Bank Reconciliation and Entries The cash account for Pala Medical Co. at June 30

Question

Bank Reconciliation and Entries The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $12,020. The bank statement indicated a balance of $13,980 on June 0, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items: a. Checks outstanding totaled $5,030. b. A deposit of $5,240, representing receipts of June 30, had been made too late to appear on the bank statement. c. The bank collected $2,730 on a $2,590 note, including interest of $140 d. A check for $770 returned with the statement had been incorrectly recorded by Pala Medical Co. as $700. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account. e. A check drawn for $50 had been erroneously charged by the bank as $500. f. Bank service charges for June amounted to $40 Required: 1. Prepare a bank reconciliation. Pala Medical Co. Bank Reconciliation June 30, 20Y1 Cash balance according to bank statement Adjustments: Total adjustments Adjusted balance Cash balance according to company's records Adjustments:

Explanation / Answer

Solution:

a) Preparing the Bank Reconciliation:

Pala Medical Co.

Bank Reconciliation

June 30, 20Y1

2) Preparing the Journal Entries:

Pala Medical Co.

Bank Reconciliation

June 30, 20Y1

Cash balance according to bank statement $13,980 Add: Deposit of June 30, not recorded by bank $5,240 Add: Bank error in charging check as $500 instead of $50 $450 $5,690 $19,670 Deduct: Outstanding checks ($5,030) Adjusted balance $14,640 Cash balance according to company’s records $12,020 Add proceeds of note collected $2,730 $14,750 Deduct error in recording check by Pala medical Co. $70 Deduct bank service charges $40 ($110) Adjusted balance $14,640

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