Werth Inc.’s bank statement from Hometown Bank at August 31, 2018, gives the fol

Question

Werth Inc.’s bank statement from Hometown Bank at August 31, 2018, gives the following information.

A summary of the Cash account in the ledger for August shows the following: balance, August 1, $18,700; receipts $84,000; disbursements $83,570; and balance, August 31, $19,130. Analysis reveals that the only reconciling items on the July 31 bank reconciliation were a deposit in transit for $4,800 and outstanding checks of $4,500. In addition, you determine that there was an error involving a company check drawn in August: A check for $400 to a creditor on account that cleared the bank in August was journalized and posted for $40.

1) Determine deposits in transit.

2)Determine outstanding checks. (Hint: You need to correct disbursements for the check error.)

3)Prepare A bank reconciliation at Augest 31.

4) Journalize the adjusting entries to be made by Hometown at Augest 31

Balance, August 1 $18,400 Bank debit memorandum: August deposits 81,000 Safety deposit box fee $ 25 Checks cleared in August 78,678 Service charge 50 Bank credit memorandum: Balance, August 31 20,692   Interest earned 45

Explanation / Answer

1 Deposit in transit Beginning 4800 Add Deposits as per cash book 84000 Less Deposits as per bank statement 81000 Ending deposit in transit 7800 2 Oustanding checks Beginning 4500 Add Disbursement as per cash book 83570 Add Error in cash book (400-40) 360 Less Disbursement as per bank statement 78678 Ending balance 9752 3 Bank reconciliation Bank balance 20692 Add Deposit in transit 7800 Less Outstanding checks 9752 Adjusted bank balance 18740 Cash balance 19130 Add Interest earned 45 45 Less Service charge 50 Safety deposit box fees 25 Error in recording (400-40) 360 435 Adjusted cash balance 18740 Journal entries Bank charges 25 Service charges 50               Cash 75 Cash 45           Interest earned 45

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