On August 31, 20X1, the balance in the checkbook and the Cash account of the Dry Creek Bed and Breakfast was $12,246. The balance shown on the bank statement on the same date was $13,177. Notes

1. The firms records indicate that a $1,410 deposit dated August 30 and a $697 deposit dated August 31 do not appear on the bank statement.
2. A service charge of $9 and a debit memorandum of $300 covering an NSF check have not yet been entered in the firms records. (The check was issued by Art Corts, a credit customer.)
3. The following checks were issued but have not yet been paid by the bank:

Check 712,	$	106
Check 713,	$	121
Check 716,	$	234
Check 736,	$	573
Check 739,	$	74
Check 741,	$	116

1. A credit memorandum shows that the bank collected a $2,064 note receivable and interest of $59 for the firm. These amounts have not yet been entered in the firms records.

Required:

1. Prepare a bank reconciliation statement for the firm as of August 31.
2. Record general journal entries for items on the bank reconciliation statement that must be journalized. Date the entries August 31, 20X1.

Analyze: What effect did the journal entries recorded as a result of the bank reconciliation have on the fundamental accounting equation?

Prepare a bank reconciliation statement for the firm as of August 31.

DRY CREEK BED AND BREAKFAST
Bank Reconciliation Statement
August 31, 20X1
Balance on bank statement
Additions:
		0
		$0
Deductions for outstanding checks:
Total deductions		0
Adjusted bank balance		$0
Balance in books
Additions:
		0
		$0
Deductions:
		0
Adjusted book balance		$0

1

Record the deposit in transit.

2

Record the outstanding checks.

3

Record the bank service fee.

4

Record the note collected by the bank plus interest.

5

Record the returned check.

What effect did the journal entries recorded as a result of the bank reconciliation have on the fundamental accounting equation?

Net effect

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