Question

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $91,408. The bank statement indicated a balance of $126,590 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

A. Checks outstanding totaled $33,700.

B. A deposit of $18,900, representing receipts of June 30, had been made too late to appear on the bank statement.

C. The bank collected $22,042 on a $20,600 note, including interest of $1,442.

D. A check for $1,600 returned with the statement had been incorrectly recorded by Pala Medical Co. as $160. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

E. A check drawn for $680 had been erroneously charged by the bank as $860.

F. Bank service charges for June amounted to $40.

Instructions

1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

2. Journalize the necessary entries. Refer to the Chart of Accounts for exact wording of account titles.

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?

CHART OF ACCOUNTS

Pala Medical Co.

General Ledger

ASSETS

110 Cash

111 Petty Cash

120 Accounts Receivable

131 Notes Receivable

141 Merchandise Inventory

145 Office Supplies

146 Store Supplies

151 Prepaid Insurance

181 Land

191 Office Equipment

192 Accumulated Depreciation-Office Equipment

193 Store Equipment

194 Accumulated Depreciation-Store Equipment

LIABILITIES

211 Accounts Payable-Skyline Supply Co.

221 Notes Payable

222 Interest Payable

231 Salaries Payable

241 Sales Tax Payable

EQUITY

310 Common Stock

311 Retained Earnings

312 Dividends

313 Income Summary

REVENUE

410 Sales

610 Interest Revenue

EXPENSES

510 Cost of Merchandise Sold

515 Credit Card Expense

516 Cash Short and Over

520 Salaries Expense

531 Advertising Expense

532 Delivery Expense

533 Insurance Expense

534 Office Supplies Expense

535 Rent Expense

536 Repairs Expense

537 Selling Expenses

538 Store Supplies Expense

561 Depreciation Expense-Office Equipment

562 Depreciation Expense-Store Equipment

590 Miscellaneous Expense

710 Interest Expense

Amount Descriptions

Adjusted balance

Bank error in charging check as $680 instead of $860

Bank error in charging check as $860 instead of $680

Bank service charges

Check for $860 returned because of insufficient funds

Deposit of June 30, not recorded by bank

Error in recording check

Error in recording June 30 deposit

Outstanding checks

Proceeds of note collected by bank, including $1,442 interest

Total adjustments

1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

Score: 18/108

Pala Medical Co.

Bank Reconciliation

June 30, 20Y1

1	Cash balance according to bank statement
2	Adjustments:
3
4
5
6
7
8
9	Cash balance according to company’s records
10	Adjustments:
11
12
13
14
15	2. Journalize the necessary entries. Refer to the Chart of Accounts for exact wording of account titles. Question not attempted. PAGE 1 JOURNAL ACCOUNTING EQUATION Score: 0/75 DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 5 6 3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?

Answer 1

	Pala Medical Co.
	Bank Reconciliation
	June 30, 20Y1
1	Cash balance according to bank statement		126590
2	Adjustments:
3	Deposit of June 30, not recorded by bank	18900
4	Outstanding checks	-33700
5	Bank error in charging check as $860 instead of $680	180
6			-14620
7	Adjusted cash balance according to bank statement		111970
8
9	Cash balance according to company’s records		91408
10	Adjustments:
11	Proceeds of note collected by bank, including $1,442 interest	22042
12	Error in recording check	-1440
13	Bank service charges	-40	20562
14			111970
Date	Account title and Explanation	Debit	Credit
	Cash	22042
	Interest Revenue		1442
	Notes receivable		20600
	Accounts Payable-Skyline Supply Co.	1440
	Cash		1440
	Bank service charge	40
	Cash		40
3	If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1,
	amount that should be reported as cash	111970