Question

  Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2021 bank statement included the following information:

Balance, July 1, 2021	$	57,428
Deposits		180,900
Checks processed		(194,010	)
Service charges		(45	)
NSF checks		(1,900	)
Monthly payment on note, deducted directly by bank from account (includes $220 in interest)		(4,020	)
Balance, July 31, 2021	$	38,353

The company’s general ledger account had a balance of $40,803 at the end of July. Deposits outstanding totaled $7,700 and all checks written by the company were processed by the bank except for those totaling $8,560. In addition, a $3,400 July deposit from a credit customer was recorded as a $340 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $45 disbursement was incorrectly processed by the bank as a $450 disbursement.

Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Answer 1

Answer: 1)
Bank Reconciliation statement for the month of July
Balance per bank statement	$38,353
Add: Deposits outstanding	$7,700
Bank error in recording check ($450 (-) $45)	$405
	$46,458
Deduct: Checks outstanding	($8,560)
Adjusted cash balance	$37,898
Add : Error in recording          ($3,400 (-) $340)	$3,060
	$43,863
Deduct:Service charges	($45)
NSF checks	($1,900)
Monthly loan payment	($4,020)
Adjusted cash balance	$37,898

2) Preparation of journal Entries
Date	Accounts and Explanation	Debit (in $)	Credit (in $)
	Cash	$3,060
	Accounts Receivable		$3,060
	(To record the error in recording Cash receipts)
	Misc Exp/ Bank Service Charges	$45
	Accounts Receivable - NSF checks	$1,900
	Interest Expense	$220
	Note Payable	$3,800
	Cash		$5,965
	(To record credit to cash)