Question

The bank statement for the checking account of Management Systems Inc. (MSI) showed a December 31, 2021, balance of $15,835.12. Information that might be useful in preparing a bank reconciliation is as follows:

1. Outstanding checks were $1,442.05.
2. The December 31, 2021, cash receipts of $635 were not deposited in the bank until January 2, 2022.
3. One check written in payment of rent for $258 was correctly recorded by the bank but was recorded by MSI as a $285 disbursement.
4. In accordance with prior authorization, the bank withdrew $570 directly from the checking account as payment on a note payable. The interest portion of that payment was $410. MSI has made no entry to record the automatic payment.
5. Bank service charges of $26 were listed on the bank statement.
6. A deposit of $935 was recorded by the bank on December 13, but it did not belong to MSI. The deposit should have been made to the checking account of MIS, Inc.
7. The bank statement included a charge of $85 for an NSF check. The check was returned with the bank statement and the company will seek payment from the customer.
8. MSI maintains a $210 petty cash fund that was appropriately reimbursed at the end of December.
9. According to instructions from MSI on December 30, the bank withdrew $16,000 from the account and purchased U.S. Treasury bills for MSI. MSI recorded the transaction in its books on December 31 when it received notice from the bank. Half of the Treasury bills mature in two months and the other half in six months.

Required:
1. Prepare a bank reconciliation for the MSI checking account at December 31, 2021. You will have to compute the balance per books.
2. Prepare any necessary adjusting journal entries indicated.
3. What amount would MSI report as cash and cash equivalents in the current asset section of the December 31, 2021, balance sheet?

Answer 1

1)	Management System Inc.
	Bank Reconciliation Statement
	December 31, 2021
	balance as per bank statement	15835.12
	Add: Deposit in Transit	645
	Less: Outstanding checks	-1442.05
	Less: Bank deposit error	-935
	Adjusted Cash Balance	14103.07
	Cash balance as per books	14672.07	(Balancing Figure)
	Add: Error in recording rent	27
	Less: Note paid	-160
	Less: Interest on note paid	-410
	Less: Bank service fees	-26
	Less: NSF Check bank charges	-85
	Adjusted Cash Balance	14103.07
	Adjusted cash balance would be 14103.07
2)	Adjusting journal entry
	Note Payable	160
	Interest Expense	410
	Bank Service Fee	26
	Bank NSF Charges	85
	Rent Expense		27
	Cash		654
	(To record adjusting entry)
3)	Cash and Cash Equivalent to be recorded:
	Adjusted cash balance	14103.07
	Petty cash	210
	U.S Tresury Bills	8000
	Total Cash and cash equivalent	22313.07