Reconciling items:

Assignment #2

Problem #1

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

Company:

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.

Instructions:

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).

Instructions:

1. Prepare the bank reconciliation.

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