Question

Bank Reconciliation and Entries The cash account for Brentwood Bike Co. at May 1 indicated a...

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. 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?
    $

Homework Answers

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

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