LO3 Bank Reconciliation balance P4. The following information is available for S
ID: 2555893 • Letter: L
Question
LO3 Bank Reconciliation balance P4. The following information is available for Sedona, Inc.,as of May 31, 2014: 485.60 a. Cash on the books as of May 31 amounted to $42,754.16. Cash on the bank state- ment for the same date was $52,351.46 b. A deposit of S5,220.94, representing cash receipts of May 31, did not appear on the ODE bank statement c. Outstanding checks totaled $3,936.80. check for $1,920.00 returned with the statement was recorded incorrectly in the check register as S1,380.00. The check was for a cash purchase of merchandise. e. The bank service charge for May amounted to $25, f. The bank collected $12,360.00 for Sedona, on a note. The face value of the note was $12,000.00 g. An NSF check for $183.56 from a customer, Eva Mendez, was returned with the statement. h. The bank mistakenly charged to the company account a check for $850.00 drawn by another company. i. The bank reported that it had credited the account for $120.00 in interest on the average balance for May REQUIRED 1. Prepare a bank reconciliation for Sedona as of May 31, 2014 2. Prepare the journal entries necessary to adjust the accounts. 3. What amount of cash should appear on Sedona's balance sheet as of May 31? 4. ACCOUNTING CONNECTION Why is a bank reconciliation considered an im tant control over cash?Explanation / Answer
1) Sedona Inc.,
Bank Reconciliation as on May 31, 2014 (Amounts in $)
2) Journal Entries (Amounts in $)
3) The adjusted cash balance of $54,485.60 should appear on the balance sheet (as calculated in requirement 1)
4) A bank reconciliation is a necessary internal control because events and items such as notes receivable collected by the bank, interest income on notes, interest income, overstatement of deposits, collection fees, NSF checks and service charges, which are unknown on internal book records, must be updated to reflect current data. As an outside record, the bank statement provides a check on the internal accounting records of the company and proves that all cash transactions have been recorded.
Balance as per Bank, May 31, 2014 52,351.46 Add: Deposit in Transit 5,220.94 Check of another company mistakenly deducted by Bank 850.00 6,070.94 Bank Adjusted Balance before deductions 58,422.40 Less: Outstanding Checks (3,936.80) Adjusted Bank Balance, May 31, 2014 54,485.60 Balance as per Books, May 31, 2014 42,754.16 Add: Note receivable collected by bank 12,000.00 Interest on note collected by bank 360.00 Interest on average balance 120.00 12,480.00 Adjusted book balance before deductions 55,234.16 Less: Check recorded incorrectly in check register (1,920-1,380) (540.00) Bank Service Charge (25.00) NSF Check of Eva Mendez (183.56) (748.56) Adjusted Book Balance, May 31, 2014 55,485.60Related Questions
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