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.
