The cash account for Brentwood Bike Co. at May 1 indicated a balance of $34,250. During May, the total cash deposited

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $34,250. During May, the total cash deposited was $140,300, and checks written totaled $138,880. The bank statement indicated a balance of $43,525 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

a. Checks outstanding totaled $6,440.

b. A deposit of $1,850 representing receipts of May 31 had been made too late to appear on the bank statement.

c. The bank had collected for Brentwood Bike Co. $5,250 on a note left for collection. The face of the note was $5,000.

d. A check for $390 returned with the statement had been incorrectly charged by the bank as $930.

e. A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as $120. The check was for the payment of an obligation to Adkins Co. on account.

f. Bank service charges for May amounted to $30.

g. A check for $1,325 from Jennings Co. was returned by the bank due to insufficient funds.

Instructions

1. Prepare a bank reconciliation as of May 31.

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

3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?

Answer:

1.

Cash balance according to bank statement$43,525

Add:  Deposit of May 31, not recorded by bank $1,850

 Bank error in charging check as $930 instead 

 of $390540 2,390

Deduct outstanding checks6,440

Adjusted balance$39,475

Cash balance according to company’s records*$35,670

Add note and interest collected by bank5,250

Deduct: Check returned because of insufficient funds $1,325

Bank service charges30

Error in recording check90 1,445

Adjusted balance$39,475

* Cash balance, May 1........................................................................... $ 34,250

Plus cash deposited in May.................................................................. 140,300

Less checks written in May.................................................................. (138,880)

Balance per company’s books, May 31................................................ $ 35,670

2.

 May 31 Cash5,250

Notes Receivable5,000

Interest Revenue250

31 Accounts Payable—Adkins Co. 90

Accounts Receivable—Jennings Co. 1,325

Miscellaneous Expense30

Cash1,445

3. $39,475; the adjusted balance from the bank reconciliation should be reported

as cash on the May 31 balance sheet for Brentwood Bike Co.