Question

Required information CC5-1 Accounting for Cash Receipts, Purchases, and Cash Payments and Reconciling Items (LO 5-3, LO 5-4, LO 5-5) [The following information applies to the questions displayed below.) Nicole's Getaway Spa (NGS) continues to grow and develop. Nicole is now evaluating a computerized accounting system and needs your help in understanding how source documents inform accounting processes. She also needs some help reconciling NGS's bank account CC5-1 Part 1 Required: 1. For each source information shown below, prepare the appropriate journal entry. (If no entry is required for a transaction/event, select "No Journal Entry Required in the first account field.) a. Purchase order dated October 13 for massage chairs costing $780 and oil supplies costing $255. b. Remittance advice from customer for $96, received October 17. c. Receiving report indicating October 22 receipt of October 13 order. Also received supplier invoice totaling $1,035 d. NGS check for payment in full of October 13 order. View transaction list 1 Purchase order dated October 13 for massage chairs csing $780 and oil supplies costing $95. Record the transaction. the 2 Remittance advice from customer for $96, received October 17. Record the transaction. Credit 3 Receiving report indicating October 22 receipt of October 13 order. Also received supplier invoice totaling $1,035. Record the transaction. 4 NGS check for payment in full of October 13 order. Record the transaction. Note : - Journal entry has been entered Record entry Clear entry View general journal

Answer 1

Solution

Nicole’s Gateway Spa

Journal Entries:

No.	Date	Account Titles and Explanation	Ref. No.	Debit	Credit
1	Oct 13,	No Entry
2	Oct 17,	Cash		$96
		Accounts Receivable			$96
		(To record cash received from customer)
3	Oct 22,	Office Furniture		$780
		Office Supplies		$255
		Accounts Payable			$1,035
		(To record receipt of massage chair and office supplies on account)
4		Accounts Payable		$1,035
		Cash			$1,035
		(To record payment of accounts payable)

Bank Reconciliation

	Nicole Gateway Spa
	Bank Reconciliation Statement
	AS on December 31
Bank Statement			Company Books
Ending balance as per bank statement		$5,800	Ending balance as per Cash account		$6,300
Add: Deposits in transit	$3,820		Add: interest collected by bank	$25	$25
Less: Outstanding checks	($3,800)	$20			$6,325
Up-to-date cash balance		$5,820	Less: NSF Check	($300)
			Less: bank charges	($25)
			Less: Error in recording check	($180)	($505)
Up-to-date cash balance		$5,820	Up-to-date cash balance		$5,820

Journal entries to adjust cash balance:

Date	Account Titles and Explanation	Ref.Post	Debit	Credit
Dec-31	Accounts Receivable		$300
	Cash			$300
	(To record NSF check)
Dec-31	Cash		$25
	Interest Receivable			$25
	(interest collected by bank)
Dec-31	No Entry
Dec-31	Bank Charges		$25
	Cash			$25
	(To record bank charges collected by bank)
Dec-31	Accounts Payable		$180
	Cash			$180
	(To correct error in recording check)

Cash and cash equivalents on NGS December 31 balance sheet –

Up-to-date cash balance   $5,820

Add: petty cash     $150

Total cash and cash equivalents $5,970

Note: Treasury bills are purchased in August, which means that the bills maturity date is more than 3 months. Hence, this item does not form part of cash and cash equivalents.