[suk11]

The bookkeeper for Biggio Corporation made these errors in journalizing and posting.
Analyze errors and their effects on trial balance.

1. A credit posting of $400 to Accounts Receivable was omitted.
2. A debit posting of $750 for Prepaid Insurance was debited to Insurance Expense.
3. A collection on account of $100 was journalized and posted as a debit to Cash $100 and a credit to Accounts Payable $100.
4. A credit posting of $300 to Property Taxes Payable was made twice.
5. A cash purchase of supplies for $250 was journalized and posted as a debit to Supplies $25 and a credit to Cash $25.
6. A debit of $395 to Advertising Expense was posted as $359.

Instructions
For each error, indicate (a) whether the trial balance will balance; if the trial balance will not balance, indicate (b) the amount of the difference, and (c)
The trial balance column that will have the larger total. Consider each error separately. Use the following form, in which error 1 is given as an example.

[suk11]

As noted in the chapter, banks charge fees of up to $30 for bounced checksthat is, checks that exceed the balance in the account. It has been estimated that processing bounced checks costs a bank roughly $1.50 per check. Thus, the profit margin on bounced checks is very high. Recognizing this, some banks have started to process checks from largest to smallest. By doing this, they maximize the number of checks that bounce if a
Customer overdraws an account. For example, NationsBank (now Bank of America) projected a $14 million increase in fee revenue as a result of processing largest checks first. In response to criticism, banks have responded that their customers prefer to have large checks processed first, because those tend to be the most important. At the other extreme, some banks will cover their customers bounced checks, effectively extending
Them an interest-free loan while their account is overdrawn.

Instructions
Answer each of the following questions.
For processing against his account.
Check NumberAmount
3150 $ 35
3162 400
3165 $ 550
3166 1,510
3169 180
Assuming a $30 fee assessed by the bank for each bounced check, how much fee revenue would the bank generate if it processed checks (1) from largest to smallest, (2) from smallest to largest, and (3) in order of check number?
(b) Do you think that processing checks from largest to smallest is an ethical business practice?
(c) In addition to ethical issues, what other issues must a bank consider in deciding whether to process checks from largest to smallest?
(d) If you were managing a bank, what policy would you adopt on bounced checks?

[Curlyben]

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