Bank Reconciliation On May 31, the Cash in Bank account of Wallace Company, a sole proprietership, had a balance of $6,734.75 On that date, the bank statement indicated a balance of $8,726.85. A comparison of returned checks and bank advices revealed the following:

Deposits in transit May 31 totaled $2,979.96

Outstanding checks May 31 totaled $3,397.08

The bank added to the account $30.58 of interest income earned by Wallace during May.

The bank collected a $2,640 note receivable for Wallace and charged a $22 collection fee. Both items appear on the bank statement.

Bank service charges in addition to the collection fee, not yet recorded were $22.00.

Included with the returned checks is a memo indicating that L. Ryder's check for $754.60 had been returned NSF. Ryder, a customer, had sent the check to pay an account of $770.00 less a discount of 2%

Wallace Company incorrectly recorded the payment of an account payable as $759.00 the check was for $1,056.00.

Required a. Prepare a bank reconciliation for Wallace Company at May 31. b. Prepare the journal entry (or entries) necessary to bring the Cash in Bank account into agreement with the reconciled cash balance on the bank reconciliation.

a.

WALLACE COMPANY Bank Reconciliation May 31
AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksCollection of noteService chargeReconciled cash balance		$Answer		Balance from general ledger				$Answer
Add:	AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksCollection of noteService chargeReconciled cash balance	Answer		Add:	AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksCollection of noteService chargeReconciled cash balance		Answer
				Less:	Collection Fee		Answer	Answer
				Add: Interest Income				Answer
	Subtotal	Answer			Subtotal			Answer
Less:	AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksCollection of noteService chargeReconciled cash balance	Answer		Less:	AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksCollection of noteService chargeReconciled cash balance		Answer
				Less:	NSF Check		Answer
				Less:	Check for $Answer
					recorded as $Answer		Answer
								Answer
AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksCollection of noteService chargeReconciled cash balance		$Answer		AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksCollection of noteService chargeReconciled cash balance				$Answer

b.

GENERAL JOURNAL
Date		Description	Debit	Credit
May	31	AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	$Answer	$Answer
		Miscellaneous Expense	Answer	Answer
		AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		To record collection of note by bank, less collection fee.
	31	AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		To record interest earned on bank account in May.
	31	AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		To record service charges.
	31	AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		Cash in Bank	Answer	Answer
		To reclassify NSF check as an account receivable.
	31	AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		AnswerAccounts payableAccounts ReceivableCash in BankInterest IncomeMiscellaneous ExpenseNotes ReceivableRepairs ExpenseSales Discounts	Answer	Answer
		To correct error in recording check.