Friends, Inc. received its bank statement for the month ended 12/31/18. The bank

Question

Friends, Inc. received its bank statement for the month ended 12/31/18. The bank statement showed a balance of $10,102.87. The company’s general ledger showed a balance of $8,656.11.

The following items were discovered when comparing the bank statement to the books of the company:

The bank charged check processing fees of $25.00.

There was a $1,825.52 automatic withdrawal to pay the mortgage. Of the $1,825.52, $1,572.86 was for interest which had been accrued.

The bank charged Friends, Inc. account $250.00 for a NSF check. The check was returned to Friends, Inc. and Friends, Inc. will seek repayment of the $250 from the customer

A check for $210.50 written by Friends, Inc. was cleared by the bank on Friends Are Us, Inc.’s account.

The bank collected a note receivable for Friends in the amount of $1,775.50 and deposited it to Friends’ account. The principal repayment was for $1,490.00; the balance was interest, which had not been accrued.

The bank charged the company $50.00 to print new checks.

The bank correctly cleared check #2501 for $482.00. The company had recorded this check in its books for $582.00. The check had been written in payment of utilities.

A $2,075.00 deposit was recorded on the company books on 12/31/18. The deposit was taken to the bank too late to be recorded on that day. The bank recorded the deposit on 1/2/19.

Outstanding checks totaled $1,524.28.

Friends’ income tax refund of $2,062.00 was directly deposited in the bank account. A receivable had been set up in 2018 in anticipation of the refund.

Required:

Prepare a bank reconciliation in good form.

Make all necessary journal entries to adjust Friends, Inc.’s books.

For Bank Reconciliation

Friends, Inc. received its bank statement for the month ended 12/31/18. The bank statement showed a balance of $10,102.87. The company’s general ledger showed a balance of $8,656.11. The following items were discovered when comparing the bank statement to the books of the company: 1. The bank charged check processing fees of $25.00. 2. There was a $1,825.52 automatic withdrawal to pay the mortgage. Of the $1,825.52, $1,572.86 was for interest which had been accrued. 3. The bank charged Friends, Inc. account $250.00 for a NSF check. The check was returned to Friends, Inc. and Friends, Inc. will seek repayment of the $250 from the customer 4. A check for $210.50 written by Friends, Inc. was cleared by the bank on Friends Are Us, Inc.’s account. 5. The bank collected a note receivable for Friends in the amount of $1,775.50 and deposited it to Friends’ account. The principal repayment was for $1,490.00; the balance was interest, which had not been accrued. 6. The bank charged the company $50.00 to print new checks. 7. The bank correctly cleared check #2501 for $482.00. The company had recorded this check in its books for $582.00. The check had been written in payment of utilities. 8. A $2,075.00 deposit was recorded on the company books on 12/31/18. The deposit was taken to the bank too late to be recorded on that day. The bank recorded the deposit on 1/2/19. 9. Outstanding checks totaled $1,524.28. 10. Friends’ income tax refund of $2,062.00 was directly deposited in the bank account. A receivable had been set up in 2018 in anticipation of the refund. Required: a. Prepare a bank reconciliation in good form. b. Make all necessary journal entries to adjust Friends, Inc.’s books. For Bank Reconciliation

Explanation / Answer

Solution:

Friends Inc. Bank Reconciliation - December 31 Bank's Cash balance Company's cash balance Particulars Amount Particulars Amount Ending balance as per Bank Statements $10,102.87 Ending Balance as per cash books $8,656.11 Additions: Additions: Outstanding cash receipt $2,075.00 Note Receivable Collection $1,775.50 Incorrect recording of check ($582 - $482) $100.00 Income tax refund $2,062.00 Deductions: Deductions: Outstanding Checks $1,524.28 NSF Cheque $250.00 Incorrect clearing of check by bank $210.50 Service Charge $25.00 Mortagage payment $1,825.52 Check print charges $50.00 Up to date cash balance as per bank $10,443.09 Up to date cash balance as per books $10,443.09

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