Question

The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

A.	Checks outstanding totaled $61,280.
B.	A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement.
C.	The bank collected $42,000 on a $40,000 note, including interest of $2,000.
D.	A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
E.	A check drawn for $240 had been erroneously charged by the bank as $420.
F.	Bank service charges for April amounted to $145.

	Instructions
1.	Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required.
2.	Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.
3.	If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

CHART OF ACCOUNTS

American Medical Co.

General Ledger

	ASSETS
110	Cash
111	Petty Cash
120	Accounts Receivable
131	Notes Receivable
141	Merchandise Inventory
145	Office Supplies
146	Store Supplies
151	Prepaid Insurance
181	Land
191	Office Equipment
192	Accumulated Depreciation-Office Equipment
193	Store Equipment
194	Accumulated Depreciation-Store Equipment

	LIABILITIES
211	Accounts Payable-Targhee Supply Co.
221	Notes Payable
222	Interest Payable
231	Salaries Payable
241	Sales Tax Payable

	EQUITY
310	Owner, Capital
311	Owner, Drawing
312	Income Summary

	REVENUE
410	Sales
610	Interest Revenue

	EXPENSES
510	Cost of Merchandise Sold
515	Credit Card Expense
516	Cash Short and Over
520	Salaries Expense
531	Advertising Expense
532	Delivery Expense
533	Insurance Expense
534	Office Supplies Expense
535	Rent Expense
536	Repairs Expense
537	Selling Expenses
538	Store Supplies Expense
561	Depreciation Expense-Office Equipment
562	Depreciation Expense-Store Equipment
590	Miscellaneous Expense
710	Interest Expense

Amount Descriptions

Bank error in charging check as $240 instead of $420

Bank error in charging check as $420 instead of $240

Bank service charges

Check for $420 returned because of insufficient funds

Deposit of April 30, not recorded by bank

Error in recording check

Error in recording April 30 deposit

Outstanding checks

Note and interest collected by bank

1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. Whenever there is more than one adjusting item in the bank portion of the reconciliation or the general ledger portion of the bank reconciliation, enter in the order presented in the instructions.

AMERICAN MEDICAL CO.

Bank Reconciliation

April 30

1	Cash balance according to bank statement
2
3
4
5
6	Adjusted balance
7
8	Cash balance according to company’s records
9
10
11
12
13	Adjusted balance

2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6

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

Answer 1

		Bank reconcilation
	Balance as per bank					388,600
	Add:
	Deposit in transit				42,500
	Erroneously charged by bank				180	42,680
						431,280
	less:
	Checks outstanding					61,280
	Adjusted balance as per bank					370,000
	Balance as per books					334,985
	Add:
	Note collected					42,000
						376,985
	less:
	Error in recording				6840
	Bank service charge				145	6985
	Adjusted cash balance					370,000
2)	Entries
	Accounting titles & explanation				Debit	Credit
	Cash				42,000
	note receivable					40,000
	interest income					2,000
	miscellaneous expense				145
	accounts payable				6,840
	cash					6,985
3)	Balance to be reported as cash			$370,000