Question

Bank Reconciliation The Chicago Scooter Company's bank statement for the month of June indicated a balance of $10,500. The company's cash account in the general ledger showed a balance of $8,670 on June 30. Other relevant information includes the following:

1. Deposits in transit on June 30 total $7,800.
2. The bank statement shows a debit memorandum for a check printing charge of $60.
3. Check number 160 payable to Simon Company was recorded in the accounting records for $372 and cleared the bank for this same amount. A review of the records indicated that the Simon account now has a $54 credit balance and the check to them should have been $426.
4. Outstanding checks as of June 30 totaled $8,700.
5. Check No. 176 was correctly written and paid by the bank for $609. The check was recorded in the accounting records as a debit to accounts payable and a credit to cash for $735.
6. The bank returned a NSF check in the amount of $1,026.
7. The bank included a credit memorandum for $1,890 representing a collection of a customer's note. The principle portion was $1,800 and the interest portion was $90. The interest had not been accrued.

Required
a. Prepare the June bank reconciliation for Chicago Scooter Company.
b. Prepare any necessary adjusting entries.

Answer 1

Solution

Chicago Scooter Company

a. Bank Reconciliation Statement

Chicago Scooter Company
Bank Reconciliation Statement
For the Month Ended June 30
Balance as per bank records	$10,500
Add: deposits in transit	$7,800
Less: outstanding checks	($8,700)	($900)
Adjusted bank balance	$9,600
Balance as per cash records	$8,670
Less: bank charges	($60)
Add: error in recording check no. 176	$126
Less: NSF Check	($1,026)
Add: collections by bank	$1,890	$930
Adjusted cash balance	$9,600

b. Adjusting entries:

Date	Account Titles and Explanation	Debit	Credit
Jun-30	Miscellaneous Expenses	$60
	Cash		$60
	(To record bank charges)
Jun-30	No entry for check no. 160
Jun-30	Cash	$126
	Accounts Payable	$126
	(To reverse the error in recording check no. 176)
Jun-30	Accounts Receivable	$1,026
	Cash		$1,026
	(To record NSF check)
Jun-30	Cash	$1,890
	Notes Receivable	$1,800
	Interest Revenue	$90
	(To record notes, including interest revenue collected by bank)

Note: for check no. 160, both bank and cash records have recorded the same amount. Though there exists an error in recording, the error is not reflected in the bank reconciliation statement as both the bank and cash records recorded $372.