Question 1 (30 Marks)

The cash account for ASA industry showed a balance of R22000 on December 31, 2021. The bank statement as of the same date showed a balance of R25000. After comparing the bank statement with the cash records, the following information was determined:
1. The bank issued a credit memorandum for R24 interest earned on ASA’s account.
2. Deposits in transit as at December 31, 2021 were R4200.
3. Outstanding cheques from December were R2349. Cheques still outstanding from November were R475.
4. Electronic payments received from customers on the December 31, 2021 totalling R4798 have not yet been recorded by the company.
5. The bank returned a NSF cheque in the amount of R444. The cheque was a payment on a customer’s account recorded on December 23, 2021.
6. The bank issued a debit memo for bank service charges of R155. This amount included a R22 charge for processing the NSF cheque.
7. The company made an error in recording one of their receipts on account from a customer. They recorded the payment on account as R507 cash when it should have been R750. The bank correctly recorded the deposit as R750
8. There was a bank error on one of the deposits made. The bank credited the company’s account for R450 whereas it should have been credited for R540. The entry was properly recorded in the company’s books.

1. Prepare the Bank reconciliation at December 31, 2021 (15Marks}
2. Prepare the necessary adjusting entries at December 31, 2021 (15marks)

Question 2

Company ABC has March 31st year end. ABC records adjusting entries on an annual basis.
Based on the following information provided below,

a) Indicate what type of adjustment it is, the account name and if it a debit or credit. (25marks)

b) Journalize the adjusting entry on March 31, 2017. (15marks)

1. At the end of the year, the unadjusted balance in the Prepaid Insurance account was R1500. Based on the analysis of the insurance policies, R1315 had expired by the year end.
2. At the end of the year, the unadjusted balance in the Unearned Revenue account was R2800. During the last week of March, R750 of this amount has been earned.
3. On December 31, 2016, ABC signed a note payable for R15000. The loan the agreement stated that the interest was 5%.
4. Depreciation for building was R13500 for the year.
5. At the beginning of the year, ABC had R600 of supplies on hand. During the year, R2340 of supplies were purchased. A count at the end of the year indicates that R235 of supplies was left on March 31.
6. Between March 29th and March 31st inclusive, four employees worked 7 hour shifts at R14.00 per hour.
7. On March 31, it was determined that R7000 of service revenue had been earned, but the bookkeeper did not record it.
8. ABC performed services for clients totalling R4300. These services have not yet been recorded.
9. Purchased computer equipment on January 1, 2017 for R20000, paying R5000 in cash and signing a R15000, two-year note payable. The equipment depreciates R300 per month and the interest is R400 per month.
10. On March 15, 2017, sold R535 of gift certificate to a local sports club. On March 31, 2017, determined that R240 of these gift certificates had not been redeemed.

Answers to Above Questions on Financial Accounting

Answer 1: The Bank reconciliation at December 31, 2021 is prepared as follows:


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