Question

The following is a list of items that could cause the book balance for cash of...

The following is a list of items that could cause the book balance for cash of Marin Services to differ from Marin’s bank statement balance from RBC (Royal Bank).

Identify if the item should be included as a reconciling item in Marin’s bank reconciliation. Indicate if a journal entry will be needed to correct any of the account for Marin.

Type of reconciling item Journal Entry?
1. A deposit of collections on account from customers was made, but the amount did not match what appeared on the bank statement. The correct amount of $4,540, shown on the bank statement should have been used in Marin’s books instead of the amount recorded of $4,629.

Add to the cash balance per bankDoes not affect the bank reconciliationDeduct from the cash balance per booksDeduct from the cash balance per bankAdd to the cash balance per books

YesNo

2. Included on the bank statement is an automatic charge for Marin Service’s monthly mortgage payment. The amount of the payment was $790 of which $485 is principal. Marin’s bookkeeper always waits for the transaction to appear on the bank statement before recording it because the amount varies from month to month.

Deduct from the cash balance per bankDoes not affect the bank reconciliationAdd to the cash balance per bankAdd to the cash balance per booksDeduct from the cash balance per books

YesNo

3. When retracing cheque payments to the journals during the bank reconciliation process, it was noticed that a $1,720 cheque, payable to Marin Service’s landlord for the current month’s rent, was charged to Advertising Expense.

Add to the cash balance per booksDeduct from the cash balance per bankAdd to the cash balance per bankDeduct from the cash balance per booksDoes not affect the bank reconciliation

YesNo

4. On the previous month’s bank reconciliation, an outstanding cheque for $450 for a final pay cheque of a part-time employee had not yet been cashed. On the current month bank statement, the cheque has still not cleared the bank account.

Add to the cash balance per bankAdd to the cash balance per booksDoes not affect the bank reconciliationDeduct from the cash balance per bankDeduct from the cash balance per books

YesNo

5. Marin has an agreement with RBC to collect notes receivable and any outstanding interest on the notes. Marin’s bookkeeper waits to record any collection until the amounts are reported by RBC, because it is not predictable how much of the collection will be interest. On the current bank statement, an entry appears for a deposit of $1,080 for a collection of a note with a principal amount of $1,020.

Add to the cash balance per booksAdd to the cash balance per bankDeduct from the cash balance per bankDoes not affect the bank reconciliationDeduct from the cash balance per books

YesNo

6. Appearing on the bank reconciliation is a charge for an NSF cheque of $670 which had been deposited earlier in the month by Marin as a payment on account by a new customer. RBC had added an additional charge of $33 for processing the NSF cheque. Because the customer was new, Marin warned the customer that any NSF charges would be added to the amount owing from the customer.

Add to the cash balance per bankDeduct from the cash balance per bankDeduct from the cash balance per booksDoes not affect the bank reconciliationAdd to the cash balance per books

YesNo

7. A cheque correctly issued in the amount of $490 as a payment on account to a supplier was incorrectly recorded in the books as $590.

Deduct from the cash balance per booksAdd to the cash balance per bankDeduct from the cash balance per bankAdd to the cash balance per booksDoes not affect the bank reconciliation

NoYes

8. Two cheques totalling $314, which were outstanding at the end of the last month, cleared in the current month’s bank statement.

Does not affect the bank reconciliationAdd to the cash balance per booksDeduct from the cash balance per bankDeduct from the cash balance per booksAdd to the cash balance per bank

YesNo

9. Included in the bank statement are charges of $46 for the use of debit cards by Marin’s customers. Marin waits for the information to be processed by the bank before recording them in the books.

Deduct from the cash balance per booksDoes not affect the bank reconciliationDeduct from the cash balance per bankAdd to the cash balance per bankAdd to the cash balance per books

YesNo

SHOW LIST OF ACCOUNTS

LINK TO TEXT

Homework Answers

Answer #1
Type of reconciling item Journal Entry
1 Add to the cash balance per books Yes
2 Deduct from the cash balance per books Yes
3 Does not affect the bank reconciliation Yes
4 Deduct from the cash balance per bank No
5 Add to the cash balance per books Yes
6 Deduct from the cash balance per books Yes
7 Add to the cash balance per books Yes
8 Does not affect the bank reconciliation No
9 Deduct from the cash balance per books Yes
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