In: Accounting
On October 31, 2021. Damon Company's general ledger shows a checking account balance of $8.457. The company's cash receipts for the month total $74,720, of which $71,395 has been deposited in the bank. In addition, the company has written checks for $72,527, of which $71,342 has been processed by the bank.
The bank statement reveals an ending balance of $13,187 and includes the following items not yet recorded by Damon: bank service fees of $350, note receivable collected by the bank of $7,000, and interest earned on the account balance plus from the note of $1.320. After closer inspection, Damon realizes that the bank incorrectly charged the company's account $1,100 for an automatic withdrawal that should have been charged to another customer's account. The bank agrees to the error.
Required:
1. Prepare a bank reconciliation to calculate the correct ending balance of cash on October 31, 2021. (Amounts to be deducted should be indicated with a minus sign.)
2. Record the necessary entries to adjust the balance for cash (If no entry is required for a transaction/event, select "No Journal Entry Required in the first account field.)
1.
Bank Reconciliation
October 31, 2021
Bank's cash Balance | Company's cash Balance | ||
Per bank statement | 13,187 | Per general ledger | 8,457 |
Correction of bank error | 1,100 | Interest revenue | 1,320 |
Deposit in transit | 3,325 | Collection of note receivable | 7,000 |
Outstanding checks | -1,185 | Bank service charge | -350 |
Bank balance as per reconciliation | $16,427 | Company balance as per reconciliation | $16,427 |
Deposit in transit = Cash receipts - Deposited in bank
= 74,720 - 71,395
= $3,325
Outstanding checks = Checks written - Checks processed
= 72,527 - 71,342
= $1,185
2.
Journal
Date |
Account Title and Explanation |
Debit |
Credit |
Oct 31 | Cash | 7,000 | |
Note receivable | 7,000 | ||
Oct 31 | Cash | 1,320 | |
Interest revenue | 1,320 | ||
Oct 31 | Bank service charge | 350 | |
Cash | 350 |
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