Question

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $34,250. During May, the total cash deposited was $140,300, and checks written totaled $138,880. The bank statement indicated a balance of $43,525 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: Checks outstanding totaled $6,440. A deposit of $1,850 representing receipts of May 31 had been made too late to appear on the bank statement. The bank had collected for Brentwood Bike Co. $5,250 on a note left for collection. The face of the note was $5,000. A check for $390 returned with the statement had been incorrectly charged by the bank as $930. A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as $120. The check was for the payment of an obligation to Adkins Co. on account. Bank service charges for May amounted to $30. A check for $1,325 from Jennings Co. was returned by the bank due to insufficient funds.

Instructions Prepare a bank reconciliation as of May 31.

Journalize the necessary entries. The accounts have not been closed. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?

Answer 1

SOLUTION

1.

Particulars	Amount ($)
Balance as per Bank statement May 31	43,525
Less: Checks Outstanding	(6,440)
Add: Deposits in Transit	1,850
Less: Note Collected with Interest not in cash GL	(5,250)
Add: Mistake in Check by Bank	540
Add:Check Record mistake in Cash GL	90
Add: Bank Service change Not in Cash GL	30
Add: NSF not recorded in Cash GL	1,325
Cash Balance As per Cash	35,670

Bank reconciliation statement-

Particulars	Amount ($)
Balance as per Bank statement	43,525
Add: Deposits in Transit	1,850
Add: Mistake in Check by Bank	540
Less: Checks Outstanding	(6,440)
Adjusted Bank Balance	39,475
Cash Balance as Per Cash GL	35,670
Add: Note Collected with Interest not in cash GL	5,250
Less: Check Record mistake in Cash GL	(90)
Less: Bank Service change Not in Cash GL	(30)
Less: NSF not recorded in Cash GL	(1,325)
Adjusted Cash Balance	39,475

2. Journal entries-

S.No.	Accounts titles and Explanation	Debit ($)	Credit ($)
1.	Cash	5,250
	Interest Income		250
	Note Receivable		5,000
2.	Accounts Payable	90
	Cash		90
3.	Bank Charges	30
	Cash		30
4.	Accounts Receivable	1,325
	Cash		1,325

3. Amount should be reported as cash is $39,475