Question

Chapter 4
Critical Thinking Case 2
Reconciling the Campbells' Checking Account

Caleb and Eva Campbell are college students who opened their first joint checking account at the American Bank on September 14, 2015. They've just received their first bank statement for the period ending October 5, 2015. The statement and checkbook ledger are shown in the table below.

CALEB & EVA CAMPBELL 2128 E. ARBOR ST. DENVER, COLORADO			THE AMERICAN BANK 800-000-0000 STATEMENT PERIOD SEPT. 6 - OCT. 5, 2015
	Opening Balance	Total Deposits for Period		Total Checks/ Withdrawals for Period	Ending Balance
	$0.00	$569.25		$473.86	$95.39
Date	Withdrawals (Debits)			Deposits (Credits)	Balance
Sept. 14				$360.00	$360.00
Sept. 15				97.00	457.00
Sept. 25	$45.20			9.25	421.05
Oct. 1				103.00	524.05
Oct. 1	3.00 BC				521.05
Oct. 4	65.90	$49.76	$45.00		$360.39
Oct. 5	265.00				95.39
RT=Returned Check		DM=Debit Memo		BC=Bank Charges
FC=Finance Charges		CM=Credit Memo

Checkbook Ledger
Check Number	Date 2015	Details	3	Check Amount	Deposit Amount	Account Balance
-	Sept. 14	Cash-gift from birthday			$360.00	$360.00
-	Sept. 15	Caleb's wages			97.00	457.00
101	Sept. 24	Kroger's-groceries		$45.20		411.80
102	Sept. 27	Telephone bill		28.56		383.24
-	Oct. 1	Caleb's wages			103.00	486.24
103	Oct. 1	Univ. Bk. Sto.-college books		65.90		420.34
104	Oct. 1	Walmart-sewing material		16.32		404.02
105	Oct. 1	B. Hadley-apartment rent		265.00		139.02
106	Oct. 2	Anthem-health insurance		17.95		121.07
107	Oct. 3	Kroger's-groceries		49.76		71.31
108	Oct. 4	Cash: gas, entertain., laundry		45.00		26.31
-	Oct. 5	Eva's salary			$449.09	$475.40

From this information, prepare a bank reconciliation for the Campbells as of October 5, 2015, using a form like the one in Worksheet 4.1. Enter all answers as positive values. Leave no cell blank, enter "0" wherever required. Round the answers to the nearest cent. Enter your answers in the given order of Check numbers.

CHECKING ACCOUNT RECONCILIATION For the Month of October, 2015 Accountholder Name(s): Caleb and Eva Campbell Type of Account: Checking Account - American Bank 1. Ending balance shown on bank statement $   Add up checks and withdrawals still outstanding: Check Number or Date Amount Check Number or Date Amount $   $   $   TOTAL $   2. Deduct total checks/withdrawals still outstanding from bank balance - $   Add up deposits still outstanding: Date Amount Date Amount 10/5/15 $   TOTAL $   3. Add total deposits still outstanding to bank balance + $   A. Adjusted Bank Balance $   4. Ending balance shown in checkbook $   5. Deduct any bank service charges for the period - $   6. Add interest earned for the period + $   B. New Checkbook Balance $   Note: Your account is reconciled when line A equals line B.

Given the new checkbook balance calculated under Question 1, determine the net adjustment, if any, adjustments will the Campbells need to make in their checkbook ledger. Enter the answers as positive value. Round the answer to the nearest cent.
$  

If the Campbells earned interest on their idle balances because the account is a money market deposit account, what impact would this have on the reconciliation process?

The effect of the interest earnings would have been a(n) in both bank and checkbook balances.

Explain.

Answer 1

CHECKING ACCOUNT RECONCILIATION
For the Month of October, 2015
Accountholder Name(s): Caleb and Eva Campbell
Type of Account: Checking Account - American Bank
1	Ending balance shown on bank statement					95.39
	Add up checks and withdrawals still outstanding:
	Check Number of Date	Amount	Check Number of Date	Amount
	Sept. 27	28.56
	Oct. 1	16.32
	Oct. 2	17.95
	TOTAL			62.83
2	Deduct total checks/withdrawals still outstanding from bank balance				-	62.83
	Add up deposits still outstanding:
	Date	Amount	Date	Amount
	Oct. 5	449.09
	TOTAL			449.09
3	Add total deposits still outstanding to bank balance				+	449.09
A.	Adjusted Bank Balance					481.65
4	Ending balance shown in checkbook					475.40
5	Deduct any bank service charges for the period				-	3.00
6	Add interest earned for the period				+	9.25
B.	New Checkbook Balance					481.65

Net adjustment required in checkbook ledger: $6.25

The interest earnings will appear on the bank statement deposits and will be included in the ending balance shown on bank statement. It will appear on the reconciliation and will be added to the ending balance shown in checkbook.