Question

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $15,010. During May, the total cash deposited was $75,240 and checks written totaled $69,860. The bank statement indicated a balance of $25,510 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

Checks outstanding totaled $11,360.

A deposit of $9,250, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,890 on a note left for collection. The face of the note was $4,510.

A check for $490 returned with the statement had been incorrectly charged by the bank as $940.

A check for $410 returned with the statement had been recorded by Brentwood Bike Co. as $140. The check was for the payment of an obligation to Adkins Co. on account.

Bank service charges for May amounted to $30.

A check for $1,130 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

Brentwood Bike Co.
Bank Reconciliation
May 31
Cash balance according to bank statement		$
	$
		$
Adjusted balance		$
Cash balance according to company's records		$
		$
	$
Adjusted balance		$

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been

closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. May 31
b. May 31

3. If a balance sheet were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Answer 1

1.

Brentwood Bike Company
Bank Reconciliation
May-31
Cash balance according to bank statement		$         25,510
Adjustments
Add:
Bank error (940-490)	$      450.00
Deposit in transit	$   9,250.00
		$     9,700.00
Deduct: Outstanding checks		$   11,360.00
Adjusted balance		$         23,850
Cash balance according to company's records		$         20,390
Adjustments
Add:
Note collected by bank	$   4,510.00
Interest income on note	$      380.00
		$     4,890.00
Deduct
Bank service charges	$         30.00
NSF Check	$   1,130.00
Clerical error (410-140)	$      270.00
Total adjustments		$     1,430.00
Asjusted balance		$   23,850.00

2.Journal entries

Cash	$ 4,890
Note receivable		$ 4,510
Interest income		$     380
Bank service charges	$        30
Accounts payable ($1,130+$270)	$ 1,400
Cash		$ 1,430

3. Balance sheet will disclose $23,580 as cash balance