Question

Bank Reconciliation and Entries The cash account for American Medical Co. at April 30 indicated a balance of $10,220. The bank statement indicated a balance of $11,360 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items: Checks outstanding totaled $4,090. A deposit of $4,260, representing receipts of April 30, had been made too late to appear on the bank statement. The bank collected $2,220 on a $2,100 note, including interest of $120. A check for $770 returned with the statement had been incorrectly recorded by American Medical Co. as $700. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account. A check drawn for $90 had been erroneously charged by the bank as $900. Bank service charges for April amounted to $30. Required: 1. Prepare a bank reconciliation. American Medical Co. Bank Reconciliation April 30 Cash balance according to bank statement $ $ Adjusted balance $ Cash balance according to company' s records $ $ Adjusted balance $ 2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank. a. April 30 b. April 30 3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash? $

Answer 1

Solution 1:

American medical co.
Bank Reconciliation
Apr-30
Cash balance according to Bank Statement		$11,360
Add: Deposit of April 30, not recorded by Bank	$4,260
Add: Bank error in charging check as $900 instead of $90	$810	$5,070
		$16,430
Deduct: Outstanding checks		$4,090
Adjusted Balance		$12,340
Cash balance according to Company's books		$10,220
Add: Note collected by Bank (Including Interest)		$2,220
		$12,440
Deduct: Company's error in charging check as $700 instead of $770	$70
Deduct: Bank Service Charges	$30	$100
Adjusted Balance		$12,340

Solution 2:

Journal Entries
S.No	Date	Particulars	Debit	Credit
(a)	30-Apr	Cash Dr	$2,220
		To Note Receivable		$2,100
		To Interest Revenue		$120
		(To record increase in cash as note collected)
(b)	30-Apr	Accounts Payable Dr	$70
		Bank Service Charges Dr	$30
		To Cash		$100
		(To record decrease in cash)

Solution 3:

cash balance to be reported = $12,340