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Problem 7-9A Preparing a bank reconciliation and recording adjustments LO6 Stewart Recording Studio, owned by Ron Stewart, showed the following bank reconciliation at March 31:

Problem 7-9A Preparing a bank reconciliation and recording adjustments LO6

Stewart Recording Studio, owned by Ron Stewart, showed the following bank reconciliation at March 31:

Stewart Recording Studio
Bank Reconciliation
March 31, 2020
Bank statement balance $ 23,100 Book balance $ 32,345
Add:
Deposit of March 31 in transit 10,450
$ 33,550
Deduct:
Outstanding cheques:
#14 $ 870
#22 335 1,205
Adjusted bank balance $ 32,345 Adjusted book balance $ 32,345

Cash Acct. No. 101
Date Explanation PR Debit Credit Balance
2020
March 31 Balance 32,345
April 30 CR17 74,660 107,005
30 CD13 99,452 7,553

A list of deposits made and cheques written during April, taken from the Cash Receipts Journal and Cash Disbursements Journal, is shown below:

Deposits Made
April 7 $ 720
13 4,800
18 6,160
23 14,510
27 1,830
30 46,640
Total April Cash Receipts $ 74,660

Cheques Written
No. 23 $ 5,430
24 3,290
25 980
26 340
27 4,640
28 4,900
29 21,510
30 45,400
31 452
32 12,510
Total April Cash Disbursements $ 99,452

The following bank statement is available for April:

Bank Statement
To: Stewart Recording Studio April 30, 2020 Bank of Canada
Cheques/Charges Deposits/Credits Balance
23,100
#31 04/03 452 04/03 10,450 33,098
#28 04/07 9,400 04/07 720 24,418
#26 04/13 340 04/13 4,800 28,878
NSF 04/18 15,570 04/18 6,160 19,468
#24 04/23 3,290 04/23 14,510 30,688
#23 04/27 5,430 04/27 1,830 27,088
#29 04/30 21,510 04/30 130,000 135,578
PMT 04/30 17,420 118,158
INT 04/30 930 117,228
SC 04/30 195 117,033
NSF = Not Sufficient Funds SC = Service Charge PMT = Payment of Principal on the loan INT = Interest on Bank Loan

  • In reviewing cheques returned by the bank, the bookkeeper discovered that cheque #28, for delivery expense, was recorded in the Cash Disbursements Journal correctly as $4,900.
  • The NSF cheque for $15,570 was that of customer Oprah Winney, deposited in March.
  • On the bank statement, the payment for $17,420 is regarding a note payable.
  • There is also a deposit of $130,000 dated April 30. It is an investment made by the owner into the business (the bank transferred the funds electronically from the owners personal account to his business account, which is why it was not recorded in the Cash Receipts Journal).

Required: a. Prepare a bank reconciliation for Stewart Recording Studio at April 30.

b. Prepare the necessary journal entries to bring the General Ledger Cash account into agreement with the adjusted balance on the bank reconciliation.

  • 1

    Record to reinstate customer account.

  • 2

    Record the April bank service charges.

  • 3

    Record the April interest expense.

  • 4

    Record the April payment on note.

  • 5

    Record the investment by owner.

  • Note : = journal entry has been entered

Journal entry worksheet

  • Record to reinstate customer account.

Note: Enter debits before credits.

Date General Journal Debit Credit
Apr 30

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