Question

Bank Reconciliation and Entries

The cash account for American Medical Co. at April 30 indicated a balance of $10,740. The bank statement indicated a balance of $12,390 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $4,460.
2. A deposit of $4,650, representing receipts of April 30, had been made too late to appear on the bank statement.
3. The bank collected $2,420 on a $2,290 note, including interest of $130.
4. A check for $770 returned with the statement had been incorrectly recorded by American Medical Co. as $700. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
5. A check drawn for $50 had been erroneously charged by the bank as $500.
6. Bank service charges for April amounted to $60.

Required:

1. Prepare a bank reconciliation.

American Medical Co.
Bank Reconciliation
April 30
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. April 30
b. April 30

3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?
$

Answer 1

A bank reconciliation statement is a document that matches the cash balance on a company’s balance sheet to the corresponding amount on its bank statement. Reconciling the two accounts helps determine if accounting changes are needed.