The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,080.

Question

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,080. During May, the total cash deposited was $65,880 and checks written totaled $61,170. The bank statement indicated a balance of $22,330 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 $9,950.

A deposit of $8,100, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,280 on a note left for collection. The face of the note was $3,950.

A check for $580 returned with the statement had been incorrectly charged by the bank as $850.

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 $60.

A check for $990 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?
$

Brentwood Bike Co. Bank Reconciliation May 31 Cash balance according to bank statement $ $ $ Adjusted balance $ Cash balance according to company's records $ $ $ Adjusted balance $

Explanation / Answer

BrentWood Bike Co. Bank Reconciliation Cash balance according to Bank statement 22,330 Add:Deposits of May 31,not recorded by bank 8,100 Add:Bank error in charging checks as 850 instead of $580 270 8,370 30,700 Deduct:checks outstanding 9,950 Adjusted balance 20,750 Cash balance according to company records 17790 (13080+65880-61170) Add:collection of note 4,280 22070 Deduct: Error in recording cheque 270 Bank service charge 60 NSF 990 1,320 Adjusted balance 20,750 2) Journal entries' a 31-May Cash 4,280 Note receivable 3,950 interest revenue 330 b. 31-May Accounts payable-Adkins co 270 Bank service charges/miscellneous exp 60 account receivable 990 cash 1,320 3) 20,750

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