Handout Problem- Chapter 7

Hansen Company has assigned you with the task of preparing its four-column proof of cash for the month of October 20x3. The following information is available:

Balance per books September 30 $10,725

October 31 5,836

Balance per bank September 30 6,915

October 31 8,276

Outstanding checks September 30 1,811

October 31 2,615

Cash receipts for October per bank 28,792

Per books 20,271

Deposits in transit September 30 5,621

October 31 996

Service charge for the month of October, charged by the bank but not recorded, was $596.

Proceeds on a note of the Jones Company were collected by the bank on October 28 but not entered on the books: principal, $2,900; interest, 396.

On October 26, a $1,144 check of the Billings Company was charged to Hansen Companys account by the bank in error.

Dishonored checks are not recorded on the books unless they permanently fail to clear the bank. The bank treats them as disbursements when they are dishonored and deposits when they are redeposited. Checks totaling $1,335 were dishonored in October; $600 was redeposited in October and $735 in November.

a. Prepare a four-column proof of cash for the month ended October 31. Reconcile both from bank to correct and from book to correct.

b. Prepare all adjusting entries suggested by the proof of cash.