Question

El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at the end of each month. The November 30, 2021, reconciliation of the bank balance is as follows:

Balance per bank, November 30				$	3,291
Add: Deposits outstanding					1,260
Less: Checks outstanding
#363	$	129
#365		207
#380		62
#381		92
#382		400			(890	)
Adjusted balance per bank, November 30				$	3,661

The company’s general ledger checking account showed the following for December:

Balance, December 1		$	3,661
Receipts			43,250
Disbursements			(42,453	)
Balance, December 31		$	4,458

The December bank statement contained the following information:

Balance, December 1		$	3,291
Deposits			43,600
Checks processed			(42,518	)
Service charges			(28	)
NSF checks			(500	)
Balance, December 31		$	3,845

The checks that were processed by the bank in December include all of the outstanding checks at the end of November except for check #365. In addition, there are some December checks that had not been processed by the bank by the end of the month. Also, you discover that check #411 for $410 was correctly recorded by the bank but was incorrectly recorded on the books as a $140 disbursement for advertising expense. Included in the bank’s deposits is a $1,900 deposit incorrectly credited to the company’s account. The deposit should have been posted to the credit of the Los Gatos Company. The NSF checks have not been redeposited and the company will seek payment from the customers involved.

Required:
1. Prepare a bank reconciliation for the El Gato checking account at December 31, 2021.
2. Prepare any necessary adjusting journal entries indicated.

Answer 1

Solution:-

EI GATO PAINTING COMPANY
BANK RECONCILIATION STATEMENT
DECEMBER 31,2021
PARTICULARS	AMOUNT	TOTAL AMOUNT
Balance on bank statement		$3,845
Additions:
Outstanding Deposits ($43,250- $ 43,600+$1,260+$1,900)	$2,810
Total Additions		$2,810
Deductions:
Outstanding Checks($42,453+$270-$42,518+$890)	$1,095
Bank error	$1,900
Total Deductions		$2,995
Adjusted Bank Balance		$3,660
Balance in Books		$4,458
Deductions:
Service Charge	$28
NSF Check	$500
Incorrect recording of check 411	$270
Total deductions		$798
Adjusted Book Balance		$3,660

JOURNAL ENTRIES
EI GATO PAINTING COMPANY
DATE	PARTICULARS	DEBIT	CREDIT
31 Dec.,2021	Accounts receivables Dr	$500
	Miscellenous Expenses Dr	$28
	Advertising Expenses Dr	$270
	To Cash		$798
	(To record NSF Check,service charge and correction entry for check no.411 )