Question

Chavez Company most recently reconciled its bank statement and book balances of cash on August 31 and it reported two checks outstanding, No. 5888 for $1,062 and No. 5893 for $493. Check No. 5893 was still outstanding as of September 30. The following information is available for its September 30 reconciliation.

From the September 30 Bank Statement

PREVIOUS BALANCE	TOTAL CHECKS AND DEBITS	TOTAL DEPOSITS AND CREDITS	CURRENT BALANCE
19,500	9,949	11,430	20,981

CHECKS AND DEBITS					DEPOSITS AND CREDITS
Date	No.	Amount			Date	Amount
09/03	5888	1,062			09/05	1,127
09/04	5902	771			09/12	2,265
09/07	5901	1,837			09/21	4,196
09/17		657	NSF		09/25	2,330
09/20	5905	954			09/30	12	IN
09/22	5903	436			09/30	1,500	CM
09/22	5904	2,090
09/28	5907	261
09/29	5909	1,881

From Chavez Company’s Accounting Records

Cash Receipts Deposited
Date		Cash Debit
Sept.	5		1,127
	12		2,265
	21		4,196
	25		2,330
	30		1,780
			11,698

Cash Payments
Check No.		Cash Credit
5901			1,837
5902			771
5903			436
5904			2,054
5905			954
5906			1,044
5907			261
5908			429
5909			1,881
			9,667

Cash			Acct. No. 101
Date	Explanation	PR	Debit	Credit	Balance
Aug. 31	Balance				17,945
Sept. 30	Total receipts	R12	11,698		29,643
30	Total payments	D23		9,667	19,976

Additional Information

1. (a) Check No. 5904 is correctly drawn for $2,090 to pay for computer equipment; however, the recordkeeper misread the amount and entered it in the accounting records with a debit to Computer Equipment and a credit to Cash of $2,054.
2. (b) The NSF check shown in the statement was originally received from a customer, S. Nilson, in payment of her account. Its return has not yet been recorded by the company.
3. (c) The credit memorandum (CM) is from the collection of a $1,500 note for Chavez Company by the bank. The collection is not yet recorded.

2. Prepare journal entries to adjust the book balance of cash to the reconciled balance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Solution:

Journal Entries - Chavez Company
S. No.	Particulars	Debit	Credit
1	No Entry
2	Cash A/c Dr	$12.00
	To Interest Revenue		$12.00
	(Being interest credited by bank)
3	Cash A/c Dr	$1,500.00
	To Notes Receivables		$1,500.00
	(Being note collected by bank and collection fee charged)
4	No Entry
5	Accounts Receivables Dr	$657.00
	To Cash		$657.00
	(Being cheque dishonored by bank)
6	Computer Equipment Dr	$36.00
	To Cash		$39.00
	(Being entry recorded with short amount now corrected)