Question

The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017.

On July 31, the company’s Cash account has a $27,497 debit balance, but its July bank statement shows a $27,233 cash balance.

Check No. 3031 for $1,482 and Check No. 3040 for $558 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $382 and Check No. 3069 for $2,281, both written in July, are not among the canceled checks on the July 31 statement.

In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,270 but was erroneously entered in the accounting records as $1,250.

The July bank statement shows the bank collected $8,000 cash on a noninterest-bearing note for Branch, deducted a $45 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.

The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.

The July statement shows a $25 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.

Branch’s July 31 daily cash receipts of $11,514 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.

Required

Prepare the bank reconciliation for this company as of July 31, 2017.

Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of July 31, 2017.

Check (1) Reconciled balance, $34,602; (2) Cr. Notes Receivable, $8,000

Analysis Component

Assume that the July 31, 2017, bank reconciliation for this company is prepared and some items are treated incorrectly. For each of the following errors, explain the effect of the error on (i) the adjusted bank statement cash balance and (ii) the adjusted Cash account book balance.

The company’s unadjusted Cash account balance of $27,497 is listed on the reconciliation as $27,947.

The bank’s collection of the $8,000 note less the $45 collection fee is added to the bank statement cash balance on the reconciliation.

Answer 1

SOLUTION

(A) Bank Reconciliation statement-

Particulars	Amount ($)	Particulars	Amount ($)
Bank statement balance	27,233	Book balance	27,497
Add: Deposit of July 31	11,514	Add: Proceeds of note less collection charge	7,955
	38,747		35,452
Deduct:		Deduct:
Check No. 3031	1,482	NSF check including fee	805
Check No. 3065	382	Service charge	25
Check No. 3069	2,281	Error (Check 3056)	20
Adjusted bank balance	34,602	Adjusted book balance	34,602

(B) Journal Entries-

S.No.	Account titles and Explanation	Debit ($)	Credit ($)
1.	No journal entry required
2.	No journal entry required
3.	Rent expense	20
	Cash		20
4.	Cash	7,955
	Collection expense	45
	Notes receivable		8,000
5.	Accounts receivable	805
	Cash		805
6.	Miscellaneous expenses	25
	Cash		25
7.	No journal entry required