Question

Bank Reconciliation and Entries

The cash account for American Medical Co. at April 30 indicated a balance of $13,410. The bank statement indicated a balance of $15,680 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $5,640.
2. A deposit of $5,880, representing receipts of April 30, had been made too late to appear on the bank statement.
3. The bank collected $3,060 on a $2,900 note, including interest of $160.
4. A check for $660 returned with the statement had been incorrectly recorded by American Medical Co. as $600. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
5. A check drawn for $50 had been erroneously charged by the bank as $500.
6. Bank service charges for April amounted to $40.

Required:

1. Prepare a bank reconciliation.

American Medical Co.
Bank Reconciliation
April 30
Cash balance according to bank statement		$
	$
Adjusted balance		$
Cash balance according to company's records		$
	$
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. April 30
b. April 30

3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?
$

Check My Work

Answer 1

1.

American medical co.
Apr-30
Cash balance according to Bank Statement		$15,680.00
Add: Deposit of April 30, not recorded by Bank	$5,880.00
Add: Bank error in charging check as $500 instead of $50	$450.00	$6,330.00
		$22,010.00
Deduct: Outstanding checks		$5,640.00
Adjusted Balance		$16,370.00
Cash balance according to Company's books (13320+67100-62300)		$13,410.00
Add: Note collected by Bank (Including Interest)		$3,060.00
		$16,470.00
Deduct: Company's error in charging check as $600 instead of $660	$60.00
Deduct: Bank Service Charges	$40.00	$100.00
Adjusted Balance		$16,370.00

2.

Journal Entries
S.No	Date	Particulars	Debit	Credit
(a)	30-Apr	Cash Dr	$3,060.00
		To Note Receivable		$2,900.00
		To Interest Revenue		$160.00
		(To record increase in cash as note collected)
(b)	30-Apr	Accounts Payable Dr	$60.00
		Bank Service Charges Dr	$40.00
		To Cash		$100.00
		(To record decrease in cash)

3.

cash balance $16,370