Question

On May 31, 2017, Forester Theatre's cash account per its general ledger showed the following balance:

CASH					No. 101
Date	Explanation	Ref	Debit	Credit	Balance
May 31	Balance				6,841

The bank statement from Canada Bank on that date showed the following balance:

CANADA BANK
Cheques and Debits	Deposits and Credits	Daily Balance
XXX	XXX	5/31 6,804

A comparison of the details on the bank statement with the details in the Cash account revealed the following facts.

• 1.The statement included a debit memo of $45 for the monthly bank service charges.
• 2.Cash sales of $836 on May 12 were deposited in the bank. The bookkeeper recorded the deposit in the cash journal as $846.
• 3.Outstanding cheques on May 31 totalled $515 and deposits in transit were $1,436.
• 4.On May 18, the company issued cheque #1581 for $685 to M. Datz on account. The cheque, which cleared the bank in May, was incorrectly journalized and posted by Forester Theatre for $658.
• 5.A $2,500 note receivable was wired to the bank account of Forester Theatre on May 31. Interest was not collected for the note.
• 6.Included with the cancelled cheques was a cheque issued by Bohr Theatre for $600 that was incorrectly charged to Forester Theatre by the bank.
• 7.On May 31, the bank statement showed an NSF charge of $934 for a cheque issued by Tyler Bickell, a customer, to Forester Theatre on account.

Instructions

(a)  

Prepare the bank reconciliation at May 31.

(b)  

Prepare the necessary adjusting entries at May 31.

Answer 1

Solution a:

Forester Theatre
Bank Reconciliation Statement
31-May
Cash Balance from Bank statement		$6,804
Add: Deposit in transit	$1,436
Add: Bank Error in charging another company' Check	$600	$2,036
Less: Outstanding Checks		$515
Adjusted cash balance		$8,325
Cash Balance from Company records		$6,841
Add: Note collected		$2,500
Less: Service Charge	$45
Less: Incorrect recording of Deposits from cash sales ($846-$836)	$10
Less: Incorrect recording of Check 1581 ($685-$658)	$27
Less: NSF charges	$934	$1,016
Adjusted Cash Balance		$8,325

Solution b:

Journal entries
S.no.	Particulars	Debit	Credit
1	Bank Service charges Dr	$45
	To Cash		$45
2	Sales Revenue Dr	$10
	To Cash		$10
3	No journal entry required
4	Accounts Payable Dr	$27
	To Cash		$27
5	Cash Dr	$2,500
	To note receivable		$2,500
6	No journal entry required
		$934
7	Accounts Receivable Dr		$934
	To Cash