Question

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $14,380. The bank statement indicated a balance of $16,970 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

Checks outstanding totaled $6,110.

A deposit of $6,360, representing receipts of June 30, had been made too late to appear on the bank statement.

The bank collected $3,310 on a $3,140 note, including interest of $170.

A check for $770 returned with the statement had been incorrectly recorded by Pala Medical Co. as $700. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

A check drawn for $40 had been erroneously charged by the bank as $400.

Bank service charges for June amounted to $40.

Required:

1. Prepare a bank reconciliation.

Pala Medical Co.
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement		$
Adjustments:
	$
Total adjustments
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
	$
Total adjustments
Adjusted balance		$

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. 20Y1 June 30
b. June 30

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

Answer 1

	Bank reconciliation
	Bank balance	16970
Add	Deposit in transit	6360
	Error by bank	360
	Total	23690
Less	Outstanding checks	6110
	Adjusted bank balance	17580
	Cash balance		14380
Add	Notes collected	3140
	Interest revenue	170
			3310
Less	Error in recording	70
	Service charges	40
			110
	Adjusted cash balance		17580
	Journal entry
	Increase in cash
1	Cash	3310
	Notes receivable		3140
	Interest revenue		170
	Decrease in cash
2	Accounts payable	70
	Misc. expense	40
	Cash		110
	Misc. expense	144
	Cash		144
3	Cash reported as	17580