Question

As the new junior accountant at Bernstein Company, you have been asked to prove the cash account balance of $18,634 at 12/31/20. You have obtained the following information:

1. The 12/31/20 bank statement shows a beginning balance of $18,783, receipts of $179,832, disbursements of $176,625, and an ending balance of $21,990.
2. On 12/31/20, deposits of $12,900 were mailed to the bank.
3. The list of outstanding checks totaled $13,950 at 12/31/20.
4. On 11/15/20, the bank made an error, crediting Bernstein for a $2,000 deposit that should have been made to the account of Berenstein Company. Bernstein has notified the bank and is waiting for the bank to correct the error.
5. On 12/20/20, Bernstein wrote a check for $1,257.30, but recorded it as $1,797.30. The check cleared the bank in December.
6. Bernstein’s 12/22/20 deposit for $1,913 was recorded as $1,193.
7. The bank statement showed that deposited checks totaling $624 were dishonored during December.
8. Interest on a bank loan for the month of December charged by the bank but not recorded on the books amounted to $250.
9. The bank charged Bernstein an $80 service charge for December.

Required:

1.   Prepare a bank reconciliation for Bernstein, determining the correct cash balance.
2.   Prepare the journal entries required by Bernstein at 12/31/20.
3. What cash amount will appear on Bernstein’s balance sheet at 12/31/20?

Please show any work done. I am trying to grasp this topic. Thank you in advance!

Answer 1

a)

Bank Reconciliation

Bank	Books
Balance, 12/31/20	21,990	Balance, 12/31/20	18,634
Add:		Add:
Deposit in transit	12,900	Correction of book error,  check written for $1,257.30, but recorded as $1,797.30	540
		Correction of book error, deposit for $1,913 was recorded as $1,193	720
Less:		Less:
Outstanding checks	- 13,950	NSF check	- 624
Correction of bank error	- 2,000	Bank service charges	- 80
		Interest on bank loan	- 250
Adjusted bank balance	$18,940	Adjusted book balance	$18,940

b)

Journal

i)	Cash	540
	Accounts payable		540
ii)	Cash	720
	Accounts receivable		720
iii)	Accounts receivable	624
	Cash		624
iv)	Interest expense	250
	Cash		250
v)	Bank service charges	80
	Cash		80

c)

Cash amount to appear on Bernstein’s balance sheet at 12/31/20 = $18,940