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	$	57,803
Deposits		181,200
Checks processed		(194,310	)
Service charges		(60	)
NSF checks		(2,050	)
Monthly payment on note, deducted directly by bank from account (includes $170 in interest)		(4,170	)
Balance, July 31, 2021	$	38,413

The company’s general ledger account had a balance of $41,313 at the end of July. Deposits outstanding totaled $8,000 and all checks written by the company were processed by the bank except for those totaling $8,590. In addition, a $3,700 July deposit from a credit customer was recorded as a $370 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $60 disbursement was incorrectly processed by the bank as a $600 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

Solution:

1.

Bank reconciliation
Bank balance to corrected balance
Balance per bank statement	38,413
Add: Deposits outstanding	8,000
Less: Checks outstanding	- 8,590
Add: Bank error in recording the check (600-60)	540
Corrected cash balance	38,363
Book balance to corrected balance
Balance per books	41,313
Add: Error in recording cash receipt (3700 - 370)	3,330
Less: service charges	- 60
Less: NSF Checks	- 2,050
Less: Automatic monthly loan payment	- 4,170
Corrected cash balance	38,363

2.

Event	Gerneral Journal	Debit	Credit
1	Cash a/c Dr	3,330
	To accounts receivable a/c		3,330
	(To record the cash received)
2	Miscellaneous expense a/c Dr	60
	Acounts receivable a/c Dr	2,050
	Interest expenses a/c Dr	170
	Notes payable a/c Dr (4170-170)	4,000
	To Cash a/c		6,280
	(To record the cash payments)