Question 3: Bank Reconciliation (10 marks)

Ling Corp., makes all payments by cheque and deposits all receipts intact. The following

information is available from the cash records:

April 30th

Bank Reconciliation

Balance per bank $7,060

Add: Deposits in transit 1,540

Deduct: Outstanding Cheques (1,840)

Balance per books $6,760

Per Bank Per Books

Balance on May 31 $8,760 $9,405

May deposits 4,960 5,710

May cheques 3,880 3,000

May note collected (not included in May deposits 1,060

May bank service charge 26

May NSF cheque from customer, returned by bank 349

(recorded by bank as a charge)

Required:

Noting that there is a timing lag between deposits and cheques being recorded in the

books and when they are recorded in the bank, determine the following:

a) Outstanding deposits at May 31

b) Oustanding cheques at May 31

c) Prepare May 31 bank reconciliation, in the format found in illustration 7A-1, showing

the balance per bank statement and the balance per books, as well as the correct cash

balance. (see format illustration 7A-1)