Assignment Details All cash and cash equivalents are reported on the balance sheet in total. Cash is considered an asset, and it is important to reconcile the company cash balance to the bank balance as a control procedure. Receivablesare amounts due to companies, and companies are required to estimate the amount that they may not collect. Requirement 1:You are the staff accountant for Elm City Gifts. The owner has just received the December 31, 2020 bank statement and has asked you to prepare the monthly bank reconciliation. The following information is true for the given statement: Cash per the unadjusted trial balance is $12,255. Cash balance per the bank statement is $11,650. Check #115 has not cleared the bank. It was written for $525. A deposit of $1,250 cleared the bank, but it was not recorded in the general ledger. A check for $400 was found in the owners desk drawer. A deposit of $750 was taken to the bank after 2 p.m. on December 31, 2020, and it was not posted by the bank until January 1, 2021. Errors were noted in the following checks:Check #121 was recorded for $325 but cleared the bank as $315. Check #125 was recorded for $585 but cleared the bank as $590.
Based on the information provided, prepare the monthly bank reconciliation for December. Use the following steps: Part 1: Determine the adjusted bank balance.Start with the ending bank balance. Add amounts that increase the bank statement balance. Deduct amounts that decrease the bank statement balance.
Part 2: Determine the adjusted book balance.Start with the ending book balance. Add amounts reported on the bank statement that increase the cash balance (these would be amounts not previously recorded). Deduct amounts reported on the bank statement that decrease the cash balance (these would be amounts not previously recorded).
Part 3: Compare balances.Compare the adjusted bank and adjusted book balances. They should agree
Requirement 2:Elm City Gifts uses the allowance method to estimate the amount of accounts receivable that may not be collected. The company prepared an aging schedule at the end of the year and estimated that the allowance account needs $90,000. Before any adjustments, the allowance for uncollectible accounts has a credit balance of $12,000. What is the amount of the bad debt expense adjusting entry at December 31, 2020?
Requirement 3:Prepare the journal entries using both the gross method and net method of accounting for sales discounts.
Gross Method Net Method
Elm City Gifts had sales of $100,000 on account terms 2/10, n/30. Record the sales under both methods. Payment in full was received for the accounts receivable within the discount period. Prepare the cash receipt under the gross and net methods. Independent of transaction 2: Assume payment in full was received for the accounts receivable after the discount period. Prepare the cash receipt under the gross and net methods.
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