Question 1 (36 marks)

Part I (18 marks)

Mask Limited received the bank statement from bank as at the end of June 2019:

Deposit/

(Withdraw)

Balance

Balance, May 31 2019 $20,000

Deposits recorded during June $38,000 58,000

A note including $500 interest deposited by

a customer to the bank

2,400

60,400

Cheques cleared during June (41,000) 19,400

Bank service charges (40) 19,360

NSF check (given by customer B Johnson) (100) 19,260

Balance, June 30 2019 $19,260

The company had ending cash balances $22,000 and $17,700 in May 2019 and June

2019 respectively. It had checks written $41,300 and cash deposits $37,000 during June

2019. The bank reconciliation for 31 May 2019 showed that deposits in transit $2,000

was carried forward from 31 May 2019.

Required:

(a) Prepare bank reconciliation statement as at 30 June 2019. (12 marks)

(b) Prepare the journal entries that should be made in the accounting records after

the above bank reconciliation is prepared. (6 marks)

Part II (18 marks)

Rocky Company Limited has the following unadjusted trial balance as at 31 December

2019. No adjusting entry has been made for the Allowance for Impairment account in

2019.

$

Accounts receivable 640,000

Net sales (70% on credit) 720,000

Allowance for impairment (Credit balance) 20,000

(a) (i) Assume the company uses the statement of financial position approach. An aging

analysis indicated that $40,000 of the accounts receivable at year end will be

uncollectible.

(1) Prepare the adjusting entries to record the estimated uncollectible accounts for

the year 2019; and

(2) Present the Account Receivable with the estimated collectible amount in the

Statement of Financial Position at 31 December 2019. (7 marks)

3

(a)(ii) Assume the company uses the statement of income statement approach. It is

estimated that 2% of net credit sales for the year will become uncollectible.

(1) Prepare the adjusting entries to record the estimated uncollectible accounts for

the year 2019; and

(2) Present the Account Receivable with the estimated collectible amount in the

Statement of Financial Position at 31 December 2019. (7 marks)

(b) If the company's Allowance for Impairment has a debit balance of $13,000 prior to

making any adjustment to record impairment loss of receivable, using the same

information as (a)(i) above, prepare the adjusting entries to record the estimated

uncollectible accounts for the year.