Question

Problem 7-11 A Preparing a bank reconciliation and recording adjustments

CHECK FIGURE: 1. Adjusted book balance = $28,250

The following is information for Dundee Reality:

1. Balance per the bank statement dated October 31, 2020, is $26,830.
2. The balance of the Cash account on the company books as of October 31, 2020, is $5,575.
3. $14,680 of customer deposits were outstanding as of September 30; this amount has been deposited to Dundee’s account in October.
4. Cheques written in October that had not cleared the bank as of October 31 were:

#8700, $985

#8709, $12,600

#8801, $620

#8815, $145

5. The bank charged Dundee’s account for a $2,350 cheque of the E-Zone Networks; the cheque was found among the cancelled cheques returned with the bank statement.
6. Bank service charges for October amount to $65.
7. A customer’s cheque (Teresa Krant) for $7,050 had been deposited in the bank correctly but was recorded in the accounting records as $7,500.
8. Among the cancelled cheques in one for $260 given in payment of an account payable to Decker Company; the bookkeeper had recorded the cheque incorrectly at $620 in the company records.
9. The bank statement showed an electronic fund transfer of 22,880 for a customer payment. A bank service fee of $50 was charged.
10. A bank deposit of October 31 for $13,420 does not appear on the bank statement.

Required

1. Prepare a bank reconciliation statement as of October 31, 2020.
2. Prepare the necessary entries to make the Cash account agree with the bank reconciliation adjusted Cash balance as of October 31.

Analysis Component:

Identify the effects on the income statement and balance sheet if the entries in Part 2 were not recorded.

Answer 1

Solution

DUNDEE REALTY
Bank Reconciliation
October 31, 2020
Balance as per bank statement		26830
Add:
Deposit in transit	13420
Cheque wrongly charged by bank	2350	15770
		42600
Less:
Outstanding checks
No. 8700	985
No. 8709	12600
No. 8801	620
No. 8815	145	14350
Adjusted balance per bank statement		28250
Cash balance as per books		5575
Add:
EFT collection	22830
Error in recording ($620 - $260)	360	23190
		28765
Less:
Bank service charges	65
Error in recording ($7500 - $7050)	450	515
Adjusted book balance		28250

2.

Date	Account Titles and Explanation	Debit	Credit
Oct. 31	Cash	22830
	Miscellaneous expense	50
	Accounts receivable		22880
	(To record electronic fund transfer from customer)
Oct. 31	Cash	360
	Accounts payable-Decker Company		360
	(To rectify error in recording cheque)
Oct. 31	Miscellaneous expense	65
	Cash		65
	(To record bank service charges)
Oct. 31	Accounts receivable-Teresa Krant	450
	Cash		450
	(To rectify error in recording deposit)

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