Question

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $13,360. The bank statement indicated a balance of $15,350 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $5,530.
2. A deposit of $5,760, representing receipts of June 30, had been made too late to appear on the bank statement.
3. The bank collected $2,990 on a $2,840 note, including interest of $150.
4. A check for $880 returned with the statement had been incorrectly recorded by Pala Medical Co. as $800. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.
5. A check drawn for $70 had been erroneously charged by the bank as $700.
6. Bank service charges for June amounted to $60.

Required:

1. Prepare a bank reconciliation.

Pala Medical Co.
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement		$
Adjustments:
	$
Total adjustments
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
	$
Total adjustments
Adjusted balance		$

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. 20Y1 June 30
b. June 30

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?

Answer 1

Bank Reconciliation Statement
balance as per bank statement		15350
Adjustment:
Checks outstanding		-5530
Deposits in transit		5760
Error I recording check	630
Total Adjustment			860
Adjusted balance as per bank statement	16210
balance as per Books		13360
Adjustment
Note collected with interest	2990
Check wrongly recorded	-80
Service charges		-60
Total adjustment			2850
Adjusted balance as per books		16210
Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Cash account			2990
	Notes receivable				2840
	Interest revenue				150
	(for note collected)
b.	Accounts payable			80
	Cash account				80
	(for check issued wrongly recorded)
c.	Misc. expense			60
	Cash account				60
	(for service charges)
Balance of cash shown in books: $ 16,210.