Question

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,890. During May, the total cash deposited was $75,440 and checks written totaled $70,050. The bank statement indicated a balance of $25,570 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $11,390.
2. A deposit of $9,280, representing receipts of May 31, had been made too late to appear on the bank statement.
3. The bank had collected for Brentwood Bike Co. $4,900 on a note left for collection. The face of the note was $4,530.
4. A check for $580 returned with the statement had been incorrectly charged by the bank as $850.
5. A check for $410 returned with the statement had been recorded by Brentwood Bike Co. as $140. The check was for the payment of an obligation to Adkins Co. on account.
6. Bank service charges for May amounted to $50.
7. A check for $1,130 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

Brentwood Bike Co.
Bank Reconciliation
May 31
Cash balance according to bank statement		$
Add deposit of May 31, not recorded by bank	$
		$
Adjusted balance		$
Cash balance according to company's records		$
		$
	$
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. May 31
b. May 31

3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Answer 1

1)	BANK RECONCILIATION STATEMENT AS ON MAY 31
	Cash balance according to bank statement		$     25,570	Cash balance according to company's records (14890+75440-700050)		$       20,280
	Add:			Add:
	Excess amount debited by bank on check (850-580)	$              270
	Deposit in transit	$          9,280	$        9,550	Note collected	$    4,530
			$     35,120	Interest collected on note (4900-4530)	$        370
	Less:					$         4,900
	Checks outstanding	$        11,390				$       25,180
			$     11,390	Less:
				Mistake in check (410-140)	$        270
				NSF cheque	$    1,130
				Bank service charges	$          50	$         1,450
	Adjusted balance as per bank statement		$     23,730	Adjusted balance as per ledger		$       23,730
2)
a)	Cash	$          4,900
	Interest income		$           370
	Notes receivable		$        4,530
	[To record collection of note receivable with interest]
b)	Accounts payable	$              270
	Cash		$           270
	[To record mistake in check--Adkins Co
	Accounts receivable	$          1,130
	Cash		$        1,130
	[o record NSF check-Jennings Co]
	Bank service charges	$                50
	Cash		$              50

3) Cash balance to be reported = $23,730