Question

El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at the end of each month. The November 30, 2018, reconciliation of the bank balance is as follows:

Balance per bank, November 30				$	3,391
Add: Deposits outstanding					1,360
Less: Checks outstanding
#363	$	139
#365		217
#380		72
#381		102
#382		250			(780	)
Adjusted balance per bank, November 30				$	3,971

The company’s general ledger checking account showed the following for December:

Balance, December 1		$	3,971
Receipts			44,250
Disbursements			(43,453	)
Balance, December 31		$	4,768

The December bank statement contained the following information:

Balance, December 1		$	3,391
Deposits			44,600
Checks processed			(43,518	)
Service charges			(38	)
NSF checks			(600	)
Balance, December 31		$	3,835

The checks that were processed by the bank in December include all of the outstanding checks at the end of November except for check #365. In addition, there are some December checks that had not been processed by the bank by the end of the month. Also, you discover that check #411 for $540 was correctly recorded by the bank but was incorrectly recorded on the books as a $450 disbursement for advertising expense. Included in the bank’s deposits is a $2,900 deposit incorrectly credited to the company’s account. The deposit should have been posted to the credit of the Los Gatos Company. The NSF checks have not been redeposited and the company will seek payment from the customers involved.

Required:
1. Prepare a bank reconciliation for the El Gato checking account at December 31, 2018.
2. Prepare any necessary adjusting journal entries indicated.

Answer 1

	El Gato Painting Company
	Bank Reconciliation
	December 31, 2018
				$
Cash Balance as per Bank Statement				3,835
Add:	Deposits Outstanding			3,910
				7,745
Less:	Oustanding Cheque			805
	Bank Error			2,900
Adjusted Cash Balance as per Bank				4,040
Cash Balance as per Books				4,768
Less:	Service Charges			38
	Error in recording Check #411			90
	NSF Checks			600
Adjusted Cash Balance as per Books				4,040
Correct Balance for the cash account as of December 31, 2018 is $ 4,040
Calculations of Deposits Outstanding
		$	$
Receipts			44,250
Less : December receipt deposits
	Bank Deposits	44,600
	Less : Deposit Error	2,900
	Less : Last month deposits pending	1,360	40,340
Deposits in Transit , Dec 31			3,910
Calculations of Checks Outstanding
Dec Disbursements			43,453
Add : Error in recording check			90
Less : December Checks Cleared
	Total checks cleared	43,518
	Less : Last Month's Checks cleared:
	#363          $ 139
	#380          $ 72
	#381          $ 102
	#382          $ 250	563	42,955
December check outstanding			588
Add : Check # 365			217
Total checks Outstanding Dec 31			805
	Journal Enteries
	In the Books of El Gato Painting Company
		Debit	Credit
1	Advertisement Expenses	$ 90
	Cash		$ 90
	( Being Check for advertisement corrected)
2	Sevice Charges	$ 38
	Cash		$ 38
	( Bank Service Charges Recorded)
3	Accounts Receivable ( NSF Checks)	$ 600
	Cash		$ 600
	( NSF Check reccorded)

Thank You.