MBA560 Financial and Managerial Accounting: Module 2 Homework (P3-24 and P4-22)

MBA560 Financial and Managerial Accounting
Module 2 Homework (P3-24 and P4-22)

Problem 3-24 Effect of purchase returns and allowances and purchase discounts on the financial statements: perpetual system
The following events were completed by Chan’s Imports in September 2012.
Sept. 1 Acquired $60,000 cash from the issue of common stock.
1 Purchased $36,000 of merchandise on account with terms 2/10, n/30.
5 Paid $800 cash for freight to obtain merchandise purchased on September 1.
8 Sold merchandise that cost $20,000 to customers for $38,000 on account, with terms 2/10, n/30.
8 Returned $1,500 of defective merchandise from the September 1 purchase to the supplier.
10 Paid cash for the balance due on the merchandise purchased on September 1.
20 Received cash from customers of September 8 sale in settlement of the account balances, but not within the discount period.
30 Paid $4,900 cash for selling expenses.

Required
a. Record each event in a statements model like the following one. The first event is recorded as an example.
b. Prepare an income statement for the month ending September 30.
c. Prepare a statement of cash flows for the month ending September 30.
d. Explain why there is a difference between net income and cash flow from operating activities.

Problem 4-22 Bank reconciliation and adjustments to the cash account
The following information is available for Cooters Garage for March 2012:

The following is a list of checks and deposits recorded on the books of Cooters Garage for March 2012:

Other Information
1. Check no. 1462 was outstanding from February.
2. A credit memo for collection of accounts receivable was included in the bank statement.
3. All checks were paid at the correct amount.
4. The bank statement included a debit memo for service charges.
5. The February 28 bank reconciliation showed a deposit in transit of $1,000.
6. Check no. 1468 was for the purchase of equipment.
7. The unadjusted Cash account balance at March 31 was $16,868.

Required
a. Prepare the bank reconciliation for Cooters Garage at the end of March.
b. Explain how the adjustments described above affect the cash account.
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