Question

  Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2021 bank statement included the following information:

Balance, July 1, 2021	$	56,678
Deposits		180,300
Checks processed		(193,410	)
Service charges		(70	)
NSF checks		(1,600	)
Monthly payment on note, deducted directly by bank from account (includes $620 in interest)		(3,720	)
Balance, July 31, 2021	$	38,178

The company’s general ledger account had a balance of $40,278 at the end of July. Deposits outstanding totaled $7,100 and all checks written by the company were processed by the bank except for those totaling $8,500. In addition, a $2,800 July deposit from a credit customer was recorded as a $280 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $70 disbursement was incorrectly processed by the bank as a $700 disbursement.

Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Answer 1

1.

Harrison Company
Bank Reconciliation
Jul-31
Bank statement balance		38,178	Book balance		40,278
Add:			Add:
Deposit in transit	7,100		Correction of book error	2,520
Correction of bank error	630				2,520
		7,730
		$45,908			$42,798
Deduct:			Deduct:
Outstanding check	-8,500		Bank service charge	-70
		-8,500	NSF Check	-1,600
			Note and interest payment	-3,720
					-5390
Adjusted bank balance		$37,408	Adjusted book balance		$37,408

2.

Date	General journal	Debit	Credit
Jul-31	Accounts receivable	$1,600
	Cash		$1,600
	( To record NSF check)
Jul-31	Cash	$2,520
	Accounts receivable		$2,520
	( To record book error)
Jul-31	Bank charge	$70
	Cash		$70
	( To record bank service charges)
Jul-31	Note payable	$3,100
	Interest expense	$620
	Cash		$3,720
	( To record note and interest payment by bank)