance of $46,000 on January 1, 2022.
These are the relevant monthly budget data for the first two months of 2022.
1. Collection from customers: January $71,000 and February $146,000.
2. Payments to suppliers: January $40,000, February $75,000.
3. Wages: January $30,000 and February $40,000. Wages are paid in the month
they are incurred.
4. Administrative expenses: January $21,000 and February $24,000. These costs
include depreciation of $1,000 per month. All other costs are paid as incurred.
5. Selling expenses: January $15,000 and February $20,000. These costs are exclusive
of depreciation. They are paid as incurred.
6. Sales of short-term investments in January are expected to realize $12,000 in
cash. Rigley has a line of credit at a local bank that enables it to borrow up
to $25,000. The company want to maintain a minimum monthly cash balance
of $20,000.

Instructions
Prepare a cash budget for January and February.
NOTE: Enter a number in cells requesting a value; enter either a number or a formula in cells with a

RIGLEY COMPANY
Cash Budget
For the Two Months Ending February 28, 2022
January February
Beginning cash balance $46,000 $24,000
Add: Cash receipts
Collections from customers 71,000 146,000
Sale of short-term investments 12,000
Total receipts 83,000 146,000
Total available cash 129,000 170,000
Less: Cash disbursements
Payments to suppliers 40,000 75,000
Wages 30,000 40,000
Administrative expenses 20,000 23,000
Selling expenses 15,000 20,000
Total disbursements 105,000 158,000
Excess (deficiency) of available cash over disbursements 24,000 12,000
Financing
Add: Borrowings 0 8,000
Less: Repayments 0 0
Ending cash balance $24,000 $20,000
After you have completed E7.17, consider the following additional question
1. Assume that collection from customers and payment to suppliers in January changed to $80,000
and $55,000 respectively. Show the impact of these changes on the Cash Budget.

RIGLEY COMPANY
Cash Budget
For the Two Months Ending February 28, 2022
January February
Beginning cash balance $46,000 $24,000
Add: Cash receipts
Collections from customers 80,000 146,000
Sale of short-term investments 12,000
Total receipts 92,000 146,000
Total available cash 138,000 170,000
Less: Cash disbursements
Payments to suppliers 55,000 75,000
Wages 30,000 40,000
Administrative expenses 20,000 23,000
Selling expenses 15,000 20,000
Total disbursements 120,000 158,000
Excess (deficiency) of available cash over disbursements 18,000 12,000
Financing
Add: Borrowings 0 8,000
Less: Repayments 0 0
Ending cash balance $18,000 $20,000
a formula in cells with a "?" .
changed to $80,000