Question

On May-31, 2017 James Logan Company had a cash balance per books of $ 6,051 and The bank statement from Farmer’s community bank on that date showed a balance of $ 6,404. A comparison of the statement with the cash account revealed the following facts

i.The statement included a debit of $ 40 for the printing of check books, not recorded in company’s book

ii.A Collection in respect of account receivable amounting Rs 836 was recorded by company as $ 886

iii.Outstanding checks at May-31 totalled $ 576

iv.On May-18, the company issued a check no.1181 for $ 685 to Barry Trest (a supplier); the check was incorrectly recorded by company’s accountant as $ 658.

v.A $ 2,500 of Note Receivable was collected by bank for logan company on May-31. The bank charged a collection fee of $20.

vi.On May-31 the bank statement showed an NSF check of $ 680 .

vii. Deposit in transit $1,916

Required: a.You are required to prepare Bank reconciliation at May-31, 2017.

b.Necessary Adjusting entries in the books of company on May-31,2017

Answer 1

There is some error in question, as there is difference of $10 in Bank Reconciliation

a.

Bank Reconciliation
Balance as per bank statement	$          6,404.00
Add :
Deposit Outstanding	$          1,916.00
Deduct :
Checks Outstanding	$             576.00
Corrected Cash Balance	$          7,744.00
Balance as per books	$          6,051.00
Add :
Collection of Note Receivable	$          2,500.00
Deduct :
Error in recording Expense	$                27.00
Error in recording Collection	$                50.00
Bank Service Charges	$                60.00
NSF Checks	$             680.00
Corrected Book Balance	$          7,734.00

b.

Account Titles	Debit	Credit
Accounts Receivable	$             680.00
Cash		$               680.00
(NSF Check)
Bank Charges	$                60.00
Cash		$                  60.00
(Bank charges)
Accounts Payable	$                27.00
Cash		$                  27.00
(Rectification of payment)
Cash	$          2,500.00
Notes Receivable		$            2,500.00
(Collection of note)
Accounts Receivable	$                50.00
Cash		$                  50.00
(To rectify error in recording collection)