Question

You are a college student and have just been hired to work part-time in the accounting department of Candy’s Cleaning Services. The person you are replacing had difficulty preparing the bank reconciliation for April 30, which is shown below.

CANDY'S CLEANING SERVICES
Bank Reconciliation
April 30, 2017
Bank balance		$33,466	Book balance		$28,948
			Add:
Deduct:			Interest	$68
NSF, customer Bonne	$419		Error Chq #93	127	195
					$29,143
Outstanding cheques:			Deduct:
#879	$2,635		Service Charge		152
#100	1,421	4,475
Adjusted bank balance		$28,991	Adjusted book balance		$28,991

In comparing the bank reconciliation to the Cash account in the general ledger, you notice a problem. You investigate further and come up with some additional information as follows:

a. The Cash account in the general ledger showed the following:

Cash Acct. No. 101

Date Explanation PR Debit Credit Balance

2017     

March 31 Balance 28,948  

April 30 CR16 56,114 85,062          

30 CD21 63,933 21,129

b. The error in cheque #93, for Utilities Expense, resulted from the bank incorrectly debiting our account for $127; the correct amount entered in the accounting records is $261.

c. The bank statement showed interest expense of $68; there was no other interest.

d. The bank debited our account for cheque #879 written by Candy’s Hair Salon.

e. Cheque #86 for $14,056 listed as outstanding on last month’s bank reconciliation was not returned with the April 30 bank statement.

Required:
a. Prepare a corrected bank reconciliation for April 30, 2017.
b. Record the journal entries resulting from the corrected bank reconciliation. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

  

Answer 1

Solution a:

Candy Cleaning Service
Bank Reconciliation - April 30
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$33,466.00	Ending Balance as per cash books	$21,129.00
Additions:		Additions:
Bank Error - Check 879	$2,635.00
Deductions:		Deductions:
Outstanding Checks ($14,056 + $1,421)	$15,477.00	NSF Cheque	$419.00
Bank Error (Check 93) ($261 - $127)	$134.00	Interest expense	$68.00
		Service Charge	$152.00
Up to date cash balance as per bank	$20,490.00	Up to date cash balance as per books	$20,490.00

Solution b:

Journal Entries - Candy Cleaning Service
Date	Particulars	Debit	Credit
30-Apr	Accounts Receivables Dr	$419.00
	To Cash		$419.00
	(Being cheque dishonored by bank)
30-Apr	Interest expense Dr	$68.00
	To Cash		$68.00
	(To record intereest expense)
30-Apr	Miscellenaeous expense Dr	$152.00
	To Cash		$152.00
	(Being service charge debited by bank)