Question

The cash account for Corey’s Construction Company at August 31, 2020, indicated a book balance of $19,885. The bank statement received by the company indicated a balance of $39,473.63 as at August 31, 2020. A comparison of the bank statement and the accompanying cancelled cheques and memos with the records revealed the following:

1. A deposit of $6,794.62 was received by the bank on August 31 after the bank statement was prepared.

2. Cheques #251 for $1,200 and #260 for $1,333.25 were not presented to the bank for encashment as at August 31, 2020.
3. The bank erroneously debited a cheque drawn Corey’s Construction as $16,000 instead of $1,600.

4. The company’s accountant recorded a $3,500.00 cheque for payment of accounts payables as $35,000

5. The bank credited a deposit of $200 as $2,000 to Corey’s Construction account.
6. A cheque for $13,500 from a customer Ali Woods was returned for insufficient funds. The bank charged $50 for Wood’s NSF cheque. The company’s policy states that the bank charges associated with NSF cheques are to be recovered from the customer.
7. A note was collected by the bank of $21,000 on August 31 which included interest of $1,500.

8. A debit memo from the bank showed service charge amounting to $2,500 as at August 31, 2020.

Required:

1. Prepare the necessary journal entries for Corey’s Construction Company at August 31, 2020.

2. Prepare Corey’s Construction Company adjusted cash book to be included in the balance sheet for August 31^st. 2020.

3. Prepare Corey’s Construction Company bank reconciliation statement for August 31, 2020

Answer 1

1.

Date	Account Titles and explanation	Debit	Credit
Aug. 31	Cash 35000-3500)	$31500
	Accounts Payable		$31500
	(To correct the error made by accountant)
Aug. 31	Cash	$21000
	Interest revenue/receivable		$1500
	Notes receivable		$19500
	(To record the collection of notes receivable directly by bank)
Aug. 31	Bank charges	$2500
	Cash		$2500
	(To record the bank charges on the statement)
Aug. 31	Accounts receivable	$13550
	Cash		$13550
	(To record the NSF check)

2.

Particulars	Amount
Balance as per books	$19885
Add: Correction of error	$31500
Add: Note collected by bank	$21000
Less: Bank charges	$2500
Less: NSF Check	$13550
Adjusted cash balance	$56335

3.

Bank Reconciliation
	Amount
Balance as per bank	$39,473.63
Add:
Deposit in transit	$6794.62
Erroneous debit($16000-$1600)	$14400
Less:
Cheque not presented #251	$1200
Cheque not presented #260	$1333.25
Erroneous credit	$1800
Adjusted bank balance on August 31	$56,335
Balance as per books	$19885
Add: Correction of error	$31500
Add: Note collected by bank	$21000
Less: Bank charges	$2500
Less: NSF Check	$13550
Adjusted cash balance on August 31	$56335