Question

A. Bank Reconciliation: At 30th September 2019, the balance in the cash account of Wordsworth Co was $9,300. The bank statement for the same date shows a balance of $10,500. On investigation of the difference between the two sums, it was established that: a. Cheques in the amount of $700 had not yet cleared the bank b. A deposit in the amount of $450 was made late on 30th September and was not shown on the bank statement. A cheque from Mrs. Jones to the amount of $190 was returned to the bank due to insufficient funds. A customer's note was collected by the bank on the company's behalf to the amount of $1250 less $50 service fee to the bank. The bank charged $60.00 for processing fees Task: 1. Prepare a bank reconciliation statement in good form as of September 30th 2019 (11 points) 2. Journalize the necessary entries to bring the cash account up-to-date (4 points)

Answer 1

B. 1. No. of units in closing inventory = 160 units

Closing Inventory = Opening Inventory + Purchases - Sales

= 200 + (150 + 200 + 150) - 540

= 160 units

B. 2. COGS = $3,870 ; Ending Inventory = $1,430

Value of Inventory and Purchases = (200 * $6.5) + [(150 * $7) + (200 * $8) + (150 * $9)]

= $1,300 + ($1,050 + $1,600 + $1,350)

= $5,300

Value of Closing Inventory (FIFO) = 150 units @ $9 each + 10 units @ $8 each

= $1,350 + $80

= $1,430

COGS = Value of opening Inventory + Value of purchases - Value of Closing Inventory

= $5,300 - $1,430

= $3,870

B. 3. COGS = $4,088 ; Ending Inventory = $1,212

Weighted Average cost per unit = Value of opening stock and purchases / No. on Units in opening inventory and purchases

= $5,300 / 700 units

= $7.57

COGS = 540 units @ $7.57 each i.e. $4,088

Value of closing inventory = 160 units @ $7.57 each i.e. $1,212

  

C (a) $109,800

The salary are charged on accrual basis to the income statement. Therefore, cost of salaries will be calculated as

Cost of salaries = Cost of 8 employees @ $13,200 per annum each + Cost of 1 trainee for 6 months @ $8,400 per annum

= (8 * $13,200) + ($8,400 / 2)

= $105,600 + $4,200

= $109,800

C. ​​​​​​​(b) $108,300

The salary actually received by the staff will be from December, 2017 to November, 2018

Salaries Received by employees =(One month salaries @12,000 per annum + Eleven Month salary @ $13,200 per annum) * 8

= [$1,000 + ($1,100 * 11)] * 8

= $13,100 * 8

= $104,800

Salary received by trainee = Five months salary @ $8,400 per annum i.e. $3,500

Total salaries received by employees = $104,800 + $3,500

= $108,300

D

1. c. $325,000

Explanation:

Gross Profit = Sales + Closing Inventory - Purchases

= $500,000 + $75,000 - $250,000

= $325,000

2. c. $129,000

Explanation:

Current assets = Cash + Inventory + Accounts Receivable

(Vehicle is a fixed asset and cannot be classified as current asset)

Current assets = $110,000 + $15,000 + $4,000

= $129,000