Question

Oscar’s Red Carpet Store maintains a checking account with Academy Bank. Oscar’s sells carpet each day but makes bank deposits only once per week. The following provides information from the company’s cash ledger for the month ending February 28, 2021. Date Amount No. Date Amount Deposits: 2/4 $ 2,400 Checks: 321 2/2 $ 4,400 2/11 2,000 322 2/8 450 2/18 2,900 323 2/12 2,200 2/25 3,800 324 2/19 1,900 Cash receipts: 2/26-2/28 1,300 325 2/27 250 $ 12,400 326 2/28 750 327 2/28 1,600 Balance on February 1 $ 6,500 $ 11,550 Receipts 12,400 Disbursements (11,550 ) Balance on February 28 $ 7,350 Information from February's bank statement and company records reveals the following additional information: The ending cash balance recorded in the bank statement is $11,645. Cash receipts of $1,300 from 2/26–2/28 are outstanding. Checks 325 and 327 are outstanding. The deposit on 2/11 includes a customer's check for $250 that did not clear the bank (NSF check). Check 323 was written for $2,800 for advertising in February. The

bank properly recorded the check for this amount. An automatic withdrawal for Oscar's February rent was made on February 4 for $1,100. Oscar's checking account earns interest based on the average daily balance. The amount of interest earned for February is $170. In January, one of Oscar's suppliers, Titanic Fabrics, borrowed $5,400 from Oscar. On February 24, Titanic paid $5,650 ($5,400 borrowed amount plus $250 interest) directly to Academy Bank in payment for January's borrowing. Academy Bank charged service fees of $125 to Oscar’s for the month. 2. Record the necessary cash adjustments.

Answer 1

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Oscar's Red Carpet
Bank reconciliation statement	Amount $			Amount $
Balance as per books	7,350.00		Balance as per bank	11,645.00
Add:			Add:
g. Interest earned not recorded	170.00		b. Cheque receipt outstanding	1,300.00
h. Collection from Titanic Fabrics not recorded	5,400.00
h. Interest on loan from Titanic Fabrics	250.00
Less:			Less:
d. Not Sufficient Fund Cheque	250.00		c. Cheque outstanding	2,050.00
e. Cheque 323 recorded erroneously (2800-2000)	800.00		Cheque 325
f. Automatic withdrawal of rent	1,100.00		Cheque 327
i. Service charges not recorded	125.00
Adjusted book balance	10,895.00		Adjusted bank balance	10,895.00

	Adjusting Entries
Event	Account	Debit $	Credit $
g.	Cash	170.00
	Interest revenue		170.00
h.	Cash	5,400.00
	Titanic Fabrics		5,400.00
h.	Cash	250.00
	Interest revenue		250.00
d.	Accounts receivable	250.00
	Cash		250.00
e.	Advertising Expense	800.00
	Cash		800.00
f.	Rent Expense	1,100.00
	Cash		1,100.00
i.	Bank Charges	125.00
	Cash		125.00