Problem 1 (15 points) Your first assignment as a staff accountant for a CPA firm

Question

Problem 1 (15 points) Your first assignment as a staff accountant for a CPA firm is to prepare a bank reconciliation for a small company for which the firm provides bookkeeping services. You have been given the information on the attached pages for the month of October. It should be noted that the company has made no errors in recording amounts in its records. REQUIRED: (1) Prepare the bank reconciliation for the company for the month of October Prepare the reconciliation by reconciling the bank balance to the correct cash balance and the book balance to the correct cash balance. Prepare the required general journal entries, in proper form, for the company based upon the bank reconciliation. Omit explanations. (2)

Explanation / Answer

Bank Reconciliation

Bank Reconciliation

31-Oct Cash balance per bank statement $95,240.00 Add:   Deposit in transit 3500 $98,740.00 Less: Outstanding checks 161 3600 177 2500 178 3000 179 1500 -10600 Less: Error in recording check 167(3200-2300) -900 Adjusted cash balance per bank $87,240.00 Cash balance per books(71190-400) $70,790.00 Add: Note Collected 6720 Foreign exchange income 10,000.00 $16,720.00 $87,510.00 Less: Bank Charges -70 NSF Check -200 -270 Adjusted cash balance per books $87,240.00 Journal Entry Accounts title Debit Credit Bank Charges 70 Cash 70 ( To record the payment of bank service charge) Accounts receivable $         200.00 Cash $          200.00 ( To record the payment of NSF checks) Cash $     6,720.00 Note receivable $       6,000.00 Interest receivable $          720.00 ( To record the receipt of note receivable along with interest cash $   10,000.00 Foreign exchange revenue $    10,000.00 ( To record the revenue from foreign exchange fluctuation)

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