The cash account for American Medical Co. at April 30 indicated a balance of $9,
ID: 2548832 • Letter: T
Question
The cash account for American Medical Co. at April 30 indicated a balance of $9,425. The bank statement indicated a balance of $10,680 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:
Checks outstanding totaled $3,840.
A deposit of $4,010, representing receipts of April 30, had been made too late to appear on the bank statement.
The bank collected $2,080 on a $1,980 note, including interest of $100.
A check for $660 returned with the statement had been incorrectly recorded by American Medical Co. as $600. The check was for the payment of an obligation to Targhee Supply Co. for the purchase on account.
A check drawn for $60 had been erroneously charged by the bank as $600.
Bank service charges for April amounted to $55.
Required:
1. Prepare a bank reconciliation.
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 American Medical Co. on April 30, what amount should be reported as cash?
$
Explanation / Answer
PART-1)
Cash balance according to bank statement
10,680
Add deposit of April 30, not recorded by bank
4,010
Add bank error in charging check as $3,300 instead of $330
540
4,550
15,230
Deduct outstanding checks
3,840
Adjusted balance
11,390
Cash balance according to company’s records
9425
Add proceeds of note collected
2,080
11,505
Deduct error in recording check by Remedy medical Co.
60
Deduct bank service charges
55
115
Adjusted balance
11,390
PART-2)
Debit
Credit
Cash
2080
Notes Receivable
1980
Interest Revenue
100
Accounts payable
60
Miscellaneous exp.
55
Cash
115
Part-3) $11,390
Cash balance according to bank statement
10,680
Add deposit of April 30, not recorded by bank
4,010
Add bank error in charging check as $3,300 instead of $330
540
4,550
15,230
Deduct outstanding checks
3,840
Adjusted balance
11,390
Cash balance according to company’s records
9425
Add proceeds of note collected
2,080
11,505
Deduct error in recording check by Remedy medical Co.
60
Deduct bank service charges
55
115
Adjusted balance
11,390
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