Question

The cash account for Brentwood Bike Co. at May 1, indicated a balance of $36,016. During May, the total cash deposited was $138,030, and checks written totaled $138,571. The bank statement indicated a balance of $43,940 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: A. Checks outstanding totaled $6,281. B. A deposit of $1,796 representing receipts of May 31, had been made too late to appear on the bank statement. C. The bank had collected for Brentwood Bike Co. $5,670 on a note left for collection. The face of the note was $5,400. D. A check for $570 returned with the statement had been incorrectly charged by the bank as $750. E. A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as $120. The check was for the payment of an obligation to Adkins Co. on account. F. Bank service charges for May amounted to $26. G. A check for $1,394 from Jennings Co. was returned by the bank due to insufficient funds. Instructions 1. Prepare a bank reconciliation as of May 31. 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 were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?

Answer 1

SOLUTION

1. Bank reconciliation statement-

Particulars	Amount ($)	Amount ($)
Balance as per bank		43,940
Add: Deposit of May 31, not recorded by bank	1,796
Bank error in charging check as $570 instead of $750(750-570)	180	1,976
		45,916
Less: Outstanding checks		(6,281)
Adjusted balance as per bank		39,635
Balance as per books (36,016+138,030-138,571)		35,475
Add: Proceed of note collected by bank, including $270 interest		5,670
		41,145
Deduct: Error in recording check (210-120)	90
Bank service charges	26
Check returned because of insufficient funds	1,394	(1,510)
Adjusted balance as per books		39,635

2. Journal entries-

S.No.	Accounts titles and Explanation	Debit ($)	Credit ($)
1.	Cash	5,670
	Notes receivable		5,400
	Interest revenue		270
2.	Account payable -Brentwood Bike Co.	90
	Account receivable-Jennings Co.	1,394
	Miscellaneous administrative expenses	26
	Cash		1,510

3. Amount shown in balance sheet for cash=$39,635