Question

he cash account for Brentwood Bike Co. at May 1 indicated a balance of $15,240. During May, the total cash deposited was $76,410 and checks written totaled $70,950. The bank statement indicated a balance of $25,900 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 $11,540.

A deposit of $9,400, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,970 on a note left for collection. The face of the note was $4,580.

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 $40.

A check for $1,150 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 $940 instead of $490
		$
Deduct outstanding checks
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

BANK RECONCILIATION STATEMENT:
Balance as per bank statement:				25900
Adjustment
Add; Deposits in transit			9400
Add: Error by bank for check			450	9850
				35750
Less: Outstanding checks			11540	-11540
Adjusted balance in Bank statement				24210
Balance as per books				20700
	(15240+76410-70950)
Add: Notes collected with interest			4970	4970
				25670
Less: Error in recording check			270
Less: Service charges			40
Less: NSF check no recorded			1150	-1460
Adjusted balance as per books				24210
Journal entries:
Accounts title and explanations					Debit $	Credit $
cash Account Dr.					4970
Notes receivable Account						4580
Interest revenue						390
Accounts payable-Adkins Co. Dr.					270
Cash Account						270
Misc expense Account Dr.					40
Cash Account						40
Accounts receivable-Jennings Dr.					1150
Cash Account						1150
balance of cash tot be shown in balance Sheet on may31: $ 24210