The cash account for Bonita Medical Co. at September 30, 2008, indicated a balan

Question

The cash account for Bonita Medical Co. at September 30, 2008, indicated a balance of $5,335,30. The bank statement indicated a balance of $5,604.60 on September 30, 2008. Comparing the bank statement and the accompanying canceled checks and memoranda with the records revealed the following reconciling items:

a. Checks outstanding totaled $4,790.45

b. A deposit of $9,226.15, representing receipts of September 30, had been made too late to appear on the bank statement.

c. The bank had collected $7,725 on a note left for collection. The face of the note was $7,500.

d. A check for $4,315 returned with the statement had been incorrectly recorded by Bonita Medical Co. as $3,415. The check was for the payment of an obligarion to Rowe Co. for the purchase of office equipment on account.

e. A check drawn for $230 had been erroneously charged by the bank as $2,300.

f. Bank services charges for September amounted to $50.

1. Prepare a bank reconcilation.

2. Journalize the necessary entries. The accounts have not been closed.

Explanation / Answer

Balance per book, September 30 $5,335.30
Add: Credit memo (notes collected) - c $7,725.00
Less: Book error ($4315 - $3415) - d $900.00
Less: Debit memo (bank charges) - f $50.00
Adjusted balance per book, September 30 $12,110.30

Balance per bank, September 30 $5,604.60
Less: Outstanding checks - a $4,790.45
Add: Deposit in transit - b $9,226.15
Add: Bank error ($2300 - $230) - e $2,070.00
Adjusted balance per bank, September 30 $12,110.30

Entry:
Adjustment c
(Dr) Cash in bank $7,725.00
(Cr) Notes receivable $7,500.00
(Cr) Interest Income $225.00
Adjustment d
(Dr) Accounts payable $900.00
(Cr) Cash in bank $900.00
Adjustment f
(Dr) Bank charges $50.00
(Cr) Cash in bank $50.00

Note: You don't record the adjusting entries of the bank. You need also to put appropriate heading on the bank reconciliation statement.

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