Question

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.

	Instructions
1.	Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.“Deduct:” or “Add:” will automatically appear if it is required.
2.	Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.
3.	If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash? 1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. Whenever there is more than one adjusting item in the bank portion of the reconciliation or the general ledger portion of the bank reconciliation, enter in the order presented in the instructions. AMERICAN MEDICAL CO. Bank Reconciliation April 30 1 Cash balance according to bank statement 2 3 4 5 6 Adjusted balance 7 8 Cash balance according to company’s records 9 10 11 12 13. Adjusted balance 2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles. PAGE 1 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 5 6

Answer 1

Solution 1:

American Medical Co.
Bank Reconciliation - April 30
Cash Balance according to bank statement	$388,600.00
Additions:
Deposit in transit	$42,500.00
Incorrect recording of Check by bank ($420-$240)	$180.00
Deductions:
Outstanding Checks	$61,280.00
Adjusted Balance	$370,000.00
Cash Balance according to Company's Records	$334,985.00
Additions:
Notes collected	$40,000.00
Interest on Note	$2,000.00
Deductions:
Incorrect recording of check ($7600-$760)	$6,840.00
Service Charges	$145.00
Up to date cash balance as per books	$370,000.00

Solution 2:

Journal Entries
Date	Particulars	Debit	Credit
30-Apr	Cash Dr	$42,000.00
	To Interest Revenue		$2,000.00
	To Notes Receivables		$40,000.00
	(Being note collection by bank recorded)
30-Apr	Accounts Payable Dr ($7600-$760)	$6,840.00
	To Cash		$6,840.00
	(Being correction entry for incorrect check recording)
30-Apr	Service Charges Dr	$145.00
	To Cash		$145.00
	(Being bank charges debited in statement)

Solution 3:

Amount to be reported for Cash on April 30 Balance Sheet = $370,000