Team A Week 5 Problems PE 2 page 862 In January 2012 the administration of Sarah Company determined that it has enough money to buy transient investments in debt and stock securities In the course of the year these are the transactions that happened Feb 1 Purchased 1 200 shares of NJF common stock for 50 600 plus brokerage fees of 1 000 Mar 1 Purchased 500 shares of SEK common stock for 18 000 plus brokerage fees of 500 Apr 1 Purchased 70 1 000 8 CRT bonds for 70 000 plus 1 200 brokerage fees Interest is payable semiannually on April 1 and October 1 July 1 Received a cash dividend of 0 80 per share on the NJF common stock Aug 1 Sold 200 shares of NJF common stock at 42 per share less brokerage fees of 350 Sept 1 Oct 1 Received the semiannual interest on the CRT bonds Oct 1 Sold the CRT bonds for 77 000 less 1 300 brokerage fees Received 2 per share cash dividend on the SEK common stock The fair values of the NJK and SEK common stocks were at 39 and 30 in every corresponding share at December 31 Instructions a Journalize the transactions and post to the accounts Debt Investments and Stock Investments Use the T account form b Prepare the adjusting entry at December 31 2012 to report the investments at fair value All securities are considered to be trading securities c Show the balance sheet presentation of investment securities at December 31 2012 d Identify the income statement accounts and give the statement classification of each account GENERAL JOURNAL Date Feb Account Titles and Explanation 1 Stock Investments Cash Debit 51600 Credit 51600 Mar Apr Jul Aug Sept Oct Oct Dec To record purchase of 1200 shares of NJF common stock 1 Stock Investments Cash To record purchase of 500 shares of SEK common stock 1 Debt Investments Cash To record purchase of 70 CRT Bonds 1 Cash 1200 x 0 80 Dividend Revenue to record receipt of a cash dividend NJF 1 Cash Loss on Sale of Investments Stock Investments To record sale of 200 shares of NJF common stock 1 Cash 500 x 2 00 Dividend Revenue to record receipt of a cash dividend 1 Cash 1 Cash Interest Revenue To record receipt of interest on CRT bonds Debt investment Gain on sale of investments To record sale of CRT bonds 31 Unrealized Loss Income Market Adjustment Trading to record unrealized loss on trading securities 18500 71200 960 8050 550 1000 2800 75700 7500 18500 71200 960 8600 1000 2800 71200 4500 7500 Stock Investments 51600 18500 8600 Debt Investment 71200 71200 Dividend Revenue Loss on Sale of Investments Interest Revenue 550 CASH 960 8050 1000 2800 75700 51600 18500 71200 960 1000 Gain on Sale of Investments Unrealized Loss Income Market Adjustment Trading 4500 7500 2800 7500 54000 Sarah Company Balance Sheet partial 31 Dec 12 Current Assets Short term investments at fair value Other Revenue Gains Dividend Revenue Interest Revenue Gain on Sale of Investments Other Expenses Losses Loss on Sale of Investments Unrealized Loss E7 5 In the Reyes Company checks are currently not prenumbered for the purchasing client and the treasurer are both permitted to provide checks Every benefactor has authorization to withheld checks stored in an open vault or cabinet The purchasing agents pays all the charges involving the merchandise bought for resale Before the payment the purchasing agent confirms that the merchandise have been acquired and validates the precise calculation of the vendors receipt After the transaction the receipt is kept by the vendor and the purchasing agent lists the payment in the cash disbursements journal The treasurer pays the remaining charges after the verification by the administrators After the payment the treasurer seals all transactions with paid sorts them according to payment date and lists the check in the cash disbursements journal The Reyes Company retains one checking account that is reconciled through the treasurer Instructions a List the weaknesses in internal control over cash disbursements 1 No prenumbered checks 2 Checks are kept in unlocked cabinet 3 No segregation of duties b Identify improvements for correcting these weaknesses 1 Order prenumbered checks 2 Lock disbursements and keep in separate area from others 3 Segregate approvers buyers signers treasury account reconcilers 4 Filing improvements 5 More than one signer needed for checks At January 31 Tasha Orin is not capable to adjust the bank balance Tasha s reconciliation is the following E7 6 Cash balance per bank Add NSF check Less Bank service charge Adjusted balance per bank Cash balance per books Less Deposits in transit Add Outstanding checks Adjusted balance per books Instructions 3 677 20 450 00 28 00 4 099 20 3 975 20 590 00 770 00 4 155 20 a What is the proper adjusted cash balance per bank 3497 20 b What is the proper adjusted cash balance per books 3497 20 c Prepare the adjusting journal entries necessary to determine the adjusted cash balance per books Tasha Dumbbunny s Bank Reconciliation January 31 2012 Cash Balance per bank statement Add Deposits in Transit Less Outstanding Checks ADJUSTED CASH BALANCE PER BANK Cash Balance per books Less NSF Bank Service ADJUSTED CASH BALANCE PER 3677 2 590 4267 2 770 3497 2 3975 2 478 3497 2 770 450 28 BOOKS Jan Jan 31 Accts Rec Cash To record NSF charge 31 Misc Expense Cash To record bank service fees 450 28 450 28 E7 9 The following data involves the Cash account in the record of the Hawkins Company Balance September 1 16 400 Cash deposited 64 000 Balance September 30 17 600 Checks written 62 800 At September 30 the bank statement demonstrates a balance amounting 16 500 and the under mentioned announcements Credits Debits Collection of 1 800 note with interest 30 1 830 NSF check H Juno 560 Interest gained on checking account 45 Safety deposit box rent 60 Deposits in transit were 4 738 and outstanding checks amounts for the total of 2 383 at September 30 Instructions a Prepare the bank reconciliation at September 30 2012 b Prepare the adjusting entries at September 30 assuming 1 the NSF check was from a customer on account and 2 no interest had been accrued on the note Hawkins Company Bank Reconciliation September 30 2012 Cash Balance per bank statement Add Deposits in Transit Less Outstanding Checks ADJUSTED CASH BALANCE PER BANK Cash Balance per books Add Collection of note receivable for 1800 plus interest 30 00 Interest earned on checking Less NSF Safety Deposit Box ADJUSTED CASH BALANCE PER BOOKS 2383 16500 4738 21238 18855 17600 1875 1830 45 560 60 620 18855 Sept 30 Accts Rec Cash To record