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Pool Supplies' May31, 2021, bank balance was $7,350. The company's cash balance at May31 was $8,210. Other information follows: 1.Outstanding cheques were #321 for $653,
Pool Supplies' May31, 2021, bank balance was $7,350. The company's cash balance at May31 was $8,210. Other information follows:
- 1.Outstanding cheques were #321 for $653, #371 for $238, #375 for $281, and #376 for $958. Cheque #321 was also outstanding on April 30 and was included on April's bank reconciliation.
- 2.Included with the statement were EFT deposits totalling $975 during Mayin payment of accounts receivable. These deposits have not been recorded by the company.
- 3.Cheque #370 was correctly written and paid by the bank for $488. The cheque had been issued to pay accounts payable and the company had recorded it as $408.
- 4.The bank statement showed a cheque #3723 for $600, which did not appear on the company's books. Investigation revealed that the cheque was actually issued by South Hampton Pizzeria and was charged to South Hampton Pool Supplies' account in error.
- 5.The bank returned an NSF cheque from a customer for $249.
- 6.The bank statement showed two debit memoranda for service charges: one for $17 related to the NSF cheque (see item [5] above) and one for $44 for monthly bank charges. The company's policy is to pass on all NSF processing fees to the customer.
- 7.The company's records showed the May15 deposit as $2,850. On the bank statement it was correctly recorded as $2,580. The deposit was for cash sales.
- 8.The company has a pre-authorized EFT payment for its monthly utilities for $225 scheduled for the last day of each month. As May31 was a Saturday this year, the bank posted it on June2. The company recorded it in May.
- 9.The $1,370 April 30 bank deposit was recorded on May1 on the bank statement. The May31 bank deposit of $2,930 was not included on the Maybank statement.
Instructions
a.Prepare bank reconciliation.
b.Prepare necessary adjusting journal entries.
c.What amount should be reported as cash on the May31 balance sheet?
Taking It Further
Explain how the bank reconciliation process can strengthen internal control.
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