Question

The general ledger of Michelle Co. Ltd. showed a cash balance of $ 25,160 on 31 December 20X2, while the bank showed a balance of $ 59,400. he following facts were available:

a. The bank collected $ 11,560 as a direct deposit for one of Michelle’s customer as a pay-ment on account. A $ apay-mentonaccount.A$ 15 fee was charged by the bank for administration. Michelle has yet to record either of these amounts.

b. Michelle paid a utilities bill of $ 390 through direct transfer from its bank account but has not yet recorded the payment.

c. There was an outstanding deposit of $ 16,800 at the end of December.

d. The bank had charged a cheque of $ 2,600, written by Mitchell Corp., to Michelle’s bank account. he bank has been contacted about the error, and will reverse the cheque in January.

e. A deposit of $ 1,300 from a customer on account was recorded by Michelle for $ 3,100. he bank noticed the error and deposited the correct amount of money, but the deposit is incorrectly recorded on Michelle’s books.

f. Michelle’s bank account shows a deposit of $ 22,000 in December, which is an increase in Michelle’s bank loan. he amount has not been recorded by Michelle.

g. At the end of November, outstanding cheques were $ 8,185. his month, cheques were issued for $ 199,000, and cheques of $ 184,900 cleared the bank account.

 

Required:

1. Prepare a bank reconciliation, in good form, at the end of December 20X2.

2. Prepare any adjusting journal entries required as a result of the reconciliation.

 

Answer 1

Requirement 1

 

Bank Reconciliation, 31 December 20x2

 

                                                                                                                  Bank Books

Balances, 31 December...................................................................   $59,400 $25,160

Additions:

  Outstanding deposit................................................................. 16,800

      Account receivable collected....................................................                      11,560

  Loan increase............................................................................                        22,000

 

  Bank error.................................................................................   2,600

Deductions:

       Cheques outstanding ($8,185 + $199,000 - $184,900)........   (22,285)

       Deposit recording error ($1,300 - $3,100)............................                      (1,800)

       Utility bill payment..................................................................                          (390)

       Bank service charge................................................................                      ___(15)

Correct cash balance....................................................................   $56,515     $56,515

 

Requirement 2

 

Journal entries from bank reconciliation:

 

       Cash...........................................................................................  33,560

  Account receivable............................................................... 11,560

  Notes payable....................................................................... 22,000

 

       Accounts receivable (payment on account).........................    1,800

             Cash ......................................................................................                      1,800

 

       Utilities expense......................................................................       390

       Bank service charge expense................................................         15

   Cash ………………………………………………..   405

   Cash ………………………………………………..   405