Question

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,600. During May, the total cash deposited was $68,640 and checks written totaled $63,730. The bank statement indicated a balance of $23,270 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $10,360.
2. A deposit of $8,440, representing receipts of May 31, had been made too late to appear on the bank statement.
3. The bank had collected for Brentwood Bike Co. $4,460 on a note left for collection. The face of the note was $4,120.
4. A check for $580 returned with the statement had been incorrectly charged by the bank as $850.
5. A check for $630 returned with the statement had been recorded by Brentwood Bike Co. as $360. The check was for the payment of an obligation to Adkins Co. on account.
6. Bank service charges for May amounted to $50.
7. A check for $1,030 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

Brentwood Bike Co.
Bank Reconciliation
May 31
Cash balance according to bank statement		$
	$
		$
Adjusted balance		$
Cash balance according to company's records		$
		$
	$
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. May 31
b. May 31

3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Answer 1

1.

Bentwood Bike Co.
Bank Reconciliation
May-31
Cash balance according to Bank Statement		$23,270
Add: Deposit of May 31, not recorded by Bank	$8,440
Add: Bank error in charging check as $850 instead of $580	$270	$8,710
		$31,980
Deduct: Outstanding checks		$10,360
Adjusted Balance		$21,620
Cash balance according to Company's books (34250+140300-138880)		$18,510
Add: Note collected by Bank (Including Interest)		$4,460
		$22,970
Deduct: Company's error in charging check as $360 instead of $630	$270
Deduct: Bank Service Charges	$50
Deduct: Insufficient Fund Check	$1,030	$1,350
Adjusted Balance		$21,620

2.

Journal Entries
S.No	Date	Particulars	Debit	Credit
(a)	31-May	Cash Dr	$4,460
		To Note Receivable		$4,120
		To Interest Revenue		$340
		(To record increase in cash as note collected)
(b)	31-May	Accounts Payable Dr	$270
		Bank Service Charges Dr	$50
		Accounts Receivable Dr	$1,030
		To Cash		$1,350
		(To record decrease in cash)

3.

Cash balance = $21,620