Question

Bank Reconciliation and Entries

The cash account for Stone Systems at July 31, 20Y5, indicated a balance of $17,750. The bank statement indicated a balance of $33,650 on July 31, 20Y5. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:

1. Checks outstanding totaled $17,865.
2. A deposit of $9,150, representing receipts of July 31, had been made too late to appear on the bank statement.
3. The bank had collected $6,095 on a note left for collection. The face of the note was $5,750.
4. 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.
5. A check drawn for $1,810 had been incorrectly charged by the bank as $1,180.
6. Bank service charges for July amounted to $80.

Required:

1. Prepare a bank reconciliation.

Stone Systems
Bank Reconciliation
July 31, 20Y5
Cash balance according to bank statement		$
	$
Total deductions
Adjusted balance		$
Cash balance according to company's records		$
Adjustments:
	$
Total additions
Adjusted balance		$

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. If an amount box does not require an entry, leave it blank.

20Y5 July 31
July 31

3. If a balance sheet were prepared for Stone Systems on July 31, 20Y5, what amount should be reported as cash?
$

Answer 1

Solution 1:

Stone Systems
Bank Reconciliation Statement
July'31
Particulars		Amount
Balance on bank statement		$33,650.00
Additions:
Outstanding Deposits	$9,150.00
Total Additions		$9,150.00
Deductions:
Outstanding checks	$17,865.00
Bank Error	$630.00
Total Deductions		$18,495.00
Adjusted bank balance		$24,305.00
Balance in books		$17,750.00
Additions:
Note Collection	$5,750.00
Interest	$345.00
Incorrect recording of check	$540.00
Total Additions		$6,635.00
Deductions:
Bank Service charges	$80.00
Total Deductions		$80.00
Adjusted book balance		$24,305.00

Solution 2:

Journal Entries - Stone Systems
Date	Particulars	Debit	Credit
31-Jul	Cash Dr	$6,635.00
	To Note receivables		$5,750.00
	To Interest revenue		$345.00
	To Accounts payable		$540.00
	(To record increase in cash)
31-Jul	Service fees expense Dr	$80.00
	To Cash		$80.00
	(To record decrease in cash)

Solution 3:

If a balance sheet were prepared for Stone Systems on July 31, 20Y5, amount should be reported as cash = $24,305