Department of Accounting and Finance

Fundamentals of Accounting-I Individual Assignment-II Review Questions for Cash and Receivables
(Submission date: On Final Exam Date)
Short Answer
1. The petty cash account has a debit balance of Br. 200. At the end of the accounting period, there is Br. 160
in the petty cash fund along with petty cash receipts totaling Br. 40. Should the fund be replenished as of the
last day of the period? Why?
2. In what order are vouchers ordinarily filed
A) In the unpaid voucher file
B) In the paid voucher file
3. In general terms, in which section does cash, appear on the balance sheet?
4. In which section of the Income statement would a credit balance in cash short and over be reported?
5. Explain some measures that strengthen internal control over cash receipts and payments.
6. What is the basic control feature in a voucher system?
7. List two items often encountered in reconciling a bank account that may cause cash per the bank statement
to be larger than the balance of cash shown in the depositor’s accounting records.

Problems
1. Shown below is the information needed to prepare bank reconciliation for MITE Company at Dec. 31.
a) At December 31, cash per the bank statement was $ 15,981; cash per the company’s records was $
17,445.
b) Two-debit memorandum accompanied the bank statement: service charges for December of $ 24,
and a $ 600 check drawn by RAMI marked ‘NSF’.
c) Cash receipts of $ 4,353 on December 31 were not deposited until January.
d) The following checks had been issued in December but were not included among the paid checks
returned by the bank: no. 620 for $ 978, no. 630 for $ 2,052, and no. 641 for $ 483.
Required:
i) Prepare a bank reconciliation at December 31
ii) Prepare the necessary journal entry or entries to update the accounting records based on the reconciliation.

2. RAM Company maintains its checking account with the Commercz Bank. The company is ready to prepare
its December 31 bank reconciliation. The following data are available:
a) The November 30 bank reconciliation showed the following:
1) Cash on hand (held by RAM company for day to day minor expenses), Br. 400 (included in
RAM’s cash account)
2) Deposit in transit, Br. 2,000, and
3) Checks outstanding: N0. 121 Br. 1,000
No. 130 2,000
No. 142 3,000
b) Bank Statement, December 31:
 Balance, December 31 Br. 67,600
 Deposits: 188,500
 Checks: No. 130, Br. 2,000; N0. 142, Br. 3,000;
N0. 143 – 176, Br. 191,000 (196,000)
 Note collected for RAM company (including
Br. 720 interest) 16,720
 NSF check, customer Binda (250)
 Bank service charges (20)
 Balance, December 31 Br. 76,550

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Required:
i) Determine deposit in transit and checks outstanding
ii) Prepare the December 31 Bank reconciliation
iii) Based on your bank reconciliation, give all journal entries that should be made at December 31.

Receivables
1. Why is Account Receivable classified as a current asset?
2. Why is segregation of duties required for related activities related to receivables?
3. Record the following transactions in the accounts of Dashen P/c., which uses the allowance method of
accounting for uncollectible receivables.
 Sep. 5- Sold merchandise on account to Hirut Co. Br. 5000
 Oct. 20- Received Br. 3000 from, Hirut Co. and Writes-off the remainder owed on the sale of September
5 as uncollectibles.
 Dec. 10- reinstated the account of Hirut Co. that had been written-off on October-20 and received Br.
2000 cash in full payment.
4. Chilallo Co. issued a 60-day, 12% note for Br. 40,000, dated February-12, to Garra Muleta Co. an account.
a) Determine the due date of the note
b) Determine the maturity value of the note
c) Present entries required to record the following
 Receipt of the note by the payee.
 Receipt by payee of payment of the note at maturity.
5. Record the following transaction in the account of Axumite Co.
May-1. Received a Br. 15,000, 60-day, 12% note from Adama Co. on account.
May-21. Discounted the note at Mekele Bank at 14%
June-30. The note is dishonored, paid the bank the amount due on the note plus a protest fee of Br. 30.
July-20. Received the amount due on the dishonored note plus interest for 20-days, at 12% on the amount charged
to Adama Co. on April-30.

6. Record the following transactions in the accounts of Dashen P/c., which uses the allowance method of
accounting for uncollectible receivables.
 Sep. 5- Sold merchandise on account to Hirut Co. Br. 5000
 Oct. 20- Received Br. 3000 from, Hirut Co. and Writes-off the remainder owed on the sale of September
5 as uncollectibles.
 Dec. 10- reinstated the account of Hirut Co. that had been written-off on October-20 and received Br.
2000 cash in full payment.

7. Prepare journal entries to record the following transactions entered in to by Meskel Company during the year
20X2.
September 1- Received a Br. 10,000, 12%, 60-day note from Yasin Co. as full settlement of his open account.
October 20- Sold merchandise on account to Heaven Co. for B.r 25,000 by receiving a 90-day, 10% note.
October 31- Received full payment from Yasin Co. for notes received on September 1.
December 31- Record the adjusting entry required for accrued interest from October 20.
Transaction. (Assume that the Accounting period ends on December 31.)

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8. Nazareth cosmetics Co. is undecided about which base to use in estimating uncollectibles accounts. On
December 31, 20X2, the balance in Account Receivable was Br. 800,000 and net credit sales amounted to Br.
1,500,000 during 20X2. An aging analysis of the account receivable indicated that Br. 12,000 in accounts
receivable are expected to be uncollectible. Past experience has shown that about ½ of 1% of net credit sales
eventually are uncollectibles. Required Prepare the adjusting entries to record estimated bad debit expense
using the
(1) Percentage of sales basis, and
(2) The percentage of receivable basis under each of the following independent assumptions
a) Allowance for Doubtful Accounts has a credit balance of Br. 2000 before adjustment.
b) Allowance for Doubtful Account has a debit balance of Br. 600 before adjustment
9. The Lasta Co. uses the allowance method for estimating uncollectibles accounts. Prepare journal entries to
record the following transactions.
January 02- Sold merchandise to Nile Co. for Br. 30,000, term n/15.
February 15- Received Br. 20,000 from Nile Co. on account.
April 20- Written-off as uncollectible the remaining balance of Nile Co. account when the business declared
bankruptcy.
June 1- unexpectedly received a check for Br. 6000 from Nile Co.

10. Compute the missing amounts for each of the following notes.
Principal Interest Rate Time Total Interest
(a) Br. 60,000 10 % 1.5 years ?
(b) Br. 200,000 ? 9 months Br. 17,250
(c) ? 12 % 60 days Br. 1,500
(d) Br. 85,000 7% ? 1,487.50

11. Meskerem Co. holds a 90-day, 10% note for Br. 100,000 dated June-12, that was received from a customer
on account. On June 30, the note is discounted at Borena Bank at the rate of 12.5 %.
a) Determine the maturity value of the note.
b) Determine the number of days in the discount period
c) Determine the amount of the discount.
d) Determine the amount of the proceeds
e) Present the journal entry required to record the discounting of the note on June 30.

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