Question

The bank statement for the checking account of Management Systems Inc. (MSI) showed a December 31, 2018, balance of $16,236.12. Information that might be useful in preparing a bank reconciliation is as follows:

Outstanding checks were $1,482.65.

The December 31, 2018, cash receipts of $655 were not deposited in the bank until January 2, 2019.

One check written in payment of rent for $262 was correctly recorded by the bank but was recorded by MSI as a $276 disbursement.

In accordance with prior authorization, the bank withdrew $610 directly from the checking account as payment on a mortgage note payable. The interest portion of that payment was $430. MSI has made no entry to record the automatic payment.

Bank service charges of $30 were listed on the bank statement.

A deposit of $955 was recorded by the bank on December 13, but it did not belong to MSI. The deposit should have been made to the checking account of MIS, Inc.

The bank statement included a charge of $55 for an NSF check. The check was returned with the bank statement and the company will seek payment from the customer.

MSI maintains a $250 petty cash fund that was appropriately reimbursed at the end of December.

According to instructions from MSI on December 30, the bank withdrew $18,000 from the account and purchased U.S. Treasury bills for MSI. MSI recorded the transaction in its books on December 31 when it received notice from the bank. Half of the Treasury bills mature in two months and the other half in six months.

Required:
1. Prepare a bank reconciliation for the MSI checking account at December 31, 2018. You will have to compute the balance per books.
2. Prepare any necessary adjusting journal entries indicated.
3. What amount would MSI report as cash and cash equivalents in the current asset section of the December 31, 2018, balance sheet?

Answer 1

Bank Reconcilation Statement
	Balance as per Bank Statement	16,236.12
Less :-	Cheques Issued but not presented for Payments	1,482.65
Less :-	Deposit made of MIS INC	955.00
	Bank Balance as per Books	13,798.47

Bank	Dr	14
Rent	Cr		14
(Being rent entry correced)
Interest	Dr	430
Mortgage Payment	Dr	180
Bank	Cr		610
(Being Mortgage and int entry passed)
Bank Charges	Dr	30
Bank	Cr		30
(Bank Charges recorded)
Bank Charges	Dr	55
Bank	Cr		55
(Cheque return charges recorded)
Petty Cash
No Entry Required, as nothing as mentioned except that petty cash is reimbursed appropriately (Its assumed, petty cash is already at 250 level)
Treasury Bills
No entry required as entry already passed

Cash and Cash Equivalents	Amount
Bank Balance	13,798.47
Cash (Receipt but deposited in bank on 2nd Jan 18)	655.00
Petty Cash	250.00
Treasury Bills (Matured within 90 days)	9,000.00
Cash and Cash Equivalents	23,703.47