Question

Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2018 bank statement included the following information:

Balance, July 1, 2018 $55,803

Deposits 179,600

Checks processed (192,710)

Service charges (35)

NSF checks (1,250)

Monthly loan payment deducted directly by bank from account (includes $270 in interest). (3,370)

Balance, July 31, 2018. $38,038

The company’s general ledger account had a balance of $39,088 at the end of July. Deposits outstanding totaled $6,400 and all checks written by the company were processed by the bank except for those totaling $8,430. In addition, a $2,100 July deposit from a credit customer was recorded as a $210 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $35 disbursement was incorrectly processed by the bank as a $350 disbursement.

Required:

1. Prepare a bank reconciliation for the month of July.

2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Answer 1

Bank reconciliation for the month of July
Balance As Per Bank statement		38038	Balance As Per BankCash Book		39088
Add			Add
Deposit in Transit	6400		Error in Recoding 2100-210		1890
Error in Recoding 350-35	315	6715
Deduct			Deduct
Check Outstanding	8430	8430	Service charges	35
			NSF checks	1250
			Loan repayment	3370	4655
		36323			36323

Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

	DR	CR
Account Receivable	1250
Cash		1250
Loan Payable	3100
Interest Payable	270
Cash		3370
Bank Charges	35
Cash		35
Cash	1890
Account Receivable		1890