Question

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $12,020. The bank statement indicated a balance of $14,010 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

Checks outstanding totaled $5,040.

A deposit of $5,250, representing receipts of June 30, had been made too late to appear on the bank statement.

The bank collected $2,730 on a $2,590 note, including interest of $140.

A check for $440 returned with the statement had been incorrectly recorded by Pala Medical Co. as $400. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

A check drawn for $50 had been erroneously charged by the bank as $500.

Bank service charges for June amounted to $40.

Required:

1. Prepare a bank reconciliation.

Pala Medical Co.
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement		$
Adjustments:
Deposit of June 30, not recorded by bank	$
Bank error in charging check as $500 instead of $50
Outstanding checks
Total adjustments
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
Proceeds of note collected by bank, including $140 interest	$
Error in recording check.
Bank service charges
Total adjustments
Adjusted balance		$

Feedback

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. 20Y1 June 30	Cash
	Notes Receivable
	Interest Revenue
b. June 30	Accounts Payable-Skyline Supply Co.
	Miscellaneous Expense
	Cash

Feedback

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?
$

Answer 1

1

Pala Medical Co
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement
Adjustments
Deposit of June 30, not recorded by bank	$   5,250	$ 14,010
Bank error in charging check as $500 instead of $50	$       450
Outstanding checks	$ (5,040)
Total adjustments		$        660
Adjusted balance		$ 14,670
Cash balance according to company's records		$ 12,020
Adjustments:
Proceeds of note collected by bank, including $140 interest	$   2,730
Error in recording check.	$       (40)
Bank service charges	$       (40)
Total adjustments		$    2,650
Adjusted balance		$ 14,670

2.

Date	Account title	Debit	Credit
Jun-30	Cash	$ 2,730
	Note receivable		$ 2,590
	Interest revenue		$     140
Jun-30	Accounts Payable-Skyline Supply Co.	$        40
	Miscellaneous Expense	$        40
	Cash		$        80

3. COmpany will show USD 14,670 as cash balance in balance sheet

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