Question

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $12,780. During May, the total cash deposited was $64,360 and checks written totaled $59,760. The bank statement indicated a balance of $21,820 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 $9,720.

A deposit of $7,920, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,180 on a note left for collection. The face of the note was $3,860.

A check for $580 returned with the statement had been incorrectly charged by the bank as $850.

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 $970 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 company
Bank Reconciliation
May-31
Cash balance according to bank statement		$   21,820
Adjustments
Add:
Bank error (850-580)	$      270
Deposit in transit	$   7,920
		$     8,190
Deduct: Outstanding checks		$     9,720
Adjusted balance		$   20,290
Cash balance according to company's records		$   17,380
Adjustments
Add:
Note collected by bank	$   3,860
Interest income on note ($4,180-$3,860)	$      320
		$     4,180
Deduct
Bank service charges	$         30
NSF Check	$      970
Clerical error (630-360)	$      270
Total adjustments		$     1,270
Asjusted balance		$   20,290

2.

Cash	$ 4,180
Note receivable		$ 3,860
Interest income		$     320
Bank service charges	$        30
Accounts payable ($970+$270)	$ 1,240
Cash		$ 1,270

3. Balance will disclose $20,290 as cash balance