Question

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,760. During May, the total cash deposited was $74,750 and checks written totaled $69,410. The bank statement indicated a balance of $25,340 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $11,290.
2. A deposit of $9,190, representing receipts of May 31, had been made too late to appear on the bank statement.
3. The bank had collected for Brentwood Bike Co. $4,860 on a note left for collection. The face of the note was $4,490.
4. A check for $580 returned with the statement had been incorrectly charged by the bank as $850.
5. A check for $520 returned with the statement had been recorded by Brentwood Bike Co. as $250. The check was for the payment of an obligation to Adkins Co. on account.
6. Bank service charges for May amounted to $60.
7. A check for $1,120 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

Brentwood Bike Co.
Bank Reconciliation
May 31
Cash balance according to bank statement		$
	$
		$
Adjusted balance		$
Cash balance according to company's records		$
		$
	$
Adjusted balance		$

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. May 31
b. May 31

3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Answer 1

1
Brentwood Bike Co.
Bank Reconciliation
May 31
Cash balance according to bank statement		25340
Add deposit of May 31, not recorded by bank	9190
Add bank error in charging check as $850 instead of $580	270	9460
		34800
Deduct outstanding checks		11290
Adjusted balance		23510
Cash balance according to company's records		20100
Add note and interest collected by bank		4860
		24960
Deduct: Check returned because of insufficient funds	1120
Bank service charges	60
Error in recording check	270	1450
Adjusted balance		23510
2
	Debit	Credit
Cash	4860
Notes Receivable		4490
Interest Revenue		370
Accounts Payable-Adkins Co.	270
Accounts Receivable-Jennings Co.	1120
Miscellaneous expense	60
Cash		1450
3
Amount reported as Cash $23510