Question

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,350. During May, the total cash deposited was $73,130 and checks written totaled $67,900. The bank statement indicated a balance of $24,790 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 $11,040.
2. A deposit of $8,990, 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. $4,750 on a note left for collection. The face of the note was $4,390.
4. A check for $580 returned with the statement had been incorrectly charged by the bank as $850.
5. A check for $970 returned with the statement had been recorded by Brentwood Bike Co. as $790. The check was for the payment of an obligation to Adkins Co. on account.
6. Bank service charges for May amounted to $40.
7. A check for $1,100 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	$
Add bank error in charging check as $850 instead of $580
		$
Deduct outstanding checks
Adjusted balance		$
Cash balance according to company's records		$
Add note and interest collected by bank
		$
Deduct check returned because of insufficient funds	$
Deduct bank service charges
Deduct error in recording check
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	Cash
	Notes Receivable
	Interest Revenue
b. May 31	Accounts Payable-Adkins Co.
	Accounts Receivable-Jennings Co.
	Miscellaneous Expense
	Cash

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

Answer 1

1.

Brentwood Bike Co.
Bank Reconciliation
At May 31
Cash balance according to bank statement		24,790
Add deposit of May 31, not recorded by bank	8,990
Add bank error in charging check as $850 instead of $580	270	9,260
		34,050
Deduct Outstanding checks		-11040
Adjusted balance		$23,010
Cash balance according to company's record		19,580
Add note and interest collected by bank		4,750
		24,330
Deduct check returned because of insufficient funds	1,100
Deduct bank service charges	40
Deduct error in recording check	180	-1,320
Adjusted balance		$23,010

2.

Date	General Journal	Debit	Credit
a. May 31	Cash	$4,750
	Notes Receivable		$4,390
	Interest Revenue		$360
	( To record interest and note collected by bank)
b. May 31	Accounts Payable-Adkins Co.	$180
	Accounts Receivable-Jennings Co.	$1,100
	Miscellaneous Expense	$40
	Cash		$1,320
	( To record error of recording check, NSF check and bank service charges)

3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, the amount should be reported as cash is $23,010

Kindly comment if you need further assistance.

Thanks‼!