Question

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,600. During May, the total cash deposited was $67,810 and checks written totaled $62,960. The bank statement indicated a balance of $22,990 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 $10,240.

A deposit of $8,340, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,410 on a note left for collection. The face of the note was $4,070.

A check for $490 returned with the statement had been incorrectly charged by the bank as $940.

A check for $850 returned with the statement had been recorded by Brentwood Bike Co. as $580. The check was for the payment of an obligation to Adkins Co. on account.

Bank service charges for May amounted to $30.

A check for $1,020 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		$
	$
		$
Adjusted balance		$
Cash balance according to company's records		$
		$
	$
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

1

Brentwood Bike Co
Bank Reconciliation
may-,31
Cash balance according to bank statement		22990
Add: Deposit of May 31, not recorded by bank	8340
Bank error in charging check as $940 instead of $490	450	8790
		31780
Deduct: Outstanding checks		10240
Adjusted balance		21540
Cash balance according to company’s records (w.N-1)		18450
Add: Proceeds of note collected by bank, including $340 interest		4410
		22860
Deduct: Check returned because of insufficient funds	1020
Bank service charges	30
Error in recording check (850-580)	270	1320
Adjusted balance		21540

Working note-1

Cash balance, May 1	13600
Plus cash deposited in May	67,810.00
Less checks written in May	-62,960.00
Balance per company's books, May 31	$18,450.00

________________________________________

2

DATE	DESCRIPTION	DEBIT	CREDIT
31-May	Cash	4,410.00
	Notes Receivable		4,070.00
	Interest Revenue		340.00
31	Accounts Payable-Adkins Co.	270
	Accounts Receivable-Jennings Co.	1,020.00
	Miscellaneous Expense	30
	Cash		1,320.00

Note:

company needs to journalize any adjusting items in the company section of the bank reconciliation, because these have not been previously recorded by the company

__________________________________________

3

If a balance sheet were prepared for Brentwood Bike Co. on May 31, 2016, what amount should be reported as cash

Amount should be reported as cash =$21,540