Question

In: Accounting

El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at...

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.

Solutions

Expert Solution

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

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