P5-73B. (Learning Objective 3: Preparing a bank reconciliation and the related journal entries)

The October 31 bank statement of Drake Engineering Associates has just arrived from Carolina First Bank. To prepare the Drake bank reconciliation, you gather the following data:

a. Drake’s Cash account shows a balance of €7,506.86 on October 31.

b. The October 31 bank balance is €8,353.87.

c. The bank statement shows that Drake earned €15.65 of interest on its bank balance during October. This amount was added to Drake’s bank balance.

d. Drake pays utilities (€780) and insurance (€260) by EFT.

e. The following Drake checks did not clear the bank by October 31:

f. The bank statement includes a deposit of €925.20, collected on account by the bank on behalf of Drake.
g. The bank statement lists a €8.25 bank service charge.
h. On October 31, the Drake treasurer deposited €350.80, which will appear on the November bank statement.
i. The bank statement includes a €496.10 deposit that Drake did not make. The bank added €496.10 to Drake’s account for another company’s deposit.
j. The bank statement includes two charges for returned checks from customers.
One is a €185.50 check received from a customer with the imprint “Unauthorized Signature.”
The other is a nonsufficient funds check in the amount of €67.65 received from another customer.
Requirements 1. Prepare the bank reconciliation for Drake Engineering Associates.
2. Journalize the October 31 transactions needed to update Drake’s Cash account. Include an explanation for each entry.

Transcribed Image Text:

Check No. Amount 237 403.15 288 78.98 291 36.39 293 155.45 294 234.00 295 47.50 296 106.79