Question

Bank Reconciliation and Entries

The cash account for American Medical Co. at April 30 indicated a balance of $9,710. The bank statement indicated a balance of $11,390 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $4,100.
2. A deposit of $4,270, representing receipts of April 30, had been made too late to appear on the bank statement.
3. The bank collected $2,220 on a $2,110 note, including interest of $110.
4. A check for $440 returned with the statement had been incorrectly recorded by American Medical Co. as $400. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
5. A check drawn for $30 had been erroneously charged by the bank as $300.
6. Bank service charges for April amounted to $60.

Required:

1. Prepare a bank reconciliation.

American Medical Co.
Bank Reconciliation
April 30
Cash balance according to bank statement		$
	$
Adjusted balance		$
Cash balance according to company's records		$
	$
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. April 30
b. April 30

3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?
$

Answer 1

1
American Medical Co.
Bank Reconciliation
April 30
Cash balance according to bank statement		11390
Add deposit of April 30, not recorded by bank	4270
Add bank error in charging check as $300 instead of $30	270	4540
Deduct outstanding checks		4100
Adjusted balance		11830
Cash balance according to company's records		9710
Add note and interest collected by bank		2220
Deduct error in recording check	40
Deduct bank service charges	60	100
Adjusted balance		11830

2
a. April 30	Cash	2220
	Notes Receivable		2110
	Interest Revenue		110
b. April 30	Accounts Payable-Targhee Supply Co.	40
	Miscellaneous Expense	60
	Cash		100

3

Amount reported as cash = $ 11830