Reconciling items:

Assignment #2

Problem #1

The following selected transactions were completed during June between Frank Company and Johnson


1. June 6 – Frank Company sold merchandise on account to Johnson Company, $15,000, terms FOB

destination, 1/15, n/eom. The cost of the merchandise sold was $12,000.

2. June 6 – Frank Company paid transportations costs of$ 100 for delivery of merchandise sold to

Johnson Company on June 8.

3. June 12 – Johnson Company returned $4,000 of merchandise purchased on account on June 6th

from Frank Company. The cost of the merchandise returned was $3,000.

4. June 20 – Johnson Company paid Frank Company for the purchase of June 8th, less discount and

less return of June 12th.


Illustrate the effects of each of the preceding transactions on the balance sheets of (1) Frank Company

and (2) Johnson Company. Identify each transaction by date.

Problem #2

The cash account for Leisure Systems at Feb 29 2012, indicated a balance of $4,720. The bank statement

indicated a balance of $18,650 on Feb 29, 2012. Comparing the bank statements and accompanying

cancelled checks and memos with records reveals the following reconciling items:

1. Checks outstanding totaled $13,960.

2. Deposits of $9,350 representing receipts of February 29 had been made too late to appear on the

bank statement.

3. The bank had collected $ 8,560 on a note left for collection. The face of the note was $8,000.

4. Bank service charge for February amounted $50.

5. A check drawn for $930 had been incorrectly charged by the bank as $390

6. A check for $520 had been incorrectly recorded by Leisure Systems as $790.The check had been for

payment for supplies from Taft Co on account (actual amount owed was in fact $790).


1. Prepare the bank reconciliation.

2. Illustrate the effects on the accounts and financial statements of the bank reconciliation.