Question

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $82,726. The bank statement indicated a balance of $128,040 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

a. Checks outstanding totaled $34,090.

b. A deposit of $18,430, representing receipts of June 30, had been made too late to appear on the bank statement.

c. The bank collected $31,779 on a $29,700 note, including interest of $2,079.

d. A check for $1,900 returned with the statement had been incorrectly recorded by Pala Medical Co. as $190. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

e. A check drawn for $370 had been erroneously charged by the bank as $730.

f. Bank service charges for June amounted to $55. Instructions

1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. "Add:" & "Deduct:" will automatically appear if it is required. For those boxes in which you must enter subtracted or negative numbers use a minus sign.

2. Journalize the necessary entries. Refer to the Chart of Accounts for exact wording of account titles.

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?

Amount Descriptions

Adjusted balance

Bank error in charging check as $730 instead of $370

Bank service charges

Deposit in transit on June 30 Deposit of June 30 not recorded by bank

Error in recording check

Outstanding checks

Note collected by bank, including $2,079 interest

Total additions

Total deductions

Answer 1

1	Pala Medical Co.
	Bank Reconciliation Statement
	June 30 20Y1
	balance as per bank statement	128040
	Adjustments:
	Add: Deposit in Transit	18430
	Add: BANK ERROR	360
	Less: Outstanding checks	-34090
	Adjusted Cash Balance	112740
	Cash balance as per books	82726
	Adjustments:
	Add: Note Collected by bank	29700
	Add: Interest on note collected	2079
	Less: Error In writing check	-1710
	Less: Bank collection fees	-55
	Adjusted Cash Balance	112740
2	Journal Entry
	110 Cash	30014
	211 Accounts Payable-Skyline Supply Co.	1710
	590 Miscellanous Expense	55
	131 Note Receivable		29700
	610 Interest Revenue		2079
	(being adjustment entry passed)
3	Cash to be reported in balance sheet	112740