Question

The Fitzgerald Company maintains a checking account at the Bank of the North. The bank provides...

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

Homework Answers

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
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