Question

Part Six: Problem

At December 31 the cash balance per books of Heinisch Company was $12,485.20, and the cash balance per the bank statement was $20,154.30. The bank did not make any errors, but two errors were made by Heinisch Company.

The December bank statement for Heinisch Company showed the following checks and deposits.

Bank Statement

                        Checks                                                                               Deposits          

Date                 Number     Amount                                               Date                 Amount

12-7                 3472          1,426.80                                            12-4                 1,211.60

12-4                 3474          1,640.70                                            12-16               2,672.70

12-8                 3475          1,300.00                                            12-21               2,954.00

12-31               3479               450.80                                            12-30               1,025.00

The cash records per books for December showed the following cash payments and receipts.

Cash Payments                                                                  Cash deposited

Date       Check Number     Amount                                                Date                 Amount

12-1                 3471               720.10                                            12-3                 $1,211.60                               

12-1                 3472          1,426.80                                            12-15               2,672.70

12-1                 3473          1,050.00                                            12-20               2,945.00                               

12-1 3474          1,640.70                                            12-30               1,025.00                               

12-2                 3475          1,300.00                                            12-31               1,190.40                               

12-4                 3476               621.30                                           

12-17               3477               807.40                                           

12-23               3478               798.00

12-24               3479               540.80

12-30               3480          1,889.50

In addition, the bank statement contains the following items:

1.      The collection of a $3,500 note and $145 of interest less a collection fee of $20 from a customer of Heinisch Company.

2.      A NSF check of $725.80 written by D. Chagnon, a customer. At December 31, the check had not been redeposited in the bank.

3.      Bank service charge of $25.

Required:

1.      Prepare bank reconciliation at December 31.

2.      Prepare the required journal entries based on the reconciliation. Omit explanations.

Date	Accounts Title and Explanation	Ref.	Debit	Credit

Answer 1

Bank Reconciliation Statement
Particulars	Amount (Rs)
Bank Balance as per Cash Book	$12,485.20
Add: Items having the effect of higher balance in pass book
(1) Cheque issued but not yet presented for payment	$5,886.30
(2) Interest Collected by Bank but not yet recorded in cash book	$145.00
(3) Collection of Note	$3,500.00
(4) Amount recorded $2,945 instead of $2,954	$9.00
(5) Amount recorded $540.80 instead of $450.80	$90.00
Less: Items having the effect of lower balance in pass book
(1) Cash deposit to bank entry passed but cash not deposited yet	($1,190.40)
(2) Bank Charges debited by the bank but not yet recorded in cash book	($45.00)
(3) Cheque received by customer not deposited into bank	($725.80)
Bank Balance as per pass book	$20,154.30

Bank Reconciliation Statement
Particulars	Amount (Rs)
Bank Balance as per pass book	$20,154.30
Add: Items having the effect of higher balance in cash book
(1) Cash deposit to bank entry passed but cash not deposited yet	$1,190.40
(2) Bank Charges debited by the bank but not yet recorded in cash book	$45.00
(3) Cheque received by customer not deposited into bank	$725.80
Less: Items having the effect of lower balance in cash book
(1) Cheque issued but not yet presented for payment	($5,886.30)
(2) Interest Collected by Bank but not yet recorded in cash book	($145.00)
(3) Collection of Note	($3,500.00)
(4) Amount recorded $2,945 instead of $2,954	($9.00)
(5) Amount recorded $540.80 instead of $450.80	($90.00)
Bank Balance as per Cash Book	$12,485.20

Journal Entries To be done
Sr. No.	Account Title and Explanation	Debit	Credit
1	Bank Charges Expense	$25.00
	Bank		$25.00
	(Being bank charges debited)
2	Bank	$3,500
	Note Receivable		$3,500
	(To record the note receivable)
3	Bank	$145
	Interest Income		$145
	(To record interest income)
4	Bank Charges Expense	$20
	Bank		$20
	(To record the charge on interest revenue)
5	Bank	$90
	Cash		$90
	(To correct the deposit amount)
6	Bank	$90
	Accounts Payable		$90
	(To record the correct payment)