Question

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,350. During May, the total cash deposited was $66,800 and checks written totaled $62,020. The bank statement indicated a balance of $22,650 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

Checks outstanding totaled $10,090.

A deposit of $8,220, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,340 on a note left for collection. The face of the note was $4,010.

A check for $270 returned with the statement had been incorrectly charged by the bank as $720.

A check for $970 returned with the statement had been recorded by Brentwood Bike Co. as $790. The check was for the payment of an obligation to Adkins Co. on account.

Bank service charges for May amounted to $60.

A check for $1,000 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

Brentwood Bike Co.
Bank Reconciliation
May 31
Cash balance according to bank statement		$
Add deposit of May 31, not recorded by bank	$
Add bank error in charging check as $720 instead of $270
		$
Deduct bank service charges
Adjusted balance		$
Cash balance according to company's records		$
Add note and interest collected by bank
		$
Deduct bank error in charging check as $720 instead of $270	$
Deduct bank service charges
Deduct error in recording check
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. May 31
b. May 31

3. If a balance sheet were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Answer 1

	BrentWood Bike Co.
	Bank Reconciliation
Cash balance according to Bank statement							22,650
Add:Deposits of May 31,not recorded by bank						8,220
Add:Bank error in charging checks as 720instead of $270						450	8,670
							31,320
Deduct:checks outstanding							10,090
Adjusted balance							21,230
Cash balance according to company records							18130	(13,350+66800-62,020)
Add:collection of note							4,340
							22470
Deduct:	Error in recording cheque			(970-790)		180
	Bank service charge					60
	NSF					1,000	1,240
Adjusted balance							21,230
2)	Journal entries'
a	31-May	Cash				4,340
		Note receivable					4,010
		interest revenue					330
b.	31-May	Accounts payable-Adkins co				180
		Bank service charges/miscellneous exp				60
		account receivable				1,000
		cash					1,240
3)	21,230