Question

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,110. During May, the total cash deposited was $65,030 and checks written totaled $60,380. The bank statement indicated a balance of $22,050 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

1. 1. Checks outstanding totaled $9,820.
   2. A deposit of $8,000, representing receipts of May 31, had been made too late to appear on the bank statement.
   3. The bank had collected for Brentwood Bike Co. $4,230 on a note left for collection. The face of the note was $3,900.
   4. A check for $490 returned with the statement had been incorrectly charged by the bank as $940.
   5. A check for $410 returned with the statement had been recorded by Brentwood Bike Co. as $140. The check was for the payment of an obligation to Adkins Co. on account.
   6. Bank service charges for May amounted to $60.
   7. A check for $980 from Jennings Co. was returned by the bank because of insufficient funds.

   Instructions:

   1. Prepare a bank reconciliation as of May 31.

   Brentwood Bike Co.
   Bank Reconciliation
   May 31
   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. May 31
   b. May 31

   3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
   $

Answer 1

1.

Ending balance as per books = Cash balance per book as of May 1 + Total cash receipts for May -  Total amount of disbursements issued in May

= 13,110 + 65,030 - 60,380

= $17,760

Bank Reconciliation

Bank	Books
Balance, May 31	22,050	Balance, May 31	17,760
Add:		Add:
Deposit in transit	8,000
Correction of bank error	450	Bank collection of receivables and interest	4,230
Less:		Less:
Outstanding checks	-9,820	NSF check	-980
		Bank service charges	-60
		Correction of book error	-270
Adjusted bank balance	$20,680	Adjusted book balance	$20,680

2.

Journal

May 31	Cash	4,230
	Note receivable		3,900
	Interest revenue		330
May 31	Accounts receivable - Jennings Co.	980
	Bank service charges	60
	Accounts payable - Adkins Co.	270
	Cash		1,310

3.

Amount to be reported as cash = $20,680