PART I

You are auditing cash in bank for Pandemic Supply Corp. for the fiscal year ended March 31. The client has not prepared the March 31 bank reconciliation. After the brief discussion with the owner, you agree to prepare the reconciliation with assistance from one of Pandemic Supplys clerk. You have obtained the following information:

	General Ledger	Bank Statement
Beginning balances	#36,500	$ 41,050
Deposits		17,800
Cash receipts journal	22,450
Cheques cleared by bank		(23,688)
Cash disbursements journal	(43,738)
March bank service charge		(150)
Note paid directly by bank		(11,470)
NSF cheque not honored by bank		(912)
Ending balances	$15,212	$22,630
	Feb. 29 Bank Reconciliation: Information in General Ledger and Bank Statement
Balance per bank		$ 41,050
Deposits in transit		400
Outstanding cheques		4,950
Balance per books		36,500

In addition, the following information is obtained:

1. Cheques clearing that were outstanding on February 29 totaled $ 4,950
2. Cheques clearing that were recorded in the March disbursement journal totaled $18,738
3. A cheque for $1,500 cleared the bank but had not been recorded in the cash disbursements journal. It was for an acquisition of inventory. Pandemic Supply uses the periodic inventory method
4. A Cheque for $1,100 was charged to Pandemic Supply but had been written on an associated companys bank account
5. Deposits included $400 from February and $17,400 for March
6. The bank withdrew from Pandemic Supplys account a nonsufficient funds (NDF) customer cheque totalling $912. The credit manager concluded that the customer intentionally closed its account and that the owner had left the city. The account was turned over to a collection agency
7. The Bank deducted $11,100 plus interest from Pandemic Supplys account for a loan made by the bank under an agreement signed four months ago. The note payable was recorded at $11,100 on Pandemic Supplys books.

Required

1. Prepare a bank reconciliation that shows both the (1) unadjusted and adjusted balances per the general ledger and (2) unadjusted and adjusted balance per bank
2. Identify the nature of adjustment requirement.