Question

The cash account for Coastal Bike Co. at October 1, 20Y9, indicated a balance of $32,527. During October, the total cash deposited was $139,121, and checks written totaled $135,890. The bank statement indicated a balance of $43,660 on October 31, 20Y9. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

a.	Checks outstanding totaled $6,625.
b.	A deposit of $1,888 representing receipts of October 31, had been made too late to appear on the bank statement.
c.	The bank had collected for Coastal Bike Co. $5,250 on a note left for collection. The face of the note was $5,000.
d.	A check for $260 returned with the statement had been incorrectly charged by the bank as $620.
e.	A check for $410 returned with the statement had been recorded by Coastal Bike Co. as $140. The check was for the payment of an obligation to Rack Pro Co. on account.
f.	Bank service charges for October amounted to $37.
g.	A check for $1,418 from Bay View Condos was returned by the bank due to insufficient funds.

	Instructions
1.	Prepare a bank reconciliation as of October 31, 20Y9. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. "Add:" & "Deduct:" will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
2.	Journalize the necessary entries. Refer to the Chart of Accounts for exact wording of account titles.
3.	If a balance sheet were prepared for Coastal Bike Co. on October 31, 20Y9, what amount should be reported as cash?

Answer 1

Cash balance as per books on October 31, 20Y9 = Cash balance on October 1 + Total deposited during October -Total checks written during October

= 32,527+139,121-135,890

= $35,758

1.

Coastal Bike Co.
Bank Reconciliation
At October 31, 20Y9
Bank statement balance	43,660.00	Book balance	35,758.00
Add:		Add:
Deposit in transit	1,888.00	Note & interest collected by bank	5,250.00
Correction of bank error	360.00
	45,908.00		41,008.00
Less:		Less:
Outstanding check	-6,625.00	Correction of book error	-270.00
		Bank service charges	-37.00
		NSF Check	-1,418.00
Adjusted bank balance	39,283.00	Adjusted book balance	39,283.00

2.

Date	General journal	Debit	Credit
Oct-31	Cash	$5,250
	Note receivable		$5,000
	Interest revenue		$250
	( To record collection of note and interest by the bank)
Oct-31	Accounts payable - Rack Pro Co.	$270
	Cash		$270
	( To record correction of book error)
Oct-31	Bank service charges	$37
	Cash		$37
	( To record bank service charges)
Oct-31	Accounts receivable - Bay View Condos	$1,418
	Cash		$1,418
	( To record NSF check)

3. If a balance sheet were prepared for Coastal Bike Co. on October 31, 20Y9 , $39,283 should be reported as cash.