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.
