Question

The cash account for American Medical Co. at April 30 indicated a balance of $93,115. The bank statement indicated a balance of $125,800 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 $30,060.
B.	A deposit of $19,240, representing receipts of April 30, had been made too late to appear on the bank statement.
C.	The bank collected $24,075 on a $22,500 note, including interest of $1,575.
D.	A check for $1,800 returned with the statement had been incorrectly recorded by American Medical Co. as $180. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
E.	A check drawn for $390 had been erroneously charged by the bank as $930.
F.	Bank service charges for April amounted to $50.

	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? CHART OF ACCOUNTS American Medical Co. General Ledger ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 131 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Office Equipment 192 Accumulated Depreciation-Office Equipment 193 Store Equipment 194 Accumulated Depreciation-Store Equipment LIABILITIES 211 Accounts Payable-Targhee Supply Co. 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Insurance Expense 534 Office Supplies Expense 535 Rent Expense 536 Repairs Expense 537 Selling Expenses 538 Store Supplies Expense 561 Depreciation Expense-Office Equipment 562 Depreciation Expense-Store Equipment 590 Miscellaneous Expense 710 Interest Expense Amount Descriptions Bank error in charging check as $390 instead of $930 Bank error in charging check as $930 instead of $390 Bank service charges Check for $930 returned because of insufficient funds Deposit of April 30, not recorded by bank Error in recording check Error in recording April 30 deposit Outstanding checks Note and interest collected by bank

Answer 1

1.

American Medical Co.
Bank Reconciliation
At April 30
Cash balance according to bank statement		125,800
Add : Deposit of April 30, not recorded by bank	19,240
Add : Bank error in charging check as $930 instead of $390	540	19,780
		145,580
Deduct Outstanding checks		-30,060
Adjusted balance		$115,520
Cash balance according to company's record		93,115
Add note and interest collected by bank		24,075
		117,190
Deduct: bank service charges	50
Deduct: error in recording check	1620	-1,670
Adjusted balance		$115,520

2.

Date	General journal	Debit	Credit
Apr-30	Cash	$24,075
	Note receivable		$22,500
	Interest revenue		$1,575
	( To record collection of note and interest by the bank)
Apr-30	Accounts payable- Targhee supply co.	$1,620
	Cash		$1,620
	( To record error in recording check)
Apr-30	Miscellaneous expense	$50
	Cash		$50
	( To record bank service charges)

3.

If a balance sheet is prepared for American Medical Co. on April 30,  $115,520 should be reported as cash.