Question

Bank Reconciliation and Entries

The cash account for Stone Systems at July 31, 20Y5, indicated a balance of $17,750. The bank statement indicated a balance of $33,650 on July 31, 20Y5. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:

Checks outstanding totaled $17,865.

A deposit of $9,150, representing receipts of July 31, had been made too late to appear on the bank statement.

The bank had collected $6,095 on a note left for collection. The face of the note was $5,750.

A check for $390 returned with the statement had been incorrectly recorded by Stone Systems as $930. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account.

A check drawn for $1,810 had been incorrectly charged by the bank as $1,180.

Bank service charges for July amounted to $80.

Required:

1. Prepare a bank reconciliation.

Stone Systems
Bank Reconciliation
July 31, 20Y5
Cash balance according to bank statement		$
Adjustments:
	$
Total adjustments
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
	$
Total adjustments
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 entry, if an amount box does not require an entry, leave it blank.

20Y5 July 31
July 31

3. If a balance sheet were prepared for Stone Systems on July 31, 20Y5, what amount should be reported as cash?
$

Answer 1

Part 1	Stone Systems
	Bank reconciliation
	July 31 20Y5
	Cash balance per bank statement					33,650
	Add : Deposit not yet recorded					9,150
						42,800
	Deduct : Outstanding checks				17,865
	Deduct : Bank error (1,810-1,180)				630	18,495
	Adjusted balance					24,305
	Cash balance per books					17,750
	Add : Proceeds of note collected by bank				6,095
	Add : Error in recording check (930-390)				540	6,635
						24,385
	Deduct : Bank service charge					80
	Adjusted balance					24,305
Part 2	Stone Systems
	Date	General Journal			Debit ($)	Credit ($)
	July 31 20Y5	Cash			6,635
			Notes Receivable			5,750
			Accounts Payable - Holland Co			540
			Interest revenue (6,095-5,750)			345
	July 31 20Y5	Miscellaneous Expense			80
			Cash			80
Part 3	If a balance sheet were prepared for Stone Systems on July 31, 20Y5, $24,305 should be reported as cash.