Question

The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

A.	Checks outstanding totaled $61,280.
B.	A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement.
C.	The bank collected $42,000 on a $40,000 note, including interest of $2,000.
D.	A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
E.	A check drawn for $240 had been erroneously charged by the bank as $420.
F.	Bank service charges for April amounted to $145. Amount Descriptions Bank error in charging check as $240 instead of $420 Bank error in charging check as $420 instead of $240 Bank service charges Check for $420 returned because of insufficient funds Deposit of April 30, not recorded by bank Error in recording check Error in recording April 30 deposit Outstanding checks Note and interest collected by bank

	Instructions
1.	Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries.“Deduct:” or “Add:” will automatically appear if it is required.
2.	Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.
3.	If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash? 3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

Answer 1

Solution 1:

American Medical Co.
Bank Reconciliation Statement
April 30.
Balance as per Bank Statement	$388,600.00
Add: Deposit of April 30, not recorded by bank	$42,500.00
Add: Bank error in charging check as $420 instead of $240	$180.00
Less: Checks outstanding	$61,280.00
Adjusted Bank Balance	$370,000.00
Cash Balance per accounting records	$334,985.00
Add: Note and interest collected by Bank	$42,000.00
Less: Error in recording Check (7600-760)	$6,840.00
Less: Bank SerVice Charges	$145.00
Adjusted Book Balance	$370,000.00

Solution 2:

Journal Entries
S.No	Particulars	Debit	Credit
1	Cash Dr	$42,000.00
	To Note Receivables		$40,000.00
	To Interest Revenue		$2,000.00
	(Being note collection by bank recorded)
2	Accounts Payable Dr	$6,840.00
	To Cash		$6,840.00
	(Being Bank Charge recorded)
3	Bank Serice Charges Dr	$145.00
	To Cash		$145.00
	(Being Service Charge recorded)

Solution 3:

Amount To be reported as cash on April 30 balance sheet = $370,000