Question

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $14,880. The bank statement indicated a balance of $17,060 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 $6,140.

A deposit of $6,400, representing receipts of June 30, had been made too late to appear on the bank statement.

The bank collected $3,330 on a $3,160 note, including interest of $170.

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

A check drawn for $90 had been erroneously charged by the bank as $900.

Bank service charges for June amounted to $30.

Required:

1. Prepare a bank reconciliation.

Pala Medical Co.
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement		$
Adjustments:
	$
Total adjustments
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
	$
Total adjustments
Adjusted balance		$

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
b. June 30

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

Answer 1

	Pala Medical Co.
	Bank Reconciliation
	June 30, 20Y1
Cash balance according to bank statement		17060
Adjustments:
Deposit of June 30, not recorded by bank	6400
Bank error in charging check as $900 instead of $90	810
Outstanding checks	-6140
Total adjustments		1070
Adjusted balance		18130
Cash balance according to company's records		14880
Adjustments:
Proceeds of note collected by bank, including $170 interest	3330
Error in recording check.	-50
Bank service charges	-30
Total adjustments		3250
Adjusted balance		18130
2
June 30            Cash	3330
Notes Receivable		3160
Interest Revenue		170
June 30            Accounts Payable-Skyline Supply Co.	50
Miscellaneous Expense	30
Cash		80
3
Amount reported as Cash = $18130