Question

The cash account for American Medical Co. at April 30 indicated a balance of $93,115. The bank statement indicated a balance of $125,800 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

A.	Checks outstanding totaled $30,060.
B.	A deposit of $19,240, representing receipts of April 30, had been made too late to appear on the bank statement.
C.	The bank collected $24,075 on a $22,500 note, including interest of $1,575.
D.	A check for $1,800 returned with the statement had been incorrectly recorded by American Medical Co. as $180. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
E.	A check drawn for $390 had been erroneously charged by the bank as $930.
F.	Bank service charges for April amounted to $50.

	Instructions
1.	Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required.
2.	Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.
3.	If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

Answer 1

American Medical Co.

Bank Reconciliation

April 30

Cash balance according to bank statement		125800
Add deposit of April 30, not recorded by bank		19240
Add bank error in charging check as $930 instead of $390		540
		145580
Deduct outstanding checks		30060
Adjusted balance		115520
Cash balance according to company's records		93115
Add proceeds of note collected by bank, including $1575 interest		24075
		117190
Deduct error in recording check by American Medical Co. (1800-180)	1620
Deduct bank service charges	50	1670
Adjusted balance		115520

Part 2

transaction	Account titles and explanation	Debit	credit
A	Cash	24075
	Notes receivable		22500
	Interest revenue		1575
B	Accounts Payable-Targhee Supply Co.	1620
	Miscellaneous Expense	50
	Cash		1670

Part 3

Cash = $115520