Question

Question 4

The October 31 bank statement of Spooky Halloween Costumes Ltd. (SHC) has just arrived from TD Bank. To prepare the SHC bank reconciliation, you gather the following data:

•     SHC’s Cash account shows a balance of $2,256.14 on October 31.
•     The October 31 bank balance is $4,023.05.
•     The bank statement shows that SHC earned $38.19 of interest on its bank balance during

October. This amount was added to SHC’s bank balance.

•     SHC pays utilities of $250 and insurance of $100 by EFT.
•     The following SHC cheques did not clear the bank by October 31:

Cheque #	Amount
237	$46.10
288	141.00
291	578.05
293	11.87
294	609.51
295	8.88
296	101.63

•     The bank statement includes a donation of $850, electronically deposited to the bank for SHC.
•     The bank statement lists a $10.50 bank service charge.
•     On October 31, the SHC treasurer deposited $16.15, which will appear on the November bank

statement.

•     The bank statement includes a $300 deposit that SHC did not make. The bank added $300 to

SHC’s account for another company’s deposit.

•     The bank statement includes two charges for returned cheques from donors. One is a $395

cheque received from a donor with the imprint “Unauthorized Signature.” The other is a nonsufficient funds cheque in the amount of $146.67 received from a client.

1.    Prepare the bank reconciliation for SHC.
2.    Journalize the October 31 transactions needed to update SHC’s Cash account. You do not need to

include an explanation for each entry.

Answer 1

1.

Spooky Halloween Costumes
Bank Reconcilliation Statement
For the month october
Particulars	Amount
Cash balance as on Oct. 31	$2,256.14
Add: Interest Earned	$38.19
Add: Check deposited outstanding	$1,497.04
Add: Donation electronically received in bank	$850
Add: Another company's deposit added in bank but not added in cash balance	$300
Less: Utilities of $250 and insurance of $100 paid by ETF	($350)
Less: Bank service charges	($10.50)
Less: Treasurer deposited $16.15, which will appear on the november bank statement	($16.15)
Less: Charges for returned cheque [Deducted from bank balance but not cash balance] [$395 + $146.67]	($541.67)
Bank Balance as on Oct.31	$4,023.05

_____________________________________________________________

2.

Prepare journal entry as follows:

Trn.	General Journal	Debit	Credit
a)	Cash	$38.19
	Interest Revenue		$38.19
b)	Utilities Expense	$250
	Insurance Expense	$100
	Cash		$350
c)	Cash	$1,497.04
	Cheque presented for clearance		$1,497.04
d)	Cash	$850
	Donation Received		$850
e)	Service charges	$10.50
	Cash		$10.50
f)	Cash	$300
	Receivable		$300
g)	Bank charges	$541.67
	Cash		$541.67