On August 1, 2019, the accountant for Western Imports downloaded the company\'s
ID: 341368 • Letter: O
Question
On August 1, 2019, the accountant for Western Imports downloaded the company's July 31, 2019, bank statement from the bank's Website. The balance shown on the bank statement was $28,770. The July 31, 2019, balance in the Cash account in the general ledger was $14,131.
Jenny Irvine, the accountant for Western Imports, noted the following differences between the bank's records and the company's Cash account in the general ledger:
An electronic funds transfer for $14,500 from Foncier Ricard, a customer located in France, was received by the bank on July 31.
Check 1422 was correctly written and recorded for $1,200. The bank mistakenly paid the check for $1,270.
The accounting records indicate that Check 1425 was issued for $66 to make a purchase of supplies. However, examination of the check online showed that the actual amount of the check was for $96.
A deposit of $890 made after banking hours on July 31 did not appear on the July 31 bank statement.
The following checks were outstanding: Check 1429 for $1,250, and Check 1430 for $142.
An automatic debit of $263 on July 31 from CentralComm for telephone service appeared on the bank statement but had not been recorded in the company's accounting records.
Required:
Prepare a bank reconciliation for the firm as of July 31.
Record general journal entries for the items on the bank reconiliation that must be journalized.
Analyze:
What effect on total expenses occurred as a result of the general journal entries recorded?
Explanation / Answer
Balance as per Bank Statement 28770 Adjustment Add: Error on check payment 70 Add: Deposits in transit 890 Less: Outstanding checks -1392 Adjusted balance as per bank statement 28338 Balance as per Books 14131 Adjustment Add: EFT from customer 14500 Less: Error in recording the payment of supplies -30 Less: Telephone charges paid -263 Adjusted Balance as per Books 28338 Journal entries Cash Account Dr. 14500 Accounts receivable 14500 (for EFT transfer) Supplies Account Dr. 30 Cash Account 30 Telephone Charges Dr. 263 Cash Account 263 Req3: Effect of Errors on Expenses: Total expense Shall be increased by (30+263) = $ 293 Note: It has been assumed that the supplies will be consumed and normally supplies inhand is considered and balance is taken as Expense.
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