Question

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $34,250. During May, the total cash deposited was $140,300, and checks written totaled $138,880. The bank statement indicated a balance of $43,525 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: A. Checks outstanding totaled $6,440. B. A deposit of $1,850 representing receipts of May 31, had been made too late to appear on the bank statement. C. The bank had collected for Brentwood Bike Co. $5,250 on a note left for collection. The face of the note was $5,000. D. A check for $390 returned with the statement had been incorrectly charged by the bank as $930. E. A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as $120. The check was for the payment of an obligation to Adkins Co. on account. F. Bank service charges for May amounted to $30. G. A check for $1,325 from Jennings Co. was returned by the bank due to insufficient funds. Instructions 1. Prepare a bank reconciliation as of May 31. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. 2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles. 3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash? X Chart of Accounts CHART OF ACCOUNTS Brentwood Bike Co. General Ledger ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable-Jennings Co. 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-Adkins Co. 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable EQUITY 310 Owner, Capital 311 Owner, Drawing 312 Income Summary REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Insurance Expense 534 Office Supplies Expense 535 Rent Expense 536 Repairs Expense 537 Selling Expenses 538 Store Supplies Expense 561 Depreciation Expense-Office Equipment 562 Depreciation Expense-Store Equipment 590 Miscellaneous Expense 710 Interest Expense X Amount Descriptions Amount Descriptions Bank error in charging check as $390 instead of $930 Bank error in charging check as $930 instead of $390 Bank service charges Check returned because of insufficient funds Company error in recording note collected by bank Deposit of May 31, not recorded by bank Error in recording check Outstanding checks Note and interest collected by bank X Bank Reconciliation 1. Prepare a bank reconciliation as of May 31. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. Whenever there is more than one adjusting item in the bank portion of the reconciliation or the general ledger portion of the bank reconciliation, enter in the order presented in the instructions. BRENTWOOD BIKE CO. Bank Reconciliation May 31 1 Cash balance according to bank statement 2 3 4 5 6 Adjusted balance 7 8 Cash balance according to company’s records 9 10 11 12 13 14 Adjusted balance X Journal 2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles. PAGE 1 JOURNAL ACCOUNTING EQUATION DATE DESCRIPTION POST. REF. DEBIT CREDIT ASSETS LIABILITIES EQUITY 1 2 3 4 5 6 7

Answer 1

Solution 1:

Bentwood Bike Co.
Bank Reconciliation
May-31
Cash balance according to Bank Statement		$43,525
Add: Deposit of May 31, not recorded by Bank	$1,850
Add: Bank error in charging check as $930 instead of $390	$540	$2,390
		$45,915
Deduct: Outstanding checks		$6,440
Adjusted Balance		$39,475
Cash balance according to Company's books (34250+140300-138880)		$35,670
Add: Note collected by Bank (Including Interest)		$5,250
		$40,920
Deduct: Company's error in charging check as $120 instead of $210	$90
Deduct: Bank Service Charges	$30
Deduct: Insufficient Fund Check	$1,325	$1,445
Adjusted Balance		$39,475

Solution 2:

Journal Entries
S.No	Date	Particulars	Debit	Credit
(a)	31-May	Cash Dr	$5,250
		To Note Receivable		$5,000
		To Interest Revenue		$250
		(To record increase in cash as note collected)
(b)	31-May	Accounts Payable Dr	$90
		Bank Service Charges Dr	$30
		Accounts Receivable Dr	$1,325
		To Cash		$1,445
		(To record decrease in cash)