Question

The cash account for Norwegian Medical Co. at April 30 indicated a balance of $89,775. The bank statement indicated a balance of $125,160 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 $31,540.
b.	A deposit of $18,000, 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 $1,700 returned with the statement had been incorrectly recorded by Norwegian Medical Co. as $170. The check was for the payment of an obligation to Universal Supply Co. for a purchase on account.
e.	A check drawn for $290 had been erroneously charged by the bank as $920.
f.	Bank service charges for April amounted to $70.

	Required:
1.	Prepare a bank reconciliation. Be sure to complete the statement heading. Refer to the Labels and Amount Descriptions for the exact wording of text entries. “Add:” or “Deduct:” will automatically appear if it is required. Enter all amounts as positive numbers.
2.	Journalize the necessary entries. The accounts have not been closed. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.
3.	If a balance sheet is prepared for Norwegian Medical Co. on April 30, what amount should be reported as cash?

Chart of Accounts

CHART OF ACCOUNTS
Norwegian 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-Universal Supply Co. 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable EQUITY 310 Owner, Capital 311 Owner, Drawing	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

Labels and Amount Descriptions

Labels
April 30
For the Month Ended April 30
Amount Descriptions
Bank error in charging check as $290 instead of $920
Bank error in charging check as $920 instead of $290
Bank service charges
Check for $920 returned because of insufficient funds
Deposit of April 30, not recorded by bank
Error in recording check
Error in recording deposit
Note and interest collected by bank
Outstanding checks

Bank Reconciliation

1. Prepare a bank reconciliation. Be sure to complete the statement heading. Refer to the Labels and Amount Descriptions for the exact wording of text entries. “Add:” or “Deduct:” will automatically appear if it is required. Enter all amounts as positive numbers.

Norwegian Medical Co.

Bank Reconciliation

1	Cash balance according to bank statement
2
3
4
5	Adjusted balance
6
7	Cash balance according to company’s records
8
9
10
11	Adjusted balance

Journal

2. Journalize the necessary entries. The accounts have not been closed. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6

Answer 1

	Norwegian Medical Co
	Bank Reconciliation Statement
	Apr-30
	Unadjusted bank balance		125,160.00
	Add: Deposit in Transit		18,000.00
	Add: error by bank		630.00
			143,790.00
	Less: Outstanding checks		31,540.00
	Adjusted bank Balance		112,250.00
	Unadjusted cash balance		89,775.00
	Add: Note Collected		22,500.00
	Add: Interest on note		1,575.00
			113,850.00
	Less:
	Error in check	1,530.00
	Bank Service Charge	70.00
			1,600.00
	Adjusted Cash Balance		112,250.00
	Adjusting Journal Entry
Date	Accounts Name and Explanation	Debit	Credit
Jun-30	Cash	24,075.00
	Note Receivable		2310
	Interest Revenue		21,765.00
	(to record increase in cash)
Jun-30	Accounts Payable	1,530.00
	Bank Charges	70.00
	CASH		1,600.00
	(To record DECREASE IN CASH)
Req 3	amount should be reported as cash in balance sheet	112,250.00