Infinity Emporium Company received the monthly statement for its bank account, showing a balance of $66,744 on August 31. The balance in the Cash account in the company's accounting system at that date was $71,952. The company's accountant reviewed the statement and the company's accounting records and noted the following.

• 1.After comparing the cheques written by the company with those deducted from the bank account in August, the accountant determined that all six cheques (totalling $6,180) that had been outstanding at the end of July were processed by the bank in August. However, five cheques written in August, totalling $4,560, were outstanding on August 31.
• 2.A review of the deposits showed that a deposit made by the company on July 31 for $11,532 was recorded by the bank on August 1, and an August 31 deposit of $12,240 was recorded in the company's accounting system but had not yet been recorded by the bank.
• 3.The August bank statement also showed:
  • a service fee of $24
  • a customer's cheque in the amount of $204 that had been returned NSF
  • a bank loan payment of $900, which included interest of $130, that the bank had deducted automatically
  • a customer paid $3,600 account balance by electronic transfer.

Required

1. Prepare a bank reconciliation as at August 31. (Hint: Items that were outstanding last month but have been processed this month should no longer affect the bank reconciliation, since both the company and the bank now have them recorded.)
2. How much cash does Infinity Emporium actually have available as at August 31?
3. Explain how the adjusted (corrected) balance of cash, as determined by the bank reconciliation, could be higher than both the balance shown on the bank statement and the balance shown in the company's Cash account.

4. Prepare adjusting journal entries to record all the necessary adjustments to bring the Cash account to its correct balance.