Question

Oscar’s Red Carpet Store maintains a checking account with Academy Bank. Oscar’s sells carpet each day but makes bank deposits only once per week. The following provides information from the company’s cash ledger for the month ending February 28, 2018. Date Amount No. Date Amount Deposits: 2/4 $ 2,600 Checks: 321 2/2 $ 4,600 2/11 2,200 322 2/8 650 2/18 3,100 323 2/12 2,400 2/25 4,000 324 2/19 2,100 Cash receipts: 2/26-2/28 1,500 325 2/27 450 326 2/28 950 $ 13,400 327 2/28 1,800 Balance on February 1 $ 6,700 $12,950 Receipts 13,400 Disbursements (12,950) Balance on February 28 $ 7,150 Information from February's bank statement and company records reveals the following additional information: a. The ending cash balance recorded in the bank statement is $11,770. b. Cash receipts of $1,500 from 2/26-2/28 are outstanding. c. Checks 325 and 327 are outstanding. d. The deposit on 2/11 includes a customer's check for $450 that did not clear the bank (NSF check). e. Check 323 was written for $2,800 for advertising in February. The bank properly recorded the check for this amount. f. An automatic withdrawal for Oscar's February rent was made on February 4 for $1,300. g. Oscar's checking account earns interest based on the average daily balance. The amount of interest earned for February is $190. h. In January, one of Oscar's suppliers, Titanic Fabrics, borrowed $5,800 from Oscar. On February 24, Titanic paid $5,950 ($5,800 borrowed amount plus $150 interest) directly to Academy Bank in payment for January's borrowing. i. Academy Bank charged service fees of $120 to Oscar’s for the month. Prepare a bank reconciliation for Oscar's checking account on February 28, 2018.

Answer 1

Solution:

Preparing the Bank Reconciliation for Oscar's Checking Account on February 28, 2018:

OSCAR'S RED CARPET STORE Bank Reconciliation February 28, 2018
Bank's Cash Balance		Company's Cash Balance
Per Bank Statement	$11,770	Per General Ledger	$7,150
Deposits Outstanding	$1,500	NSF Check	($450)
Checks Outstanding	($2,250)	Company Error	($400)
		EFT for Rent	($1,300)
		Interest on Account	$190
		Note Collected	$5,800
		Interest on note	$150
		Service Fees	($120)
Bank Balance per Reconciliation	$11,020	Company balance per Reconciliation	$11,020