Question

McDermott Company's bank statement for September 30 showed an ending cash balance of $1,476. The company's Cash account in its general ledger showed a $1,130 debit balance.

The following information was also available as of September 30.

• The bank deducted $170 for an NSF check from a customer deposited on September 15.
• The September 30 cash receipts, $1,340, were placed in the bank's night depository after banking hours on that date and this amount did not appear on the September 30 bank statement.
• A $24 debit memorandum for checks printed by the bank was included with the canceled checks.
• Outstanding checks amounted to $1,280.
• Included with the bank statement was a credit memo in the amount of $920 for an EFT in payment of a customer’s account.
• Included with the canceled checks was a check for $320, drawn on the account of another company.

1. Prepare a bank reconciliation as of September 30.

2. Prepare the journal entries for the items on the company’s bank reconciliation as of September 30.

Answer 1

McDermott Company
Bank Reconciliation
At September 30
Updates to bank Statement
Ending Cash Balance per Bank Statement		$1,476
Additions
Deposit 9/30	$1,340
Bank error	$320	$1,660
Deductions
Outstanding checks		-$1,280
Up to date Ending Cash Balance		$1,856
McDermott Company
Bank Reconciliation
At September 30
Updates to Company's Books
Ending Cash Balance per books		$1,130
Additions
Proceeds of note less collection fee		$920
Deductions
NSF check processing fee	-$170
Bank service charge	-$24	-$194
Up to date Ending Cash Balance		$1,856
Journal entries
Cash	$920
Notes Receivables		$920
Accounts Receivable	$170
Cash		$170
Service Charge Expense	$24
Cash		$24