Harrison Company maintains a checking account at the First National City Bank. T
ID: 2407581 • Letter: H
Question
Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2018 bank statement included the following information:
The company’s general ledger account had a balance of $40,278 at the end of July. Deposits outstanding totaled $7,100 and all checks written by the company were processed by the bank except for those totaling $8,500. In addition, a $2,800 July deposit from a credit customer was recorded as a $280 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $70 disbursement was incorrectly processed by the bank as a $700 disbursement.
Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.
(includes $620 in interest) (3,720 ) Balance, July 31, 2018 $ 38,178
Explanation / Answer
Required 1)
Bank balance to corrected balance
Balance per bank statement $38,178
Add: Deposit outstanding $7,100
Less: check outstanding ($8,500)
Add: Bank error in recording check $630
Corrected cash balance $37,408
Book balance to corrected balance
Balance per book $40,278
Add: error in recording cash receipt $2,520
Less: services charges ($70)
Less: NSF checks ($1600)
Less: Automatic monthly loan payment ($3,720)
Corrected cash balance $37,408
Required 2)
Debit credit
1) cash $2,520
Accounts receivable $2,520
2) Miscellaneous expenses $70
Accounts receivable $1600
Interest expense $620
Note payable $3100
Cash $5,390
Explanation
1) Bank error in recording check - ($700 - $70) = $630
2)Error in recording cash receipt -($2800- $280)=$2,520
3) Note payable - ($3720 -$620) = $3100
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