Question

The bank statement for the checking account of Management Systems Inc. (MSI) showed a December 31, 2021, balance of $15,634.62. Information that might be useful in preparing a bank reconciliation is as follows:

1. Outstanding checks were $1,421.75.
2. The December 31, 2021, cash receipts of $625 were not deposited in the bank until January 2, 2022.
3. One check written in payment of rent for $256 was correctly recorded by the bank but was recorded by MSI as a $273 disbursement.
4. In accordance with prior authorization, the bank withdrew $550 directly from the checking account as payment on a note payable. The interest portion of that payment was $400. MSI has made no entry to record the automatic payment.
5. Bank service charges of $24 were listed on the bank statement.
6. A deposit of $925 was recorded by the bank on December 13, but it did not belong to MSI. The deposit should have been made to the checking account of MIS, Inc.
7. The bank statement included a charge of $75 for an NSF check. The check was returned with the bank statement and the company will seek payment from the customer.
8. MSI maintains a $300 petty cash fund that was appropriately reimbursed at the end of December.
9. According to instructions from MSI on December 30, the bank withdrew $15,000 from the account and purchased U.S. Treasury bills for MSI. MSI recorded the transaction in its books on December 31 when it received notice from the bank. Half of the Treasury bills mature in two months and the other half in six months.

Required:
1. Prepare a bank reconciliation for the MSI checking account at December 31, 2021. You will have to compute the balance per books.
2. Prepare any necessary adjusting journal entries indicated.
3. What amount would MSI report as cash and cash equivalents in the current asset section of the December 31, 2021, balance sheet?

Answer 1

			Bank Reconciliation
	Balance as per bank statement					15,634.62
	Add:
	Deposit in transit					625
	Deduct:
	outstanding checks					1,421.75
	Error in recording deposit					925
	Corrected cash balance					13,912.87
	Balance per books
	Add:					14,544.87
	Error in recording rent					17
	Deduct:
	Automatic mortgage note payment					550
	Bank service charges					24
	NSF					75
	Corrected cash balance					13,912.87
	Journal entry worksheet
	Event	General Journal				Debit	Credit
	1)	Cash				17
		Rent expense					17
	2)	Notes payable/Mortgage payable				150
		interest expense				400
		bank service charge				24
		accounts receivable				75
		cash					649
	3)	total cash and cash equivalent				21,712.87
		(cash+petty cash+US treasury bills)
		only half treasury bills will be considered cash equivalent