The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30

The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

a. Checks outstanding totaled $61,280.

b. A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement.

c. The bank collected $42,000 on a $40,000 note, including interest of $2,000. 

d. A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.

e. A check drawn for $240 had been erroneously charged by the bank as $420.

f. Bank service charges for April amounted to $145.

Instructions

1. Prepare a bank reconciliation.

2. Journalize the necessary entries. The accounts have not been closed.

3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

Answer:

1.

Cash balance according to bank statement$388,600

Add:  Deposit of April 30, not recorded by bank $42,500

 Bank error in charging check as $420 instead 

 of $240180 42,680

Deduct outstanding checks61,280

Adjusted balance$370,000

Cash balance according to company’s records $334,985

Add note and interest collected by bank42,000

Deduct: Error in recording check$ 6,840

Bank service charges145 6,985

Adjusted balance$370,000

2.

 Apr. 30 Cash42,000

Notes Receivable40,000

Interest Revenue2,000

30 Accounts Payable—Targhee Supply Co. 6,840

Miscellaneous Expense145

Cash6,985

3. $370,000; the adjusted balance from the bank reconciliation should be reported

as cash on the April 30 balance sheet for American Medical Co.