Question

A company’s bookkeeper incorrectly recorded the receipt of a $480 cheque, received in settlement of an accounts receivable, as a receipt of $840. The error was found when the bank account was reconciled at month end. How would the error be dealt with at the end of the month?

Select one:

a. $360 addition to the balance per bank in the bank reconciliation

b. $360 deduction from the balance per bank in the bank reconciliation

c. $360 addition to the balance per books

d. $360 deduction from the balance per books

On September 1, 20x4, a company borrowed $600,000 from the bank at an interest rate of 6%. The repayment schedule calls for annual payments of $100,000 plus interest commencing on August 31, 20x5. What is the balance in the note payable account as at December 31, 20x7?

Select one:

a. $100,000

b. $200,000

c. $300,000

d. $306,000

Answer 1

Answer:

a) Company bookkeeper wrongly recorded a receipt of $840 instead of $480 in settlement of accounts receivable, due to this balance as per company books record is overstated at $360, hence at the time of reconciliation need to deduct $360 from the balance as per books.

Accordingly option (d) is the correct answer.

b) Calculation of Balance of Notes Payable on December 31, 20x7

Balance of Notes Payable as on Sept 1, 20x4 $600,000

Less: Amount paid till December 31, 20x7 $300,000

(Commencing from August 31, 20x5)

Balance of Notes Payable on December 31, 20x7 $300,000

Accordingly Option (C) is the correct answer.