Question

In: Accounting

The following information is available to reconcile Branch Company’s book balance of cash with its bank...

The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31.

  

  1. On July 31, the company’s Cash account has a $24,836 debit balance, but its July bank statement shows a $27,850 cash balance
  2. Check No. 3031 for $1,770, Check No. 3065 for $661, and Check No. 3069 for $2,538 are outstanding checks as of July 31.
  3. Check No. 3056 for July rent expense was correctly written and drawn for $1,290 but was erroneously entered in the accounting records as $1,280.
  4. The July bank statement shows the bank collected $5,500 cash on a note for Branch. Branch had not recorded this event before receiving the statement.
  5. The bank statement shows an $805 NSF check. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.
  6. The July statement shows a $8 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.
  7. Branch’s July 31 daily cash receipts of $6,632 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.

a .Prepare journal entries to establish the fund on May 1, to replenish it on May 15 and on May 31, and to reflect any increase or decrease in the fund balance on May 16 and May 31.

b. Prepare the bank reconciliation for this company as of July 31.
c. Prepare the journal entries necessary to make the company’s book balance of cash equal to the reconciled cash balance as of July 31.

Solutions

Expert Solution

BRANCH COMPANY
Bank Reconciliation
July 31
Bank statement balance $27,850 Book balance $24,836
Add: Add:
Deposit of July 31 $6,632 Proceeds of note less collection charge $5,500
6,632 5,500
34,482 30,336
Deduct: Deduct:
Check No. 3031 1,770 NSF check including fee 805
Check No. 3065 661 Service charge 8
Check No. 3069 2,538 Error (Check 3056) 10
4,969 823
Adjusted bank balance $29,513 Adjusted book balance $29,513
Date General Journal Debit Credit
July 31 Rent expense 10
Cash 10
July 31 Cash 5,500
Notes receivable 5,500
July 31 Accounts receivable—E. Shaw 805
Cash 805
July 31 Miscellaneous expenses 8
Cash 8

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