Question

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The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017.

  

On July 31, the company’s Cash account has a $25,752 debit balance, but its July bank statement shows a $27,446 cash balance.

Check No. 3031 for $1,260 and Check No. 3040 for $622 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $406 and Check No. 3069 for $2,028, both written in July, are not among the canceled checks on the July 31 statement.

In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,270 but was erroneously entered in the accounting records as $1,260.

The July bank statement shows the bank collected $5,000 cash on a noninterest-bearing note for Branch, deducted a $25 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.

The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.

The July statement shows a $8 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.

Branch’s July 31 daily cash receipts of $6,152 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.

1

Record the adjusting entry required, if any, related to the July 31 cash balance.

2

Record the adjusting entry required, if any, related to the outstanding checks.

3

Record the adjusting entry required, if any, related to Check No. 3056.

4

Record the adjusting entry required, if any, related to the non-interest-bearing note.

5

Record the adjusting entry required, if any, related to the NSF check.

6

Record the adjusting entry required, if any, related to bank service charges.

7

Record the adjusting entry required, if any, related to the July 31 deposit.

Answer 1

Solution :

Bank Reconciliation - July 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$27,446.00	Ending Balance as per cash books	$25,752.00
Additions:		Additions:
Outstanding cash receipt	$6,152.00	Note collection (Net of collection fee)	$4,975.00
Deductions:		Deductions:
Outstanding Checks (Check no 3031, 3065, 3069)	$3,694.00	NSF Cheque (Including NSF Charge)	$805.00
		Service Charge	$8.00
		Incorrect recording of check no 3056 ($1270 - $1260)	$10.00
Up to date cash balance as per bank	$29,904.00	Up to date cash balance as per books	$29,904.00

Journal Entries
Event	Particulars	Debit	Credit
1	No Entry
2	No Entry
3	Rent Expense Dr	$10.00
	To Cash		$10.00
	(To record correction entry of Rent payment)
4	Cash Dr	$4,975.00
	Collection expense Dr	$25.00
	To Note Receivables		$5,000.00
	(Being note collected by bank)
5	Accounts receivables Dr	$795.00
	NSF charge Dr	$10.00
	To Cash		$805.00
	(Being check dishonoured by bank)
6	Service Charges Dr	$8.00
	To Cash		$9.00
	(Being service charges debited by bank)
7	No Entry