Question

The cash account for American Medical Co. at April 30 indicated a balance of $97,456. The bank statement indicated a balance of $127,960 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

A.	Checks outstanding totaled $30,050.
B.	A deposit of $19,720, representing receipts of April 30, had been made too late to appear on the bank statement.
C.	The bank collected $22,149 on a $20,700 note, including interest of $1,449.
D.	A check for $1,450 returned with the statement had been incorrectly recorded by American Medical Co. as $145. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
E.	A check drawn for $290 had been erroneously charged by the bank as $920.
F.	Bank service charges for April amounted to $40.

	Instructions
1.	Prepare a bank reconciliation. 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 American Medical Co. on April 30, what amount should be reported as cash?

CHART OF ACCOUNTS
American Medical Co.
General Ledger
ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 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-Targhee Supply 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

Amount Descriptions
Bank error in charging check as $290 instead of $920
Bank error in charging check as $920 instead of $290
Bank service charges
Check for $920 returned because of insufficient funds
Deposit of April 30, not recorded by bank
Error in recording check
Error in recording April 30 deposit
Outstanding checks
Note and interest collected by bank

1. Prepare a bank reconciliation. 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.

AMERICAN MEDICAL CO.

Bank Reconciliation

April 30

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	Adjusted balance

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

. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

Answer 1

		Bank reconcilation
	Balance as per bank					127,960
	Add:
	Deposit in transit				19,720
	Erroneously charged by bank				630	20,350
						148,310
	less:
	Checks outstanding					30,050
	Adjusted balance as per bank					118,260
	Balance as per books					97,456
	Add:
	Note collected					22,149
						119,605
	less:
	Error in recording				1305
	Bank service charge				40	1345
	Adjusted cash balance					118,260
2)	Entries
	Accounting titles & explanation				Debit	Credit
	Cash				22,149
	note receivable					20,700
	interest income					1,449
	miscellaneous expense				40
	accounts payable				1,305
	cash					1,345
3)	Balance to be reported as cash			$118,260