Question

Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2018 bank statement included the following information:

Balance, July 1, 2018	$	56,678
Deposits		180,300
Checks processed		(193,410	)
Service charges		(70	)
NSF checks		(1,600	)
Monthly loan payment deducted directly by bank from account (includes $620 in interest)		(3,720	)
Balance, July 31, 2018	$	38,178

The company’s general ledger account had a balance of $40,278 at the end of July. Deposits outstanding totaled $7,100 and all checks written by the company were processed by the bank except for those totaling $8,500. In addition, a $2,800 July deposit from a credit customer was recorded as a $280 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $70 disbursement was incorrectly processed by the bank as a $700 disbursement.

Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Answer 1

Required 1)
Bank balance to corrected balance
Balance per bank statement                          $38,178
Add: Deposit outstanding                                $7,100
Less: check outstanding                                 ($8,500)
Add: Bank error in recording check               $630          
Corrected cash balance                                   $37,408

Book balance to corrected balance
Balance per book                                               $40,278
Add: error in recording cash receipt              $2,520
Less: services charges                                      ($70)
Less: NSF checks                                                ($1600)
Less: Automatic monthly loan payment          ($3,720)
Corrected cash balance                                     $37,408

Required 2)
                                                       Debit               credit
1)       cash                                    $2,520
            Accounts receivable                                $2,520

2) Miscellaneous expenses        $70
     Accounts receivable              $1600
     Interest expense                  $620
      Note payable                         $3100
           Cash                                                            $5,390

Explanation
1) Bank error in recording check - ($700 - $70) = $630
2)Error in recording cash receipt -($2800- $280)=$2,520
3) Note payable - ($3720 -$620) = $3100