Question

The cash account for American Medical Co. at April 30 indicated a balance of $91,408. The bank statement indicated a balance of $126,590 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 $33,700.
B.	A deposit of $18,900, representing receipts of April 30, had been made too late to appear on the bank statement.
C.	The bank collected $22,042 on a $20,600 note, including interest of $1,442.
D.	A check for $1,600 returned with the statement had been incorrectly recorded by American Medical Co. as $160. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
E.	A check drawn for $680 had been erroneously charged by the bank as $860.
F.	Bank service charges for April amounted to $40.

	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?

Answer 1

1.

American Medical Co.
Bank Reconciliation
At April 30
Bank statement balance	126,590	Book balance	91,408
Add:		Add:
Deposit in transit	18,900	Note and interest collected by bank	22,042
Correction of bank error	180
	145,670		113,450
Less:		Less:
Outstanding check	-33,700	Bank service charges	-40
		Correction of book error	-1440
Adjusted bank balance	$111,970	Adjusted book balance	$111,970

2.

Date	General journal	Debit	Credit
Apr-30	Cash	$22,042
	Note receivable		$20,600
	Interest revenue		$1,442
	( To record collection of note and interest by the bank)
Apr-30	Accounts payable- Targhee supply co.	$1,440
	Cash		$1,440
	( To record correction of recording check)
Apr-30	Bank service charges	$40
	Cash		$40
	( To record bank service charges)

3.

If a balance sheet is prepared for American Medical Co. on April 30, $111,970 should be reported as cash.