Question

Problem 7-5B On May 31, O'Hearne Limited had a cash balance per books of $13,126. The bank statement from Community Bank on that date showed a balance of $15,230. A comparison of the bank statement with the company's Cash account revealed the following: 1.The bank statement included a bank service charge of $80. 2.The bank statement included electronic collections totalling $4,188. These were not previously recorded. 3.Outstanding cheques at April 30 totalled $2,900. Of these, $2,240 worth cleared the bank in May. There were $1,892 of cheques written in May that were still outstanding on May 31. 4.Included with the cancelled cheques was a cheque issued by O'Bearne Inc. for $1,200 that was incorrectly charged to O'Hearne by the bank. 5.On May 31, the bank statement showed a returned (NSF) cheque for $1,350 issued by a customer in payment of its account. In addition, the bank charged an $80 processing fee for this transaction. 6.The May 31 deposit of $1,926 was not included in the deposits on the May bank statement. The deposit had been placed in the bank's night deposit vault on May 31. Instructions (a) Prepare the bank reconciliation at May 31. (b) Prepare any journal entries required from the reconciliation.

Answer 1

O'Hearne Limited
Bank Reconciliation
May-31
Bank statement balance		15,230	Book balance		13,126
Add:			Add:
Deposit in transit	1,926		Electronic fund transfer	4,188
Correction of bank error	1,200				4,188
Less:			Less:
Outstanding check	-2552		Bank service charges	-160
		574	NSF Check	-1,350
					-1510
Adjusted bank balance		$15,804	Adjusted book balance		$15,804

b.

Date	General Journal	Debit	Credit
May 31	Cash	$4,188
	Accounts receivable		$4,188
	( To record EFT collection)
May 31	Bank charges	$160
	Cash		$160
	( To record bank charges)
May 31	Accounts receivable	$1,350
	Cash		$1,350
	( To record NSF check)

Cheque outstanding at April 20 = @2,900

Cheques cleared in April = $2,240

Cheques outstanding for April = Cheque outstanding at April 20 - Cheques cleared in April

= 2,900-2,240

= $660

Cheques outstanding for May = $1,892

Total cheques outstanding at the end of May = Cheques outstanding for April + Cheques outstanding for May

= 660+1,892

= $2,552