The following information is available to reconcile Litner Co.\'s book balance o
ID: 2361661 • Letter: T
Question
The following information is available to reconcile Litner Co.'s book balance of cash with its bank statement cash balance as of April 30. The April 30 cash balance according to the accounting records is $78,356, and the bank statement cash balance for that date is $83,525.
a. The bank erroneously cleared a $480 check against the account in April that was not issued by Litner. The check documentation included with the bank statement indicates the check was actually issued by Lightning Co.
b. On April 30, the bank issued a credit memorandum for $53 interest earned on Litner's account.
c. When the April checks are compared with entries in the accounting records, it is found that Check No. 1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350
d. A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Litner, deducted a $30 collection fee, and credited the balance to the company's Cash account. Litner did not record this transaction before receiving the statement.
e. A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer. The bank assessed a $25 fee for processing it.
f. Litner's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date, but do not appear on the April 30 bank statement.
g. Litner's April 30 cash disbursements journal indicates that Check No. 1837 for $584 and Check No. 1840 for $1,219 were both written and entered in the accounting records, but are not among the canceled checks.
1. Prepare the bank reconciliation for this company as of April 30.
2. Prepare the journal entries necessary to bring the companys book balance of cash into conformity with the reconciled cash balance as of April 30.
Explanation / Answer
Litner Company Bank Reconciliation April 30 2011 Book Balance Bank Balance Balance per books, Apr 30 78,356 Balance per bank, Apr 30 83,525 Add: Interest Income 53 Add: Deposit in Transit 5,102 Cr Memo for Notes Rec collected 9,970 10,023 Bank error on clearing chk 480 Total 88,379 Total 89,107 Less: Error on check 1828 Less: Check 1837 not included by bank (584) (Chk sh be 1,530 instead of 1,350) (180) Check 1840 not included by bank (1,219) NSF Check and bank charges (895) Adjusted balance per books 87,304 Adjusted balance per bank 87,304 Journal Entries: DR (CR) a) N/A b) Cash in Bank 53 Interest Income (53) c)Advertising Exp 180 Cash in Bank (180) d) Bank Fees 30 Cash in Bank 9,970 Notes Receivables (10,000) e) Bank Fees 25 Accts Recvble 870 Cash in Bank (895)
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