Question

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $89,775. The bank statement indicated a balance of $125,160 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 $31,540.

B. A deposit of $18,000, representing receipts of June 30, had been made too late to appear on the bank statement.

C. The bank collected $24,075 on a $22,500 note, including interest of $1,575.

D. A check for $1,700 returned with the statement had been incorrectly recorded by Pala Medical Co. as $170. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

E. A check drawn for $290 had been erroneously charged by the bank as $920.

F. Bank service charges for June amounted to $70.

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?

Answer 1

1)
	Bank Reconciliation
	Balance as per bank statement					125,160
	Add:
	Deposits in transit				18,000
	Error in recording		(920-290)		630	18,630
						143,790
	less:
	Checks outstanding					31,540
	Adjusted bank balance					112,250
	Unadjusted cash balance					89,775
	Add:
	note receivable with interest					24,075
						113,850
	less:
	Error in recording		(1700-170)		1530
	Bank service charge				70	1600
	Adjusted cash balance					112,250
2)	Accounting entries
	Account titles & Explanations				Debit	Credit
	cash				24,075
	note receivable					22,500
	interest revenue					1,575
	Accounts payable				1,530
	cash					1,530
	Bank service charge/misc expense				70
	cash					70
3)	Amount to be reported as cash			112,250