In: Accounting
El Gato Painting Company maintains a checking account at
American Bank. Bank statements are prepared at the end of each
month. The November 30, 2021, reconciliation of the bank balance is
as follows:
Balance per bank, November 30 | $ | 3,261 | ||||
Add: Deposits outstanding | 1,230 | |||||
Less: Checks outstanding | ||||||
#363 | $ | 126 | ||||
#365 | 204 | |||||
#380 | 59 | |||||
#381 | 89 | |||||
#382 | 370 | (848 | ) | |||
Adjusted balance per bank, November 30 | $ | 3,643 | ||||
The company’s general ledger checking account showed the following
for December:
Balance, December 1 | $ | 3,643 | ||
Receipts | 42,950 | |||
Disbursements | (42,153 | ) | ||
Balance, December 31 | $ | 4,440 | ||
The December bank statement contained the following
information:
Balance, December 1 | $ | 3,261 | |||
Deposits | 43,300 | ||||
Checks processed | (42,218 | ) | |||
Service charges | (25 | ) | |||
NSF checks | (470 | ) | |||
Balance, December 31 | $ | 3,848 | |||
The checks that were processed by the bank in December include all
of the outstanding checks at the end of November except for check
#365. In addition, there are some December checks that had not been
processed by the bank by the end of the month. Also, you discover
that check #411 for $650 was correctly recorded by the bank but was
incorrectly recorded on the books as a $560 disbursement for
advertising expense. Included in the bank’s deposits is a $1,600
deposit incorrectly credited to the company’s account. The deposit
should have been posted to the credit of the Los Gatos Company. The
NSF checks have not been redeposited and the company will seek
payment from the customers involved.
Required:
1. Prepare a bank reconciliation for the El Gato
checking account at December 31, 2021.
2. Prepare any necessary adjusting journal entries
indicated.
i) | EI Gato painting Corp | ||
Bank Reconciliation Statement | |||
Month Ended December 31 | |||
Cash Balance as per bank statement | 3848 | ||
Add: Deposit Outstanding | 2480 | ||
Less: BANK ERROR | -1600 | ||
Less: Outstanding checks | -873 | ||
Corrected Cash Balance | 3855 | ||
Cash balance as per books | 4440 | ||
Less: Bank Service charges | -25 | ||
Error Rectification | -90 | ||
NSF Checks | -470 | ||
Corrected book Balance | 3855 | ||
ii) | Journal enttry | ||
Account NAME | Debit | Credit | |
Advertisement Expense | 90 | ||
Misc. Expense | 25 | ||
Accounts Receivable | 470 | ||
To bank | 585 | ||
(being adjustment entry passed) | |||
Note 1 | Receipts | 42950 | |
Less: Dec receipt deposited | |||
BANK DEPOSIT | 43300 | ||
Less Deposit Error | -1600 | ||
Less: prior Month deposit | -1230 | 40470 | |
Deposit Outstanding | 2480 | ||
Note 2 | Dec. Disbursement | 42153 | |
Error in rec. check 411 | 90 | ||
Less: Total checks cleared | 42218 | ||
Prior Month checks | -644 | -41574 | |
Dec check o/s | 669 | ||
Add: check 365 | 204 | ||
Total checks outstanding | 873 | ||