On October 31, 2021, Damon Company’s general ledger shows a checking account balance of $8,400. The company’s cash receipts for
the month total $74,340, of which $71,300 has been deposited in the bank. In addition, the company has written checks for $72,470, of which $71,000 has been processed by the bank. The bank statement reveals an ending balance of $11,800 and includes the following items not yet recorded by Damon: bank service fees of $160, note receivable collected by the bank of $5,100, and interest earned on the account balance plus from the note of $370. After closer inspection, Damon realizes that the bank incorrectly charged the company’s account $340 for an automatic withdrawal that should have been charged to another customer’s account. The bank agrees to the error. Required: 1. Prepare a bank reconciliation to calculate the correct ending balance of cash on October 31, 2021. (Amounts to be deducted should be indicated with a minus sign.)
1 answer:
Answer:
Explanation:
Bank Reconciliation: The bank reconciliation deals with the bank statement balance and the cash statement balance. The motive is to compare these two statements so that the organization can run in the smoothly manner.
There are various transactions due to which the bank statement balance and the cash statement balance do not match. To match these statements, we adjust the transactions accordingly.
The outstanding deposits is computed below:
= Company cash receipts - bank deposited
= $74,340 - $71,300
= $3,040
And, the outstanding checks is computed below:
= Company written checks - Processed by bank
= $72,470 - $71,000
= $1,470
The preparation of the bank reconciliation statement on October 31, 2021 for Damon Company is presented in the spreadsheet. Kindly find the attachment below:
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Answer:
Ans. The current price of the stock is $56.82
Explanation:
Hi, well, the problem here is that we have different discount rates, in other words the required rate of return for the stock changes several times, therefore we are going to break this problem in 3 parts, or bring to present value all the cash flows in 3 steps. Let´s start with the value of the dividends.
We have to use the following formula.
Where, D(n-1) is last dividend and Dn is the dividend that we are looking for, for example, D1 = 3.10*(1+0.06)=3.29, D2=3.29*(1+0.06)=3.48, and so forth. The amount to pay on dividends per share is,
D1=3.29; D2=3.48; D3=3.69; D4=3.91; D5=4.15; D6=4.40; D(7)=4.66
Since the first 3 years are to be discounted at a 15%, this is how the formula should look like.
Now, for the second part, we have to bring all cash flows to year 3 at r(2)=13% and then bring it to present value at r(1)=15%. This is because we have 2 different discount rates, this is as follows.
Finally, we need to bring all the future cash flows from year 7 and beyond, notice that we need to use the return rate r(3) to bring everything to year 6, then we have to bring it to year 3 and then to present value, everything as follows.
So, the price of the stock is PV(1) + PV(2) + PV(3), or:
Price= $56.82/share
Best of luck.