Question

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,950. During May, the total cash deposited was $74,930 and checks written totaled $69,570. The bank statement indicated a balance of $25,400 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 $11,310.

A deposit of $9,220, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,870 on a note left for collection. The face of the note was $4,500.

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

A check for $630 returned with the statement had been recorded by Brentwood Bike Co. as $360. 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 $1,120 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 outstanding checks
Adjusted balance		$
Cash balance according to company's records		$
Add note and interest collected by bank
		$
	$
Deduct bank service charges
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	Cash
	Notes Receivable
	Interest Revenue
b. May 31	Accounts Payable-Adkins Co.
	Accounts Receivable-Jennings Co.
	Miscellaneous Expense
	Cash

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							25,400
Add:Deposits of May 31,not recorded by bank						9,220
Add:Bank error in charging checks as 720instead of $270						450	9,670
							35,070
Deduct:checks outstanding							11,310
Adjusted balance							23,760
Cash balance according to company records							20310	(14950+74930-69570)
Add:collection of note							4,870
							25180
Deduct:	Error in recording cheque			(630-360)		270
	Bank service charge					30
	NSF					1,120	1,420
Adjusted balance							23,760
2)	Journal entries'
a	31-May	Cash				4,870
		Note receivable					4,500
		interest revenue					370
b.	31-May	Accounts payable-Adkins co				270
		Bank service charges/miscellneous exp				30
		account receivable				1,120
		cash					1,420
3)	23,760