Question

The cash account for Stone Systems at July 31, 2016, indicated a balance of $17,750. The bank statement indicated a balance of $33,650 on July 31, 2016. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:

A.	Checks outstanding totaled $17,865.
B.	A deposit of $9,150, representing receipts of July 31, had been made too late to appear on the bank statement.
C.	The bank had collected $6,095 on a note left for collection. The face of the note was $5,750.
D.	A check for $390 returned with the statement had been incorrectly recorded by Stone Systems as $930. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account.
E.	A check drawn for $1,810 had been incorrectly charged by the bank as $1,180.
F.	Bank service charges for July amounted to $80.

Instructions

1.

Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required.

2.

Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.

3.

If a balance sheet were prepared for Stone Systems on July 31, 2016, what amount should be reported as cash?

1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. Whenever there is more than one adjusting item in the bank portion of the reconciliation or the general ledger portion of the bank reconciliation, enter in the order presented in the instructions.

STONE SYSTEMS

Bank Reconciliation

July 31, 2016

1	Cash balance according to bank statement
2
3
4
5
6	Adjusted balance
7
8	Cash balance according to company’s records
9
10
11
12
13	Adjusted balance

2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6

3. If a balance sheet were prepared for Stone Systems on July 31, 2016, what amount should be reported as cash?

Answer 1

SOLUTION

(A) Bank Reconciliation statement

Particulars	Amount ($)	Amount ($)
Cash balance according to bank statement		33,650
Add: Deposit of July 31, not recorded by bank		9,150
		42,800
Deduct: Outstanding checks	17,865
Bank error in charging check as $1,180 instead of $1,810	630	(18,495)
Adjusted balance		24,305
Cash balance according to company's records		17,750
Add: Proceeds of note collected by bank	6,095
Error in recording check	540	6,635
		24,385
Deduct: Bank service charges		(80)
Adjusted balance		24,305

(B) Journal Entries-

S.No.	Account title and Explanation	Debit ($)	Credit ($)
1.	Cash	6,635
	Notes Receivable		6,095
	Accounts Payable - Holland Co.		540
2.	Miscellaneous Expense	80
	Cash		80

(C) If a balance sheet were prepared for Stone Systems on July 31, 2016, $24,305.00 should be reported as cash.