Question

The cash account for Stone Systems at July 31, 2016, indicated a balance of $17,750. The bank statement indicated a balance of $33,650 on July 31, 2016. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:

A.	Checks outstanding totaled $17,865.
B.	A deposit of $9,150, representing receipts of July 31, had been made too late to appear on the bank statement.
C.	The bank had collected $6,095 on a note left for collection. The face of the note was $5,750.
D.	A check for $390 returned with the statement had been incorrectly recorded by Stone Systems as $930. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account.
E.	A check drawn for $1,810 had been incorrectly charged by the bank as $1,180.
F.	Bank service charges for July amounted to $80.

	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 were prepared for Stone Systems on July 31, 2016, what amount should be reported as cash?

Chart of Accounts

CHART OF ACCOUNTS
Stone Systems
General Ledger
ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 131 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Office Equipment 192 Accumulated Depreciation-Office Equipment 193 Store Equipment 194 Accumulated Depreciation-Store Equipment LIABILITIES 211 Accounts Payable-Holland Co. 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Insurance Expense 534 Office Supplies Expense 535 Rent Expense 536 Repairs Expense 537 Selling Expenses 538 Store Supplies Expense 561 Depreciation Expense-Office Equipment 562 Depreciation Expense-Store Equipment 590 Miscellaneous Expense 710 Interest Expense

Amount Descriptions

Amount Descriptions
Bank error in charging check as $1,180 instead of $1,810
Bank error in charging check as $1,810 instead of $1,180
Bank service charges
Check for $1,180 returned because of insufficient funds
Deposit of July 31, not recorded by bank
Error in recording check
Error in recording July 31 deposit
Outstanding checks
Proceeds of note collected by bank, not including interest
Proceeds of note collected by bank, including $345 interest

Bank Reconciliation

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. Whenever there is more than one adjusting item in the bank portion of the reconciliation or the general ledger portion of the bank reconciliation, enter in the order presented in the instructions.

STONE SYSTEMS

Bank Reconciliation

July 31, 2016

1	Cash balance according to bank statement
2
3
4
5
6	Adjusted balance
7
8	Cash balance according to company’s records
9
10
11
12
13	Adjusted balance

Journal

2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6

Final Question

3. If a balance sheet were prepared for Stone Systems on July 31, 2016, what amount should be reported as cash?

Answer 1

SOLUTION

(A)

Stone Systems

Bank Reconciliation

July 31, 2016

	Amount ($)	Amount ($)
Cash balance according to bank statement		33,650
Add: Deposit of July 31, not recorded by bank		9,150
		42,800
Deduct: Outstanding checks	17,865
Bank error in charging check as $1,180 instead of $1,810	630	18,495
Adjusted balance		24,305
Cash balance according to company's records		17,750
Add: Proceeds of note collected by bank, including $345 interest	6,095
Error in recording check	540	6,635
		24,385
Deduct: Bank service charges		(80)
Adjusted balance		24,305

(B) Journal Entries-

Date	Account titles and Explanation	Debit ($)	Credit ($)
July 31	Cash	6,635
	Notes Receivable		6,095
	Accounts Payable - Holland Co.		540
July 31	Miscellaneous Expense	80
	Cash		80

(C) If a balance sheet were prepared for Stone Systems on July 31, 2016, $24,305.00 should be reported as cash.