Question

chapter 7 -03

instructions

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $97,456. The bank statement indicated a balance of $127,960 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

A.	Checks outstanding totaled $30,050.
B.	A deposit of $19,720, representing receipts of June 30, had been made too late to appear on the bank statement.
C.	The bank collected $22,149 on a $20,700 note, including interest of $1,449.
D.	A check for $1,450 returned with the statement had been incorrectly recorded by Pala Medical Co. as $145. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.
E.	A check drawn for $290 had been erroneously charged by the bank as $920.
F.	Bank service charges for June amounted to $40.

	Instructions
1.	Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign.
2.	Journalize the necessary entries. Refer to the Chart of Accounts for exact wording of account titles.
3.	If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash? CHART OF ACCOUNTS Pala Medical Co. General Ledger ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 131 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Office Equipment 192 Accumulated Depreciation-Office Equipment 193 Store Equipment 194 Accumulated Depreciation-Store Equipment LIABILITIES 211 Accounts Payable-Skyline Supply Co. 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends 313 Income Summary Amount Descriptions Adjusted balance Bank error in charging check as $290 instead of $920 Bank error in charging check as $920 instead of $290 Bank service charges Check for $920 returned because of insufficient funds Deposit of June 30, not recorded by bank Error in recording check Error in recording June 30 deposit Outstanding checks Proceeds of note collected by bank, including $1,449 interest Total adjustments 1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. 1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. For those boxes in which you must enter subtracted or negative numbers use a minus sign. Score: 57/108 Pala Medical Co. Bank Reconciliation June 30, 20Y1 1 Cash balance according to bank statement ✔ 2 Adjustments: 3 ✔ ✔ 4 ✔ ✔ 5 ✔ 6 7 ✔ 8 9 Cash balance according to company’s records ✔ 10 Adjustments: 11 ✔ 12 13 ✔ 14 15 ✔

Answer 1

Pala Medical Company
Bank Reconcillation
for June 30,20Y1
	Cash Balance ar per Bank		$127,960
Add	Deposit of June30, not recorded by Bank	$19,720
	Bank error in charging check as $920instead of $290'	$630
Less	Outstanding Check	-$30,050	-$9,700
	Adjusted Balance as per Bank		$118,260
	Cash Balance as per Books		$97,456
Less:	Bank Service Charges	-$40
	Error ($1450-$145 less amount of payment was recorded	-$1,305
Add:	Proceed of Note collected by Bank, including $1449 Interest	$22,149	$20,804
	Adjusted Balance		$118,260
2. Journal Entry S. No. Account Title & Explanation Debit Credit 1 Cash $22,149 Note Receivable $20,700 Interest Revenue $1,449 ( Being Note Collected) 2 Account Payable -Skyline Supply Company $1,305 Cash $1,305 ( Being Error made in recording 3 Bank charges $40 Cash $40 ( Being Bank Charges Booked) 3. Cash will be reported in Balancesheet as on 30 June 20Y1: $118260