Question

The following information is available to reconcile a company's book balance of cash with its bank statement’s cash balance as of June 30. The June 30 cash balance according to the accounting records is $8,542, and the bank statement cash balance for that date is $8,047.

a) The bank erroneously cleared a $95 check against the account in June that was not issued by the company. The check documentation included with the bank statement indicated that another company issued the check.

b) On June 30, the bank issued a credit memorandum for $5 interest earned on the company’s account.

c) When the June checks were compared with entries in the accounting records, it was found that Check No. 1727 had been correctly drawn for $540 to pay for advertising. However, it was erroneously entered in the accounting records as $450.

d) A credit memorandum indicated that the bank collected $900 cash on a note receivable for the company, deducted a $30 collection fee, and credited the balance to the company's Cash account. The company did not record this transaction before receiving the statement.

e) A debit memorandum of $895 was enclosed with the bank statement for an NSF check for $870 received from a customer. The bank assessed a $25 fee for processing it.

f) June 30 daily cash receipts of $1,315 were placed in the bank's night depository on that date but did not appear on the June 30 bank statement.

g) June 30 cash disbursements journal indicated that Check No. 1737 for $830 and Check No. 1740 for $280 were both written and entered in the accounting records but were not among the canceled checks.

h) A debit memorandum for $85 indicated the bank deducted the annual lock box fee for the company.

Instructions

a) Prepare the bank reconciliation for this company as of June 30.

b) Prepare the related journal entries

Bank Reconciliation
June 30
Bank statement balance		Book balance of cash
Add:		Add:
Deduct:
		Deduct:
Reconciled balance		Reconciled balance

Answer 1

Bank Recociliation
Balance as per Bank Statement				8047	Balance as per Books			8542
Additions					Additions
Error in recording check				95	Interest earned			5
Deposits in transit				1315	Collection of notes receivable			870
Subtotal				9457	Subtotal			9417
Deductions					Deductions
Outstanding checks				1110	Error in recording advertising check			90
					NSF check			895
					Annual Locker charges			85
Adjusted balance as per bank Statement				8347				8347
Journal entries:
Accounts title and explanations				Debit $	Credit $
Cash account dr.				5
Interest revenue					5
Cash account Dr.				870
Misc expense Account Dr.				30
Notes receivable					900
Advertising expense Account Dr.				90
Cash account					90
Accounts receivable Account Dr.				895
Cash account					895
Locker expense Account Dr.				85
Cash account					85