Question

Shamrock, Inc.’s bank statement from Main Street Bank at August 31, 2017, gives the following information.

Balance, August 1		$18,550		Bank debit memorandum:
August deposits		71,150		Safety deposit box fee		$ 60
Checks cleared in August		68,643		Service charge		85
Bank credit memorandum:				Balance, August 31		20,992
Interest earned		80

A summary of the Cash account in the ledger for August shows the following: balance, August 1, $18,850; receipts $74,150; disbursements $73,535; and balance, August 31, $19,465. Analysis reveals that the only reconciling items on the July 31 bank reconciliation were a deposit in transit for $4,835 and outstanding checks of $4,535. In addition, you determine that there was an error involving a company check drawn in August: A check for $400 to a creditor on account that cleared the bank in August was journalized and posted for $40.

Determine deposits in transit.

Deposits in transit

$

eTextbook and Media

List of Accounts

  

  

Determine outstanding checks. (Hint: You need to correct disbursements for the check error.)

Outstanding checks

$

eTextbook and Media

List of Accounts

  

  

Prepare a bank reconciliation at August 31. (List items that increase balance as per bank & books first.)

SHAMROCK, INC. Bank Reconciliation                                                                       For the Month Ended August 31, 2017For the Year Ended August 31, 2017August 31, 2017
Adjusted cash balance per bankCash balance per bank statementDeposits in transitOutstanding checksError in recording checkInterest earnedService chargeSafety deposit box rent					$
AddLess:	Service chargeAdjusted cash balance per bankDeposits in transitSafety deposit box rentOutstanding checksInterest earnedCash balance per bank statementError in recording check
AddLess:	Adjusted cash balance per bankCash balance per bank statementDeposits in transitSafety deposit box rentError in recording checkInterest earnedOutstanding checksService charge
Service chargeOutstanding checksDeposits in transitAdjusted cash balance per bankInterest earnedCash balance per bank statementError in recording checkSafety deposit box rent					$
Deposits in transitInterest earnedOutstanding checksAdjusted cash balance per booksCash balance per booksError in recording checkService chargeSafety deposit box rent					$
AddLess:	Deposits in transitSafety deposit box rentCash balance per booksInterest earnedAdjusted cash balance per booksOutstanding checksError in recording checkService charge
AddLess:
	Deposits in transitAdjusted cash balance per booksService chargeCash balance per booksOutstanding checksError in recording checkInterest earnedSafety deposit box rent		$
	Error in recording checkService chargeCash balance per booksSafety deposit box rentAdjusted cash balance per booksOutstanding checksDeposits in transitInterest earned
	Cash balance per booksOutstanding checksInterest earnedAdjusted cash balance per booksError in recording checkService chargeSafety deposit box rentDeposits in transit
Service chargeSafety deposit box rentAdjusted cash balance per booksError in recording checkInterest earnedOutstanding checksCash balance per booksDeposits in transit					$

eTextbook and Media

List of Accounts

  

  

Journalize the adjusting entries to be made by Shamrock, Inc. at August 31. (Credit account titles are automatically indented when amount is entered. Do not indent manually.)

Date	Account Titles and Explanation	Debit	Credit
Aug. 31
	(To record Interest earned)
Aug. 31
	(To correct error in recording check)
Aug. 31
	(To record service charge and safety deposit box fee)

Answer 1

1)Deposits in Transit
Particulars	Amount (in $)
Beginning Deposit in Transit	$4,835
Add: Amount Deposited	$74,150
Less; deposit Cleared	($71,150)
Ending Deposit in Transit	$7,835
2)Outstanding Checks
Particulars	Amount (in $)
Beginning Outstanding checks	$4,535
Add: disbursements	$73,535
Add: errors in checks ($440 - $40)	$400
Less: checks Cleared	($68,643)
Ending Outstanding Checks	$9,827

Bank Reconciliation at august 31
Particulars	Amount (in $)	Amount (in $)
Cash Balance Per Bank Statement		$20,992
Add: Deposit in Transit		$7,835
Less: Outstanding Checks		($9,827)
Adjusted Cash Balance Per Bank		$19,000
Cash Balance as Per Book		$19,465
Add: Interest Earned		$80
Less:
Deposit Box Fee	($60)
Bank Service Charge	($85)
Error in recording Check No.2480                  ($440 (-)$ 40)	($400)	($545)
Adjusted Cash Balance Per Books		$19,000

Recording of Journal entries
Date	Account Title and Explanation	Debit	Credit
Aug-31	Cash	$80
	Interest Revenue		$80
	(To record interest Earned)
Aug-31	Accounts Payable	$400
	Cash               ($440(-)$ 40)		$400
	(To Correct error in recording check)
Aug-31	Bank Charges ($60 + $85)	$145
	Cash		$145
	(To record the service charge and Safety Deposit fee)