Question

The Tarragon Trading Company's bank statement for the month of November showed a balance per bank of $5,000. The company's Cash account in the general ledger had a balance of $3,440 at 30 November. Other information is as follows:

(1)    The bank statement shows a debit memorandum for $50 for cheque printing charges.

(2)    The total amount of cheques still outstanding at 30 November amounted to $2,800.

(3)    Cash receipts for 30 November recorded on the company's books were $3,100 but this amount does not appear on the bank statement.

(4)    The bank included a credit memorandum for $1,460, which represents collection of a customer's note by the bank for the company; principal amount of the note was $1,400, bank charge was $20 and interest was $80. Interest has not been accrued.

(5)    Cash sales of $4,900 on 12 November were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $4,090. The bank credited Tarragon Trading for the correct amount.

(6)    The bank returned a dishonoured cheque from a customer for $360.

Required

(a) Prepare a bank reconciliation for the Tarragon Trading Company at 30 November.

(b) Prepare any adjusting entries necessary as a result of the bank reconciliation.

Answer 1

a)

Bank Reconciliation

Bank	Books
Balance, November 30	5,000	Balance, November 30	3,440
Add:		Add:
Deposit in transit	3,100	Correction of book error	810
		Bank collection of receivables	1,460
Less:		Less:
Outstanding checks	- 2,800	NSF check	- 360
		Bank service charges	- 50
Adjusted bank balance	5,300	Adjusted book balance	5,300

b)

Journal

November 30	Bank service charges	50
	Cash		50
November 30	Cash	1,460
	Bank charges	20
	Note receivable		1,400
	Interest revenue		80
November 30	Cash	810
	Sales		810
November 30	Accounts receivable	360
	Cash		360