Question

The cash account for American Medical Co. at April 30 indicated a balance of $13,140. The bank statement indicated a balance of $15,360 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 $5,530.

B. A deposit of $5,760, representing receipts of April 30, had been made too late to appear on the bank statement.

C. The bank collected $3,000 on a $2,840 note, including interest of $160.

D. A check for $550 returned with the statement had been incorrectly recorded by American Medical Co. as $500. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.

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

F. Bank service charges for April amounted to $50.

1)Prepare a Bank Reconciliation

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.

3) If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

Answer 1

Ans-

American Medical Co.
Bank Reconciliation Statement
April 30.
Balance as per Bank Statement	$15,360.00
Add: Deposit of April 30, not recorded by bank	$5,760.00
Add: Bank error in charging check as $500 instead of $50	$450.00
Less: Checks outstanding	$5,530.00
Adjusted Bank Balance	$16,040.00
Cash Balance per accounting records	$13,140.00
Add: Note and interest collected by Bank	$3,000.00
Less: Error in recording Check (550-500)	$50.00
Less: Bank Service Charges	$50.00
Adjusted Book Balance	$16,040.00

Solution 2:

Journal Entries
S.No	Particulars	Debit	Credit
1	Cash Dr	$3,000.00
	To Note Receivables		$2,840.00
	To Interest Revenue		$160.00
	(Being note collection by bank recorded)
2	Accounts Payable Dr	$50.00
	To Cash		$50.00
	(Being Bank Charge recorded)
3	Bank Service Charges Dr	$50.00
	To Cash		$50.00
	(Being Service Charge recorded)

Solution 3:

Amount To be reported as cash on April 30 balance sheet = $16,040