Question

The Fitzgerald Company maintains a checking account at the Bank of the North.
The bank provides a bank statement along with canceled checks on the last day of each month. T
he October 31, 2016, bank statement included the following information:



Balance, October 1, 2016 $ 32,690
   Deposits 86,000
   Checks processed -75,200
   Service charges -350
   NSF checks -1,600
   Monthly loan payment deducted
      directly by bank from account
      (includes $400 in interest)    (3,400)
Balance, October 31, 2016 $38,140

The company's general ledger cash (checking) account had a balance of $42,544 at the end of October.
Deposits outstanding totaled $4,224, and all checks written by the company were processed by the bank
except for those totaling $5,620. In addition, a check for $500 for the purchase of office furniture was
incorrectly recorded by the company as a $50 disbursement. The bank correctly processed the check
during October.



Required:

1. Prepare a bank reconciliation for the month of October.
2. Prepare the necessary journal entries at the end of October to adjust the general ledger cash account.
Use the Excel file template provided.

Answer 1

1. Bank reconciliation for the month of October is:

Fitzgerald Company
Bank Reconciliation
October 31, 2016
Particulars	Amount ($)	Amount ($)
Unadjusted bank Balance, October 31, 2016		38,140.00
Add: Deposit in transit	4,224
Less: outstanding checks	5,620
True cash balance, October 31, 2016		36,744.0
Unadjusted book Balance, October 31, 2016		42,544.00
Less:
Check for office furniture recorded incorrectly as 50 instead of 500	450
Bank Service charges	350
NSF Checks	1,600
Monthly loan payment including interest	3,400
True cash balance, October 31, 2016		36,744.0

2. Necessary journal entries at the end of October to adjust the general ledger cash account is as prepared below:

Date	Particulars	L.F	Amount ($)	Amount ($)
2016
Oct-31	Bank Service Charges		350
	Cash			350
	(For bank service fees)
Oct-31	Loan Payable		3,000
	Interest expense		400
	Cash			3,400
	(For cash piad on loan)
Oct-31	Account Receivable		1,600
	Cash			1600
	(for NSF check)
Oct-31	Office Furniture		450
	Cash			450
	(for check for office furniture)