Question

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $13,015. The bank statement indicated a balance of $15,420 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $5,550.
2. A deposit of $5,780, representing receipts of June 30, had been made too late to appear on the bank statement.
3. The bank collected $3,010 on a $2,850 note, including interest of $160.
4. A check for $660 returned with the statement had been incorrectly recorded by Pala Medical Co. as $600. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.
5. A check drawn for $30 had been erroneously charged by the bank as $300.
6. Bank service charges for June amounted to $45.

Required:

1. Prepare a bank reconciliation.

Pala Medical Co.
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement		$
Adjustments:
	$
Total adjustments
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
	$
Total adjustments
Adjusted balance		$

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. 20Y1 June 30
b. June 30

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?
$

Answer 1

1.

Pala Medical Co
Bank Reconciliation
Jun-30
Cash balance according to bank statement		15,420
Adjustments:
Deposit in transit	5,780
Correction of bank error	270
Outstanding checks	-5,550
Total adjustments		500
Adjusted balance		$15,920
Cash balance according to company's record		13015
Adjustments:
Note collected	2,850
Interest earned	160
Bank service charges	-45
Correction of book error	-60
Total adjustments		2,905
Adjusted balance		$15,920

2.

Date	General Journal	Debit	Credit
June 30	Cash	$3,010
	Note receivable		$2,850
	Interest revenue		$160
	( To record note and interest revenue)
June 30	Bank service charges	$45
	Accounts payable- Skyline Supply Co	$60
	Cash		$105
	( To record bank service charges and correction of book error)

3.

If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, Amount should be reported as cash?
$15,920.