Question

The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31.

On July 31, the company’s Cash account has a $25,642 debit balance, but its July bank statement shows a $26,858 cash balance.

Check No. 3031 for $1,070 and Check No. 3040 for $527 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $311 and Check No. 3069 for $1,838, both written in July, are not among the canceled checks on the July 31 statement.

In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,270 but was erroneously entered in the accounting records as $1,260.

The July bank statement shows the bank collected $5,500 cash on a noninterest-bearing note for Branch, deducted a $28 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.

The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.

The July statement shows a $8 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.

Branch’s July 31 daily cash receipts of $6,652 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.

1. Prepare the bank reconciliation for this company as of July 31.

Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of July 31. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

BRANCH COMPANY
Bank Reconciliation
July 31
Bank statement balance		$26,858	Book balance		$25,642
Add:			Add:
Deposit of July 31	$6,652		Proceeds of note less collection charge	$5,472
		6652			5472
		$33,510			31114
Deduct:			Deduct:
Check No. 3031	1,070		NSF check including fee	805
Check No. 3065	311		Service charge	8
Check No. 3069	1,838		Error (Check 3056)	10
		3,219			823
Adjusted bank balance		$30,291	Adjusted book balance		30291
2
Transaction	General Journal	Debit	Credit
a.	No journal entry required
b.	No journal entry required
c.	Rent expense	10
	Cash		10
d.	Cash	5,472
	Collection expense	28
	Notes receivable		5,500
e.	Accounts receivable—E. Shaw	805
	Cash		805
f.	Miscellaneous expenses	8
	Cash		8
g.	No journal entry required