Question

Chapter 5, Problem 25P Accounting: What the Numbers Mean (12th Edition)

Bank reconciliation—compute Cash account balance and bank statement balance before reconciling items Beckett Co. received its bank statement for the month ending June 30, 2019, and reconciled the statement balance to the June 30, 2019, balance in the Cash account. The reconciled balance was determined to be $9,600. The reconciliation recognized the following items:

1. Deposits in transit were $4,200.

2. Outstanding checks totaled $6,000.

3. Bank service charges shown as a deduction on the bank statement were $100.

4. An NSF check from a customer for $800 was included with the bank statement. Beckett Co. had not been previously notified that the check had been returned NSF.

5. Included in the canceled checks was a check written for $790. However, it had been recorded as a disbursement of $970.

Required:

a. What was the balance in Beckett Co.’s Cash account before recognizing any of the preceding reconciling items?

b. What was the balance shown on the bank statement before recognizing any of the preceding reconciling items?

Answer 1

Answer a.

Adjusted Cash Balance = Unadjusted Cash Balance + Error in Recording Check - Bank Service Charge - NSF Check
$9,600 = Unadjusted Cash Balance + ($970 - $790) - $100 - $800
$9,600 = Unadjusted Cash Balance + $180 - $900
Unadjusted Cash Balance = $10,320

Therefore, balance in cash account before recognizing any reconciling items is $10,320

Answer b.

Adjusted Cash Balance = Unadjusted Cash Balance + Deposits in Transit - Outstanding Checks
$9,600 = Unadjusted Cash Balance + $4,200 - $6,000
Unadjusted Cash Balance = $11,400

Therefore, balance on bank statement before recognizing any reconciling items is $11,400