Question

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $12,630. The bank statement indicated a balance of $14,690 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

Checks outstanding totaled $5,290.

A deposit of $5,510, representing receipts of June 30, had been made too late to appear on the bank statement.

The bank collected $2,860 on a $2,720 note, including interest of $140.

A check for $770 returned with the statement had been incorrectly recorded by Pala Medical Co. as $700. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

A check drawn for $50 had been erroneously charged by the bank as $500.

Bank service charges for June amounted to $60.

Required:

1. Prepare a bank reconciliation.

Pala Medical Co.
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement		$
Adjustments:
Deposit of June 30, not recorded by bank	$
Bank error in charging check as $500 instead of $50
Outstanding checks
Total adjustments
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
Proceeds of note collected by bank, including $140 interest	$
Error in recording check.
Bank service charges
Total adjustments
Adjusted balance		$

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. 20Y1 June 30	Cash
	Notes Receivable
	Interest Revenue
b. June 30	Accounts Payable-Skyline Supply Co.
	Cash

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
Pala Medical Co.
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement		14690
Adjustments:
Deposit of June 30, not recorded by bank	5510
Bank error in charging check as $500 instead of $50	450
Outstanding checks	-5290
Total adjustments		670
Adjusted balance		15360
Cash balance according to company's records		12630
Adjustments:
Proceeds of note collected by bank, including $140 interest	2860
Error in recording check.	-70
Bank service charges	-60
Total adjustments		2730
Adjusted balance		15360
2
a. 20Y1 June 30             Cash	2860
Notes Receivable		2720
Interest Revenue		140
b. June 30                      Accounts Payable-Skyline Supply Co.	70
Miscellaneous expense	60
Cash		130
3
Amount reported as Cash $15360