Question

1	Cash on hand at the company and not yet deposited at the bank.	4,800
2	EFT for monthly utility bill not yet recorded by the company.	1,600
3	Note collected by the bank and not yet recorded by the company.	10,200
4	Interest collected by the bank from note in #3 not yet recorded by the company.	1,300
5	A check witten for insurance expense for $90 was cashed. The check was recorded on the books for $160.	?
6	Checks written by the company but not yet processed by the bank.	2,600
7	Service fee charged by bank but not yet recorded by the company.	100
8	Customer checks determined by the bank to have nonsufficient funds.	3,000
	Bank balance at the end of the period.	16,990
	Company balance at the end of the period.	12,320

Required:
1-a. What is the revised Cash balance at the end of the period?

1-b. Is the bank reconciliation in balance?

• Yes

• No

2-a. What is the balance in Cash if the entry to correct the insurance payment hasn't been made?

2-b. Would the bank reconciliation still be in balance?

• Yes

• No

3. Which statement below is true regarding the effect of the company incorrectly recording a customer deposit at $180,000 rather than $18,000?

• No effect on the bank reconciliation.

• The difference of $162,000 will be subtracted from the book balance.

• The difference of $162,000 will be added to the book balance.

• The bank balance will be increased by $180,000.

Answer 1

Solution

Bank reconciliation statement

Bank Reconciliation Statement
Balance as per bank		$16,990
Add: deposits in transit	$4,800
Less: outstanding checks	$(2,600)	$2,200
Adjusted Bank Balance		$19,190
Balance as per Company		$12,320
Add: Note collected by bank	$10,200
Add: interest collected by bank	$1,300
Add: error in recording checks	$70	$11,570
Less: EFT for utility	$1,600
Less: bank service charge	$100
Less: NSF check	$3,000	$(4,700)
Adjusted balance as per Company		$19,190

1a. revised cash balance at the end of the period is $19,190.

1b. Yes, the bank reconciliation is in balance. Adjusted bank balance is $19,190

2a. the balance in Cash if the entry to correct the insurance payment hasn’t been made would be $19,120.

The excess amount charged as insurance expense, $160 - $90 = $70

When not corrected, the revised cash balance would be short by $70, $19,190 - $70 = $19,120.

2b. No, the bank reconciliation would not be in balance, as the adjusted bank balance would be $19,190, while the adjusted Cash balance would be $19,120.

3 The effect of company incorrectly recording a customer deposit at $180,000 rather than $18,000 would be –

The Difference of $162,000 will be added to the Book balance.