Question

The Fitzgerald Company maintains a checking account at the Bank of the North. The bank provides a bank statement along with canceled checks on the last day of each month. The October 31, 2018, bank statement included the following information:

Balance, October 1, 2018	$	32,760
Deposits		89,500
Checks processed		(78,700	)
Service charges		(420	)
NSF checks		(1,670	)
Monthly loan payment deducted
directly by bank from account
(includes $470 in interest)		(4,170	)
Balance, October 31, 2018	$	37,300

The company’s general ledger cash (checking) account had a balance of $42,677 at the end of October. Deposits outstanding totaled $4,294, and all checks written by the company were processed by the bank except for those totaling $5,690. In addition, a check for $570 for the purchase of office furniture was incorrectly recorded by the company as a $57 disbursement. The bank correctly processed the check during October.

Required:
1. Prepare a bank reconciliation for the month of October.
2. Prepare the necessary journal entries at the end of October to adjust the general ledger cash account.

Prepare a bank reconciliation for the month of October.

Fitzgerald Company’s Bank Reconciliation
Balance per bank statement	$37,300
Add:
Deposits outstanding	4,294
Deduct:
Checks outstanding	5,690
Corrected cash balance	$35,904
Balance per books	$42,677
Deduct:
Error in recording check	503
NSF checks	1,670
Automatic monthly loan payment	4,170
Service charges	420
Corrected cash balance	$35,914

Answer 1

	Fitzgerald Company's Bank reconciliation
	Balance per bank statement					37,300
	Add:
	Deposits in transit					4,294
						41,594
	less:
	checks outstanding					5,690
	Adjusted bank statement					35,904
	Balance as per cash book					42,677
	less
	Error in recording check (570-57)					513
	Service charges					420
	NSFn checks					1,670
	loan payment					4,170
	Adjusted cash balance					35,904
	Journal Entries
	Accounting titles & Explanations					Debit	Credit
	office furniture					513
	cash						513
	Bank service charge/miscellaneous expense					420
	Cash						420
	Accounts receivable					1,670
	cash						1,670
	loan					3700
	interest expense					470
	cash						4,170