The cash account for Stone Systems at July 31 indicated a balance of $17,750. The bank statement indicated

The cash account for Stone Systems at July 31 indicated a balance of $17,750. The bank statement indicated a balance of $33,650 on July 31. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:

a. Checks outstanding totaled $17,865.

b. A deposit of $9,150, representing receipts of July 31, had been made too late to appear on the bank statement.

c. The bank had collected $6,095 on a note left for collection. The face of the note was $5,750.

d. A check for $390 returned with the statement had been incorrectly recorded by Stone Systems as $930. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account.

e. A check drawn for $1,810 had been incorrectly charged by the bank as $1,180.

f. Bank service charges for July amounted to $80.

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 Stone Systems on July 31, what amount should be reported as cash?

Answer:

1.

Cash balance according to bank statement$33,650

Add deposit of July 31, not recorded by bank9,150

Deduct: Outstanding checks$17,865

Bank error in charging check as $1,180 instead 

of $1,810630 18,495

Adjusted balance$24,305

Cash balance according to company’s records$17,750

Add:   Note and interest collected by bank $ 6,095

  Error in recording check540 6,635

Deduct bank service charges80

Adjusted balance$24,305

2.

 July 31 Cash6,635

Notes Receivable5,750

Interest Revenue345

Accounts Payable—Holland Co.540

31 Miscellaneous Expense80

Cash80

3. $24,305; the adjusted balance from the bank reconciliation should be reported

as cash on the July 31 balance sheet for Stone Systems.