QUESTION 2 (16 marks) Part I (10 marks) Rainbow Company's December 31, 2019 bank statement showed a balance of $53,410. Rainbow's December 31, 2019 cash balance was $45,800. Shown below is the information needed to prepare a bank reconciliation for Rainbow Company. (1) Deposits in transit amounted to $5,500. (ii) Outstanding checks at the end of December totaled $12,200. (iii) The bank service fee for December was $100. (iv) A customer payment for a $1,500 receivable was collected by the bank but not yet recorded by Rainbow Company. (v) A check issued for the purchase of office supplies was wrongly recorded for $890 but appeared on the bank statement at $980. (vi) A check of $400 was returned with bank statement because of insufficient fund in the customer's account. Required: Prepare a bank reconciliation for Rainbow Company at December 31, 2019. Part II (6 marks) Preparing the bank reconciliation is considered to be an important step in the internal control process for cash. It is because the cash balances in the depositor's accounting records and its bank statement usually do not agree. Explain the causes of discrepancies for this situation with a specific example for each cause