Exercise 7-7

LaSalle Company established a petty cash fund on May 1, cashing a check for $100. The company reimbursed the fund on June 1 and July 1 with the following results.

June 1: Cash in fund $1.75. Receipts: delivery expense $31.25; postage expense $41; and miscellaneous expense $25.

July 1: Cash in fund $3.25. Receipts: delivery expense $21; entertainment expense $51; and miscellaneous expense $24.75.

On July 10, LaSalle increased the fund from $100 to $150.00.

Prepare journal entries for LaSalle Company. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Exercise 7-14

Nayak Company has recorded the following items in its financial records.

Cash in bank $41,000

Cash in plant expansion fund 100,000

Cash on hand 8,000

Highly liquid investments 34,000

Petty cash 500

Receivables from customers 89,000

Stock investments 61,000

The cash in bank is subject to a compensating balance of $5,000. The highly liquid investments had maturities of 3 months or less when they were purchased. The stock investments will be sold in the next 6 to 12 months. The plant expansion project will begin in 3 years.

What amount should Nayak report as Cash and cash equivalents on its balance sheet?

Problem 7-3A

On May 31, 2014, Terrell Company had a cash balance per books of $6,781.50. The bank statement from Home Town State Bank on that date showed a balance of $6,804.60. A comparison of the statement with the cash account revealed the following facts.

1. The statement included a debit memo of $40 for the printing of additional company checks.

2. Cash sales of $836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $886.15. The bank credited Terrell Company for the correct amount.

3. Outstanding checks at May 31 totaled $276.25. Deposits in transit were $1,916.15.

4. On May 18, the company issued check No. 1181 for $685 to Barry Dietz on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Terrell Company for $658.

5. A $3,000 note receivable was collected by the bank for Terrell Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note.

6. Included with the cancelled checks was a check issued by Bridges Company to Jon Newton for $600 that was incorrectly charged to Terrell Company by the bank.

7. On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sandy Grifton, a customer, to Terrell Company on account.

(a) Prepare the bank reconciliation at May 31, 2014. (Reconcile the bank balance first and then the book balance.)

(b) Prepare the necessary adjusting entries for Terrell Company at May 31, 2014. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)