El Gato Painting Company maintains a checking account at American Bank. Bank sta

Question

El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at the end of each month. The November 30, 2016, reconciliation of the bank balance is as follows The company's general ledger checking account showed the Balance, December The December bank statement contained the following 2.018 Balanoe, December 3 3850 The checks that were processed by the bank in December include all of the outstanding checks at the end of November except for check #365. In addition, there are some December checks that had not been processed by the bank by the end of the month. Also, you discover that check #411 for $640 was correctly recorded by the bank but was incorrectly recorded on the books as a $460 disbursement for advertising expense. Included in the bank's deposits is a $1,400 deposit incorrectly credited to the company's account. The deposit should have been posted to the credit of the Los Gatos Company. The NSF checks have not been redeposited and the company will seek payment from the customers involved. Required: Prepare a bank reconciliation for the El Gato checking account at December 31, 2016.

Explanation / Answer

Part 1 Bank Reconcilliation Balance as per Bank Statement $3,850.00 ADD: Deposit in Transit $2,260.00 LESS: Bank Error $(1,400.00) Outstanding Cheques $(935.00) Corrected Cash Balance $3,775.00 Adjusted Balance as per Bank Cash as per Books $4,428.00 ADD: Note collected by Bank LESS: Service Charge $(23.00) LESS: Error in recording cheque $(180.00) LESS: NSF Cheque $(450.00) Adjusted Balance as per Books $3,775.00 Part 2 Journal Entries Particulars Debit Credit NSF Cheque $450.00 Service Charge $23.00 Error in recording cheqye $180.00 Cash $653.00 (To record credit to cash)

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