Werth Inc.’s bank statement from Hometown Bank at August 31, 2018, gives the following information. Balance,...

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

Expert Solution

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

ekkarill92 answered 2 years ago

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