Question

The following data has been gathered for Ludlow Inc. for the month ended November 30, 2018:

∙     The bank statement reveals a balance of $3,500

∙     The November 30, 2018, book balance was $1,300

∙     There was an EFT deposit of $1,000 on the bank statement for a rental property.

∙     The bookkeeper had erroneously recorded cheque #101 as $435 cheque instead of $453. The cheque was to settle accounts payable.

∙     The bank statement revealed $120 in service charges.

∙     Cheques #103, #105, #115 and #133 for $50, $885, $681 and $32 were not returned with the bank statement.

∙     A deposit made on November 17, 2018, for $350 did not appear on the bank statement.

∙     A deposit of $1,500 made on November 10 was erroneously credited to Taylor Enterprises account by the bank for $1,050.

∙     A bank debit memo indicated an NSF cheque from a customer for $100.

∙     There was an EFT receipt of $590 for interest income earned on investment.

Required

1. Prepare a bank reconciliation for Taylor Enterprises for November 30^th
2. Record the journal entries that Taylor Enterprises should record on November 30^th to update their Cash Account. Include any explanation for each entry.

Answer 1

a.

Bank reconciliation

Bank balance	3,500	Book balance	1,300
Deposit in transit	350	EFT deposit	1,000
Bank error	450	Interest revenue	590
Check oustandings :
Cheque no. 103 50		Book error	-18
Cheque no 105 885		Bank service charge	-120
Cheque no 115 681		NSF cheque	-100
Cheque no 133 32	-1,648
Adjusted bank balance	2,652	Adjusted book balance	2,652

b.

Journal

Date	Account Title and Explanation	Debit	Credit
	Cash	1,000
	Rent revenue		1,000
	(To record rent revenue)
	Accounts payable	18
	Cash		18
	(To record error in recording of accounts payable)
	Bank service charge	120
	Cash		120
	(To record bank service charge)
	Accounts receivable	100
	Cash		100
	(To record NSF cheque)
	Cash	590
	Interest revenue		590
	(To record interest revenue)