Bank Reconciliation and Entries
The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $11,025. The bank statement indicated a balance of $12,910 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:
Checks outstanding totaled $4,650.
A deposit of $4,840, representing receipts of June 30, had been made too late to appear on the bank statement.
The bank collected $2,520 on a $2,390 note, including interest of $130.
A check for $660 returned with the statement had been incorrectly recorded by Pala Medical Co. as $600. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.
A check drawn for $40 had been erroneously charged by the bank as $400.
Bank service charges for June amounted to $25.
Required:
1. Prepare a bank reconciliation.
| Pala Medical Co. | ||
| Bank Reconciliation | ||
| June 30, 20Y1 | ||
| Cash balance according to bank statement | $ | |
| Adjustments: | ||
| $ | ||
| Total adjustments | ||
| Adjusted balance | $ | |
| Cash balance according to company's records | $ | |
| Adjustments: | ||
| $ | ||
| Total adjustments | ||
| Adjusted balance | $ | |
2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.
| a. 20Y1 June 30 | |||
| b. June 30 | |||
3. If a balance sheet were prepared for Pala
Medical Co. on June 30, 20Y1, what amount should be reported as
cash?
$
1.
| Pala Medical Co | ||
| Bank Reconciliation | ||
| June 30, 20Y1 | ||
| Cash balance according to bank statement | $ 12,910 | |
| Adjustments | ||
| Deduct: Outstanding checks | $ (4,650) | |
| Add: Deposit in transit | $ 4,840 | |
| Add: Bank error ($400-$40) | $ 360 | |
| Total adjustments | $ 550 | |
| Adjusted balance | $ 13,460 | |
| Cash balance according to company's records | $ 11,025 | |
| Adjustments | ||
| Add: Note collected by bank | $ 2,390 | |
| Add: Interest on note | $ 130 | |
| Less: Error in recording of on account payment | $ (60) | |
| Less: Bank service charges | $ (25) | |
| Total adjustments | $ 2,435 | |
| Asjusted balance | $ 13,460 | |
2.
| Cash | $ 2,520 | |
| Note receivable | $ 2,390 | |
| Interest income | $ 130 | |
| Accounts payable | $ 60 | |
| Cash | $ 60 | |
| Bank charges | $ 25 | |
| Cash | $ 25 |
3. Balance will show adjusted cash balance which is $13,460
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