P7-3A

On May 31, 2017, Terrell Ltd. had a cash balance per book of 6,781.50. The bank statement from Home Town Bank on that date showed a balance of 6,824.60. A comparison of the statement with the Cash account revealed the following facts.

1. The statement included a debit memo of 60 for the printing of additional company checks.

2. Cash sales of 836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for 886.15. The bank credited Terrell Company for the correct amount.

3. Outstanding checks at May 31 totaled 276.25. Deposits in transit were 1,916.15.

4. On May 18, the company issued check No. 1181 for 685 to Barry Dietz on the account. The check, which cleared the bank in May, was incorrectly journalized and posted by Terrell for 658.

5. A 3,000 note receivable was collected by the bank for Terrell on May 31 plus 80 interest. The bank charged a collection fee of 20. No interest has been accrued on the note.

6. Included with the canceled checks was a check issued by Bridges plc to Jon Newton for 600 that was incorrectly charged to Terrell by the bank.

7. On May 31, the bank statement showed an NSF charge of 640 for a check issued by Sandy Grifton, a customer, to Terrell on the account.

Instructions

a) Prepare the bank reconciliation on May 31, 2017.

(b) Prepare the necessary adjusting entries for Terrell on May 31, 2017