Question

The cash account of Pronghorn Corp. shows a ledger balance of $3,974.85 on June 30, 2017. The bank statement as at that date indicates a balance of $4,150. When the statement was compared with the cash records, the following facts were determined:

1.		There were bank service charges for June of $25.
2.		A bank memo stated that Bao Dai’s note for $890 and interest of $32 had been collected on June 29, and the bank had made a charge of $4.60 on the collection. (No entry had been made on Pronghorn’s books when Bao Dai’s note was sent to the bank for collection.)
3.		Receipts for June 30 of $2,990 were not deposited until July 2.
4.		Cheques outstanding on June 30 totalled $2,255.75.
5.		On June 29, the bank had charged Pronghorn Corp.’s account for a customer’s uncollectible cheque amounting to $472.20.
6.		A customer’s cheque for $90 had been entered as $40 in the cash receipts journal by Pronghorn Corp. on June 15 as a collection on account.
7.		Cheque no. 742 in the amount of $494 had been entered in the cashbook as $449, and cheque no. 747 in the amount of $53.80 had been entered as $538. Both cheques were issued to pay for cash purchases of equipment.
8.		In May 2017, the bank had charged a $22.50 Monty Corp. cheque against the Pronghorn Corp. account. The June bank statement indicated that the bank had reversed this charge and corrected its error.

Prepare any entries that are needed to make the books correct and complete.

Answer 1

Solution:

Journal Entries
S.no.	Particulars	Debit	Credit
1	Bank Service Charges Dr	$25.00
	To Cash		$25.00
	(To record service charges by bank)
2	Cash Dr	$917.40
	Collection Fee Dr	$4.60
	To Note Receivable		$890.00
	To Interest revenue		$32.00
	(To record note collected by bank and collection fee charged)
3	No Journal Entry required.
4	No Journal Entry required.
5	Accounts Receivable Dr	$472.20
	To Cash		$472.20
	(To record Customer's uncollectible check)
6	Cash Dr ($90-$40)	50
	To Accounts receivable		$50.00
	(To record correction of collection on account of a customer's Check)
7-a	Accounts Payable Dr ($494- $449)	$45.00
	To Cash		$45.00
	(to record correction of Check no. 742)
7-b	Cash Dr ($538 - $53.80)	$484.20
	To Accounts Payable		$484.20
	(to record correction of Check no. 747)
8	No Journal Entry required.