Question

Ace Lawn Care Module 4 Mini Practice Problem

In June, Jim commented to you that he could never figure out his bank statement, “it never matches the balance in my accounting records” he tells you. So you explain that a bank reconciliation is a tool used to balance the bank statement to the accounting books. He gives you his bank statement for June, 2014 (shown below). The general ledger shows a balance for the account cash of $19,319.00 on June 30, 2014 (detail transactions below). Jim’s business only has one checking account and no other cash accounts.

Instructions:

Using the bank statement and the general ledger, prepare a bank reconciliation for Ace Lawn Care as of June 30, 2014. Record the necessary journal entries to adjust the books for the appropriate reconciling items. Start with Page 6 for the journal entries. Explanations are optional.

CHECKING ACCOUNT DETAIL:

DATE	TRANSACTION TYPE & NUMBER	AMOUNT	BALANCE
BEGINNING BALANCE			$17,850.00
6/2/2014	CHECK #1570	226.00	17,624.00
6/5/2014	CHECK #1571	83.00	17,541.00
6/6/2014	EFT #43	127.00	17,414.00
6/10/2014	DEPOSIT #104	1,550.00	18,964.00
6/15/2014	CHECK #1572	145.00	18,819.00
6/15/2014	CHECK #1573	185.00	18,634.00
6/20/2014	DEPOSIT #105	885.00	19,519.00
6/24/2014	EFT #44	143.00	19,376.00
6/28/2014	CHECK #1574	87.00	19,289.00
6/28/2014	CHECK #1575	95.00	19,194.00
6/30/2014	DEPOSIT #106	425.00	19,619.00
6/30/2014	CHECK #1576	155.00	19,464.00
6/30/2014	CHECK #1577	145.00	$19,319.00

BANK STATEMENT:

FIRST NATIONAL BANK
ACCOUNT SUMMARY JUNE 30, 2014
BEGINNING BALANCE	$17,850.00
PAYMENTS	$1,021.00
DEPOSITS	2,440.00
FEES	35.00
ENDING BALANCE	$19,234.00
PAYMENTS
DATE	REFERENCE	AMOUNT
6/5/2014	1570	$266.00
6/9/2014	1571	83.00
6/10/2014	43	127.00
6/19/2014	1572	145.00
6/28/2014	1573	185.00
6/28/2014	NSF	120.00
6/30/2014	1575	95.00
TOTAL PAYMENTS		$1,021.00
DEPOSITS
DATE	REFERENCE	AMOUNT
6/11/2014	104	$1,550.00
6/23/2014	105	885.00
6/30/2014	INTEREST	5.00
TOTAL DEPOSITS		$2,440.00
FEES
6/30/2014	SVC CHG	$35.00
TOTAL FEES		$35.00

Additional Information: Check #1570 was written for $266.00, but was recorded incorrectly in the general ledger. The check was for fuel.

Ace Lawn Care

Chart of Accounts

Classification	Account Number	Account Name
ASSETS	101	Cash
	110	Accounts Receivable
	112	Allowance for Doubtful Accounts
	115	Notes Receivable
	116	Interest Receivable
	120	Supplies
	130	Prepaid Insurance
	140	Inventory
	150	Equipment
	155	Accumulated Depreciation – Equipment
LIABILITIES	201	Accounts Payable
	220	Notes Payable
	225	Interest Payable
OWNER’S EQUITY	301	Owner’s Capital
	305	Owner’s Drawings
	310	Income Summary
REVENUES	401	Lawn Service Revenue
	410	Sales Revenue
	415	Sales Returns and Allowances
	420	Interest Income
COST OF GOODS SOLD	501	Purchases
	505	Purchase Returns and Allowances
EXPENSES	620	Supplies Expense
	630	Fuel Expense
	640	Repair and Maintenance Expense
	650	Advertising Expense
	660	Insurance Expense
	670	Depreciation Expense
	680	Interest Expense
	690	Bad Debt Expense
	695	Miscellaneous Expense

Answer 1

ACE LAWN CARE
Bank Reconciliation Statement
for the month of June 2014
Balance as per Bank	19234	Balance as per ledger	19319
Add:		Add:
NSF check	120	Check #1574	87
Deposit #106	425	Check #1576	155
SVC charge	35	Check #1577	145
Wrong entry for Check #1570	40	EFT #44	143
		Interest	5
Total Additions	620	Total Additions	535
Deduct:		Deduct:
Check #1574	87	NSF check	120
Check #1576	155	Deposit #106	425
Check #1577	145	SVC charge	35
EFT #44	143	Wrong entry for Check #1570	40
Interest	5
Total Deductions	535	Total Deductions	620
Balance as per ledger	19319	Balance as per Bank	19234

1. Entry to correct the check #1570
Date	Account Title	Debit	credit
June 30, 2014	Fuel expense	40
	Cash		40
2. Entry to record bank charges
Date	Account Title	Debit	credit
June 30, 2014	Bank charges	35
	Cash		35
3. Entry to record interest income
Date	Account Title	Debit	credit
June 30, 2014	Cash	5
	Interest revenue		5

The revised balance as per ledger = $19,319 - $35 - $40 +$5 = $19,249

Revised reconciliation statement

ACE LAWN CARE
Bank Reconciliation Statement
for the month of June 2014
Balance as per Bank	19234	Balance as per ledger	19249
Add:		Add:
NSF check	120	Check #1574	87
Deposit #106	425	Check #1576	155
		Check #1577	145
		EFT #44	143
Total Additions	545	Total Additions	530
Deduct:		Deduct:
Check #1574	87	NSF check	120
Check #1576	155	Deposit #106	425
Check #1577	145
EFT #44	143
Total Deductions	530	Total Deductions	545
Balance as per ledger	19249	Balance as per Bank	19234