Question

Bank reconciliation and entries OBJ. 5 The cash account for American Medical Co. at April 30 indicated a balance of $334,985.

The bank statement indicated a balance of $388,600 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 $61,280.

b. A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement.

c. The bank collected $42,000 on a $40,000 note, including interest of $2,000.

d. A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.

e. A check drawn for $240 had been erroneously charged by the bank as $420.

f.Bank service charges for April amounted to $145.

Answer 1

Solution:

American medical co.
Bank Reconciliation
Apr-30
Cash balance according to Bank Statement		$3,88,600
Add: Deposit of April 30, not recorded by Bank	$42,500
Add: Bank error in charging check as $420 instead of $240	$180	$42,680
		$4,31,280
Deduct: Outstanding checks		$61,280
Adjusted Balance		$3,70,000
Cash balance according to Company's books		$3,34,985
Add: Note collected by Bank (Including Interest)		$42,000
		$3,76,985
Deduct: Company's error in charging check as $760 instead of $7600	$6,840
Deduct: Bank Service Charges	$145	$6,985
Adjusted Balance		$3,70,000

Journal Entries
S.No	Date	Particulars	Debit	Credit
(a)	30-Apr	Cash Dr	$42,000
		To Note Receivable		$40,000
		To Interest Revenue		$2,000
		(To record increase in cash as note collected)
(b)	30-Apr	Accounts Payable Dr	$6,840
		Bank Service Charges Dr	$145
		To Cash		$6,985
		(To record decrease in cash)