Question

The cash account for American Medical Co. at April 30 indicated a balance of $91,408. The bank statement indicated a balance of $126,590 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items: A. Checks outstanding totaled $33,700. B. A deposit of $18,900, representing receipts of April 30, had been made too late to appear on the bank statement. C. The bank collected $22,042 on a $20,600 note, including interest of $1,442. D. A check for $1,600 returned with the statement had been incorrectly recorded by American Medical Co. as $160. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account. E. A check drawn for $680 had been erroneously charged by the bank as $860. F. Bank service charges for April amounted to $40. Instructions 1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. 2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles. 3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

Answer 1

1.

American medical co.
Apr-30
Cash balance according to Bank Statement		$1,26,590
Add: Deposit of April 30, not recorded by Bank	$18,900
Add: Bank error in charging check as $860 instead of $680	$180	$19,080
		$1,45,670
Deduct: Outstanding checks		$33,700
Adjusted Balance		$1,11,970
Cash balance according to Company's books (13320+67100-62300)		$91,408
Add: Note collected by Bank (Including Interest)		$22,042
		$1,13,450
Deduct: Company's error in charging check as $160 instead of $1600	$1,440
Deduct: Bank Service Charges	$40	$1,480
Adjusted Balance		$1,11,970

2.

Journal Entries
S.No	Date	Particulars	Debit	Credit
(a)	30-Apr	Cash Dr	$22,042
		To Note Receivable		$20,600
		To Interest Revenue		$1,442
		(To record increase in cash as note collected)
(b)	30-Apr	Accounts Payable Dr	$1,440
		Bank Service Charges Dr	$40
		To Cash		$1,480
		(To record decrease in cash)

3.

cash balance = $111,970