In: Accounting
The following information is available to reconcile Cloy Company's book balance of cash with its bank statement cash balance as of March 31, 2019. The March 31, 2019 cash balance according to the accounting records is $58,542, and the bank statement cash balance for that date is $68,047.
a. The bank erroneously cleared a $395 check against the account
in June that was not issued by Cloy. The check documentation
included with the bank statement indicates the check was actually
issued by Clare Co.
b. On March 31, the bank issued a credit memorandum for $35
interest earned on Cloy's account.
c. When the March checks are compared with entries in the
accounting records, it is found that Check No. 1727 had been
correctly drawn for $1,450 to pay for advertising but was
erroneously entered in the accounting records as $1,540.
d. A credit memorandum indicates that the bank collected $9,000
cash on a note receivable for Cloy, deducted a $30 collection fee,
and credited the balance to the company's Cash account. Cloy did
not record this transaction before receiving the statement.
e. A debit memorandum of $895 is enclosed with the bank statement
for an NSF check for $870 received from a customer. The bank
assessed a $25 fee for processing it.
f. Cloy's March31, daily cash receipts of $6,325 were placed in the
bank's night depository on that date, but do not appear on the
March 31 bank statement.
g. Cloy's March 31 cash disbursements journal indicates that Check
No. 1737 for $4,830 and Check No. 1740 for $3,280 were both written
and entered in the accounting records, but are not among the
canceled checks.
h. A debit memorandum for $85.00 indicates the bank deducted the
annual lock box fee for the company.
1. Prepare the bank reconciliation for this company as of March
31, 2019.
2. Prepare the journal entries necessary to bring the company's
book balance of cash into conformity with the reconciled cash
balance as of March 31, 2019.
Solution 1:
Cloy Company | |||
Bank Reconciliation - March 31 | |||
Bank's Cash balance | Company's cash balance | ||
Particulars | Amount | Particulars | Amount |
Ending balance as per Bank Statements | $68,047.00 | Ending Balance as per cash books | $58,542.00 |
Additions: | Additions: | ||
Outstanding Deposits | $6,325.00 | Interest earned | $35.00 |
Bank Error | $395.00 | Incorrect recording of check 1727 | $90.00 |
Note collection by bank (net of collection fee) | $8,970.00 | ||
Deductions: | Deductions: | ||
Outstanding Checks | $8,110.00 | NSF Cheque (including fee) | $895.00 |
Lock box fee | $85.00 | ||
Up to date cash balance as per bank | $66,657.00 | Up to date cash balance as per books | $66,657.00 |
Solution 2:
Journal Entries - Cloy Company | |||
Date | Particulars | Debit | Credit |
31-Mar | Cash Dr | $35.00 | |
To Interest earned | $35.00 | ||
(To record interest earned) | |||
31-Mar | Cash Dr | $90.00 | |
To Advertising expense | $90.00 | ||
(To record correction entry for check 1727) | |||
31-Mar | Cash Dr | $8,970.00 | |
Expenses for collection Dr | $30.00 | ||
To Note receivables | $9,000.00 | ||
(To record note collection by bank) | |||
31-Mar | Accounts Receivables Dr | $895.00 | |
To Cash | $895.00 | ||
(Being cheque dishonored by bank) | |||
31-Mar | Miscellaneous expenses Dr | $85.00 | |
To Cash | $85.00 | ||
(Being Lock box fee debited by bank) |