Question

Sky Company is unable to reconcile the bank balance at January 31. Sky's reconciliation is as follows.

Cash balance per bank $5,300

Add: NSF check 1,570

Less: Bank service charge 35

Adjusted balance per bank $6,835

Cash balance per books $5,705

Less: Deposits in transit 750

Add: Outstanding checks 1,950

Adjusted balance per books $6,905

Instructions

(a) Prepare a correct bank reconciliation.

(b) Journalize the entries required by the reconciliation.