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Part I- Bank Reconciliation

Sweet Emotion Bakery just received its May 31, 2015 bank statement. The company also has its May ledger accounts for cash on hand.

A comparison of the checks written with the checks that have cleared the bank shows outstanding checks of $5,700. In addition, a deposit of $4,500 was in transit at the end of May.

Also, Check #1427 in payment for a shipment of chocolate chips cleared the bank for $1,270 but was erroneously recorded in our books for $1,720. (The company had originally debited Supply Inventory)

Finally, included in the $84,700 of bank deposits during May is a deposit of $3,000 that was actually for Simply Sweets Bakery but was erroneously credited to Sweet Emotion Bakery.

From the information given in the preceding paragraphs and in the bank statement and ledger below, prepare a reconciliation of the bakerys cash balance. A template is provided on the following page.

BANK STATEMENT
	Checks	Deposits	Balance
Balance, May 1, 2015			$14,200
Deposits during May		$84,700	$98,900
Checks cleared during May	$80,300		$18,600
Bank service charges	$525		$18,075
NSF Checks-C. Monster	$2,700		$15,375
Interest Earned		$300	$15,675
Balance, May 31, 2015			$15,675

Cash
May 1 Balance $14,200	May Checks Written $86,450
May Deposits $86,200

Reconciliation Worksheet

Balance per Bank $ ___________ Balance per Books $ ___________

Add: Add:

Deduct: Deduct:

Reconciled Bank Balance: $_______ Reconciled Book Balance: $ _________

Give any journal entries that should be made as a result of the bank reconciliation:

Additions:

Deductions:

What is the bakerys correct cash balance? $_____________

Part II: Depreciation & Sale of long-term assets; Bonds.

On September 30 of the current year, a company acquired and placed in service a machine at a cost of $700,000. It has been estimated that the machine has a service life of five years and a salvage value of $40,000. Using the double-declining-balance method of depreciation, prepare a schedule showing depreciation amounts for the current year and the next four years (round answers to the nearest dollar). The company closes its books on December 31 of each year.

	Depreciation for the Period			End of Period
Year		Depreciation Rate	Depreciation Expense	Accumulated Depreciation	Book Value
1
2
3
4
5
6

On April 1, 2015, a company disposed of equipment for $14,200 cash that had cost $35,000 on January 1, 2010. The equipment had a salvage value of $5,000 and a useful life 10 years. The double-declining-balance depreciation method was used. On December 31, 2014, accumulated depreciation was $20,664. Prepare a journal entry to record depreciation for 2015 up to the date of disposal of the equipment and prepare a journal entry to record the disposal of the equipment.

Apr.	1
	1

ABC Corporation issued 14%, 5-year bonds with a par value of $5,000,000 on January 1, 2015. Interest is to be paid semiannually on each June 30 and December 31. The bonds were issued at $5,368,035 cash when the market rate for this bond was 12%.

(a) Prepare the general journal entry to record the issuance of the bonds on January 1, 2015.

1/1/15

(b) Show how the bonds would be reported on ABC's balance sheet at January 1, 2015.

Long-Term liabilities:

(c) Assume that ABC uses the effective interest method for amortizing any discount or premium on bonds. Prepare the general journal entry to record the first semiannual interest payment on June 30, 2015. SHOW YOUR CALCULATIONS!

6/30/15

(d) Assume instead that ABC uses the straight-line method for amortizing any discount or premium on bonds. Prepare the general journal entry to record the first semiannual interest payment on June 30, 2015. SHOW YOUR CALCULATIONS!

6/30/15

(e) Assume that ABC uses the effective interest method for amortizing any discount or premium on bonds. Prepare the general journal entry to record the second semiannual interest payment on December 31, 2015. SHOW YOUR CALCULATIONS!

12/31/15

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