In: Accounting
Werth Inc.’s bank statement from Hometown Bank at August 31, 2018, gives the following information.
Balance, August 1 | $18,400 | Bank debit memorandum: | ||||
August deposits | 81,000 | Safety deposit box fee | $ 25 | |||
Checks cleared in August | 78,678 | Service charge | 50 | |||
Bank credit memorandum: | Balance, August 31 | 20,692 | ||||
Interest earned | 45 |
A summary of the Cash account in the ledger for August shows the
following: balance, August 1, $18,700; receipts $84,000;
disbursements $83,570; and balance, August 31, $19,130. Analysis
reveals that the only reconciling items on the July 31 bank
reconciliation were a deposit in transit for $4,800 and outstanding
checks of $4,500. In addition, you determine that there was an
error involving a company check drawn in August: A check for $400
to a creditor on account that cleared the bank in August was
journalized and posted for $40.
1) Determine deposits in transit.
2)Determine outstanding checks. (Hint: You need to correct disbursements for the check error.)
3)Prepare A bank reconciliation at Augest 31.
4) Journalize the adjusting entries to be made by Hometown at Augest 31
1 | Deposit in transit | ||
Beginning | 4800 | ||
Add | Deposits as per cash book | 84000 | |
Less | Deposits as per bank statement | 81000 | |
Ending deposit in transit | 7800 | ||
2 | Oustanding checks | ||
Beginning | 4500 | ||
Add | Disbursement as per cash book | 83570 | |
Add | Error in cash book (400-40) | 360 | |
Less | Disbursement as per bank statement | 78678 | |
Ending balance | 9752 | ||
3 | Bank reconciliation | ||
Bank balance | 20692 | ||
Add | Deposit in transit | 7800 | |
Less | Outstanding checks | 9752 | |
Adjusted bank balance | 18740 | ||
Cash balance | 19130 | ||
Add | |||
Interest earned | 45 | 45 | |
Less | Service charge | 50 | |
Safety deposit box fees | 25 | ||
Error in recording (400-40) | 360 | ||
435 | |||
Adjusted cash balance | 18740 | ||
Journal entries | |||
Bank charges | 25 | ||
Service charges | 50 | ||
Cash | 75 | ||
Cash | 45 | ||
Interest earned | 45 | ||