Question $2(31$ marks$)$

Part I $(25$ marks$)$

Kivi Service Corporation $($Kivi$)$ received the bank statement from Northwest Bank showing a

balance of $$54,730$ at $30$ June $2022.$ The cash account in the general ledger of Kivi showed a

balance $$38,250$ as at $30$ June $2022.$ The company adjusts its account annually and its year end

date is at $31$ December. No outstanding checks were carried over from May and no deposits in

transit were noted at the end of May. An examination of the bank statement revealed the following

information:

$1.$ The general ledger of Kivi showed a total deposit of $$31,500$ as at $30$ June, but the bank showed

a deposit of $$22,000$ in the bank statement.

$2.$ A check $$3,200$ issued by one of Kivi$$s customers was deducted from Kivi$$s bank account

because of insufficient fund.

$3.$ The bank statement for June included a debit memorandum from the bank and indicated a service

fee of $$250$ was charged by the bank.

BHMH$21012023/24$ S$1$ Assignment $2$

Page $4$

$4.$ Three checks issued by Kivi in June have not been paid by the bank: no$\mathrm{.}711$ for $$520,$ no$\mathrm{.}722$

for $$870$ and no$\mathrm{.}733$ for $$240.$

$5.$ Check no$.744$ of $$3,500$ was correctly cleared in the bank for payment of insurance expense but

was erroneously entered in Kivi$$s record as $$5,300.$

$6.$ A credit memorandum attached with the June bank statement indicated that a total of $$20,000$

was directly deposited by a Kivi$$s customer to settle an interest bearing note receivable of

principal $$19,000.$

$7.$ A check $$6,000$ deposited to Kovi Ltd was erroneously credited to Kivi$$s account by the bank.

Required:

$($a$)$ Prepare a bank reconciliation statement for the month of June $2022.(18$ marks$)$

$($b$)$ Prepare the necessary journal entries to update the accounting record for Kivi at $30$ June $2022.$

$(7$ marks$)$

Part II $(6$ marks$)$

An aging schedule of Philmar, Inc.$$s accounts receivable as at $31$ December $2022$ was produced

under the following four groupings:

Days Account outstanding Amount $($$$)$ Estimated $\%$ of Uncollectible

Not yet due $760,0001\%$

$1-30$ days past due $60,0002\%$

$31-90$ days past due $80,00010\%$

$>90$ days past due $90,00020\%$

$990,000$

Further information of the company is as follows:

Allowance for Impairment $($Credit balance$)31/12/2021$ $ $32,000$

Net Sales $(80\%$ on credit$)$ for year ending $12/31/2022$ $$2,300,000$

Required:

$($a$)$ Prepare adjusting entries to record the impairment loss of receivable for the year $2022$ under

Statement of Financial Position Approach. Show your workings. $(4$ marks$)$

$($b$)$ Assume Philmar, Inc. uses Income Statement Approach if it is estimated that $1\%$ of net credit

sales for the year will become uncollectible. Prepare the adjusting entries to record the

impairment loss of receivable for the year $2022$