Question

The following information is available to the accountant of Hilary Company when preparing the monthly bank reconciliation:    

Outstanding cheques                                                       $500

Bank service charges                                                      50

Deposits in transit                                                           1,500

Customer note receivable collected by bank                  975

Cash balance per ledger (prior to reconciliation)           1,340

a). Assuming the bank doesn’t make any error, what should be the unadjusted cash balance on bank statement?

b). Prepare adjusting journal entries to record all the necessary adjustments to bring the Cash account to its correct balance. Note: No need to present the bank reconciliation.

Answer 1

a)

Balance as per ledger	$   1,340.00
Deduct: Bank charges	$      (50.00)
Add: Customer note receivable collected by bank	$      975.00
Adjusted cash balance	$   2,265.00

Adjusted cash balance will be equal to adjusted bank balance.

Adjusted bank balance	$   2,265
Add: Outstanding checks	$       500
Less: Deposit in transit	$ (1,500)
Unadjusted bank balance	$   1,265

b)

Bank charges	$           50
Cash	$         925
Note receivable		$         975