Bank Reconciliation and Entries

The cash account for American Medical Co. at April 30 indicated a balance of $14,395. The bank statement indicated a balance of $16,430 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $5,910.
2. A deposit of $6,160, representing receipts of April 30, had been made too late to appear on the bank statement.
3. The bank collected $3,200 on a $3,040 note, including interest of $160.
4. A check for $660 returned with the statement had been incorrectly recorded by American Medical Co. as $600. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
5. A check drawn for $90 had been erroneously charged by the bank as $900.
6. Bank service charges for April amounted to $45.

Required:

1. Prepare a bank reconciliation.

American Medical Co.
Bank Reconciliation
April 30
Cash balance according to bank statement		$
Add deposit of April 30, not recorded by bank	$
Add bank error in charging check as $900 instead of $90
Deduct outstanding checks
Adjusted balance		$
Cash balance according to company's records		$
Add note and interest collected by bank
Deduct error in recording check	$
Deduct bank service charges
Adjusted balance		$

Feedback

1. Set up two columns: one for the company cash account section and the other for the bank balance section. Determine the effect of the data on each column. Recall that when you are finished, the adjusted balances in the bank and company sections of the reconciliation must be equal. If not, an item has been overlooked or treated in error.

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. April 30	Cash
	Notes Receivable
	Interest Revenue
b. April 30	Accounts Payable-Targhee Supply Co.
	Miscellaneous Expense
	Cash

Feedback

2. Keep in mind that the company needs to journalize any adjusting items in the company section of the bank reconciliation, because these have not been previously recorded by the company. Debit memo items like bank service charges decrease Cash. Items that come from credit memos like collections of notes or interest by the bank increase cash. If the company made an error that overstates or understates cash in the company section, the journal adjustment would decrease Cash or increase Cash, respectively.

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