Question

Shown below is the information needed to prepare bank reconciliation for Mandy Company on 31 October 2019:
(1) The cash ledger account showed a balance of $8,510, while the bank statement indicated a cash balance of $12,390.

(2) The bank statement showed $45 interest earned for the month of October.

(3) ZYX company settled its notes payable by depositing $4,000 directly into Mandy’s bank account.

(4) The company issued three checks totaling $1,000, which had not been shown in the bank statement in October. (5) A $300 check mailed to the bank for deposit had not reached the bank on 31 October.

(6) A $710 deposit to Manning Company was erroneously credited to Mandy’s account by the bank.

(7) The bank returned a customer’s NSF check for $575 received as payment of an account receivable.

(8) A $2,500 check received from a tenant for rental revenue was recorded as $3,500 in the book.

Question 1B

Prepare the necessary journal entries to update the accounting records.

Answer 1

Solution 1b:

Mandy Company
Bank Reconciliation - October 31
Bank's Cash balance	Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$12,390.00	Ending Balance as per cash books	$8,510.00
Additions:		Additions:
Outstanding Deposits	$300.00	Note Collection	$4,000.00
		Interest earned	$45.00
Deductions:		Deductions:
Outstanding Checks	$1,000.00	NSF Cheque	$575.00
Bank Error	$710.00	Incorrect recording of check	$1,000.00
Up to date cash balance as per bank	$10,980.00	Up to date cash balance as per books	$10,980.00

Journal Entries - Mandy Company
Date	Particulars	Debit	Credit
31-Oct	Cash Dr	$4,000.00
	To Note receivables		$4,000.00
	(To record note collection)
31-Oct	Cash Dr	$45.00
	To Interest earned		$45.00
	(To record interest earned)
31-Oct	Accounts Receivables Dr	$575.00
	To Cash		$575.00
	(Being cheque dishonored by bank)
31-Oct	Rental revenue Dr	$1,000.00
	To Cash		$1,000.00
	(To record correction entry for check)