The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,600.
ID: 2412989 • Letter: T
Question
The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,600. During May, the total cash deposited was $67,810 and checks written totaled $62,960. The bank statement indicated a balance of $22,990 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
Checks outstanding totaled $10,240.
A deposit of $8,340, representing receipts of May 31, had been made too late to appear on the bank statement.
The bank had collected for Brentwood Bike Co. $4,410 on a note left for collection. The face of the note was $4,070.
A check for $490 returned with the statement had been incorrectly charged by the bank as $940.
A check for $850 returned with the statement had been recorded by Brentwood Bike Co. as $580. The check was for the payment of an obligation to Adkins Co. on account.
Bank service charges for May amounted to $30.
A check for $1,020 from Jennings Co. was returned by the bank because of insufficient funds.
Instructions:
1. Prepare a bank reconciliation as of May 31.
2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.
3. If a balance sheet were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$
Explanation / Answer
Answer:
1
Brentwood Bike Co
Bank Reconciliation
may-,31
Cash balance according to bank statement
22990
Add: Deposit of May 31, not recorded by bank
8340
Bank error in charging check as $940
instead of $490
450
8790
31780
Deduct: Outstanding checks
10240
Adjusted balance
21540
Cash balance according to company’s records
(w.N-1)
18450
Add: Proceeds of note collected by bank, including $340 interest
4410
22860
Deduct: Check returned because of insufficient funds
1020
Bank service charges
30
Error in recording check (850-580)
270
1320
Adjusted balance
21540
Working note-1
Cash balance, May 1
13600
Plus cash deposited in May
67,810.00
Less checks written in May
-62,960.00
Balance per company's books, May 31
$18,450.00
________________________________________
2
DATE
DESCRIPTION
DEBIT
CREDIT
31-May
Cash
4,410.00
Notes Receivable
4,070.00
Interest Revenue
340.00
31
Accounts Payable-Adkins Co.
270
Accounts Receivable-Jennings Co.
1,020.00
Miscellaneous Expense
30
Cash
1,320.00
Note:
company needs to journalize any adjusting items in the company section of the bank reconciliation, because these have not been previously recorded by the company
__________________________________________
3
If a balance sheet were prepared for Brentwood Bike Co. on May 31, 2016, what amount should be reported as cash
Answer:
Amount should be reported as cash =$21,540
Brentwood Bike Co
Bank Reconciliation
may-,31
Cash balance according to bank statement
22990
Add: Deposit of May 31, not recorded by bank
8340
Bank error in charging check as $940
instead of $490
450
8790
31780
Deduct: Outstanding checks
10240
Adjusted balance
21540
Cash balance according to company’s records
(w.N-1)
18450
Add: Proceeds of note collected by bank, including $340 interest
4410
22860
Deduct: Check returned because of insufficient funds
1020
Bank service charges
30
Error in recording check (850-580)
270
1320
Adjusted balance
21540
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