Question

The Tarragon Trading Company's bank statement for the month of November showed a balance per bank of $7,000. The company's Cash account in the general ledger had a balance of $5,659 at 30 November. Other information is as follows:

(1)    Cash receipts for 30 November recorded on the company's books were $5,200 but this amount does not appear on the bank statement.

(2)    The bank statement shows a debit memorandum for $40 for cheque printing charges.

(3)    The total amount of cheques still outstanding at 30 November amounted to $5,800.

(4)    Cheque No. 138 was correctly written and paid by the bank for $409. The cash payment journal reflects an entry for Cheque No. 138 as a debit to Accounts Payable and a credit to Cash in Bank for $490.

(5)    The bank returned a dishonoured cheque from a customer for $560.

(6)    The bank included a credit memorandum for $1,260, which represents collection of a customer's note by the bank for the company; principal amount of the note was $1,200, bank charge was $20 and interest was $80. Interest has not been accrued.

Required

(a) Prepare a bank reconciliation for the Tarragon Trading Company at 30 November.

(b) Prepare any adjusting entries necessary as a result of the bank reconciliation.

Answer 1

solution : a

The Tarragon Trading Company

Bank reconciliation

30 November

cash balance as per bank $7000

Add: (1) outstanding deposit ......................................................5200

less : (3) outstanding cheque ................................................... (5800)

adjusted cash balance as per book.......................................... 6400

Cash balance as per books $5659

Add : (4) Accounts payable error................................................. 81

(6) collect 1200 and interest 80 ....................................1280

less : (2)cheque printing..............................................................( 40)

(6)bank charges.................................................................. (20 )

(5) dishonour cheque.........................................................( 560)

adjusted cash balance as per books ................................... 6400

solution b

  journal entries

nov 30 cash a/c Dr. ............................................................81

to Account payable .......................................................81

(To Correct error in recoarding cheque no 138)

nov 30 cash a/c Dr . .......................................................1260

to notes receivable .......................................................1200

to interest earned ...........................................................60

(to record collection of note receivable and interest by the bank )

nov 30 bank charges a/c Dr ........................................ 20

printing charges a/c Dr ....................................... 40

to cash..........................................................................60

(to recoard bank charges and printing charges )

Alternative

miscellaneous Expenses a/c Dr .......................................60

to cash....................................................................................60

(to recoard bank charges and printing charges )

Nov 30 accounts Receivable ..........................................560

to cash ...........................................................................560

(to record NSF Cheque)