otected View SALONID P7.12A -- Prepare bank reconciliation and adjusting entries. Enable Editing so D E Sally's Sweet Shop's August 31 bank balance was $11,135. The company's cash balance at August 31 was $10,805. Other information follows: F G . M N O P 3 1. Outstanding cheques were #421 for $165, #485 for $265, #492 for $175, and #494 for $1,165. Cheque #421 was also outstanding last month on July 31 and was included on July's bank reconciliation 2. Included with the statement were EFT deposits totalling $1,735 during August in payment of accounts receivable. These deposits have not been recorded by the company. 3. Cheque #490 was correctly written and paid by the bank for $206. The cheque had been issued to pay accounts payable and the company had recorded it as $266. 4. The bank statement showed a cheque #4832 for $795, which did not appear on the company's books. Investigation revealed that the cheque was actually issued by Wally's Water Works and was charged to Sally's Sweet Shop's account in error. 5. The bank returned an NSF cheque from a customer for $385. 6. The bank statement showed two debit memoranda for service charges: one for $25 related to the NSF cheque (see item [5] above) and one for $45 for cheque printing charges. The company's policy is to pass on all NSF processing fees to the custom 7. The company's records showed the August 15 deposit as $4,690. On the bank statement, it was correctly recorded as $4,990. The deposit was for cash sales. 8. The company has a pre-authorized EFT payment for its monthly utilities for $245 scheduled for the last day of each month. As August 31 was a Sunday this year, the bank posted it on September 1. The company recorded it in August 9. The August 31 bank deposit of $2,530 was not included on the August bank statement. 10 11 12 13 74 15 Instructions 16 a) Prepare a bank reconciliation. 17 18 econciliation. 0 1 Unadjusted bank balance Add: -2. 23 24 25 Less: 26 27 Adjusted bank balance $ Unadjusted cash balance Add: 28 29 30 31 32 33 34 35 36 Less: Adjusted cash balance 37 $ 38 b) Prepare any necessary adjusting journal entries. 39 40 Date Account Titles and Explanation 41 Debit 42 Credit 43 44 45 46 Adjusted cash balance $ 37 38 b) Prepare any necessary adjusting journal entries. 39 40 Date Account Titles and Explanation 41 Debit Credit 42 43 44 45 46 47 48 49 50 51 52 c) What amount should be reported as cash on the August 31 balance sheet? 53 54 55 56 8 89 90 9UXUS 57 Taking It Further 58 Why is it important that the person who prepares the bank reconciliation shouldn't also be able to write and sign cheques? 59 In what ways would that increase the opportunity for employee fraud? 60