Question
The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,640. During May, the total cash deposited was $73,260 and checks
The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,640. During May, the total cash deposited was $73,260 and checks written totaled $68,020. The bank statement indicated a balance of $24,840 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
- Checks outstanding totaled $11,060.
- A deposit of $9,010, representing receipts of May 31, had been made too late to appear on the bank statement.
- The bank had collected for Brentwood Bike Co. $4,760 on a note left for collection. The face of the note was $4,400.
- A check for $490 returned with the statement had been incorrectly charged by the bank as $940.
- A check for $520 returned with the statement had been recorded by Brentwood Bike Co. as $250. The check was for the payment of an obligation to Adkins Co. on account.
- Bank service charges for May amounted to $30.
- A check for $1,100 from Jennings Co. was returned by the bank because of insufficient funds.
Instructions:
1. Prepare a bank reconciliation as of May 31.
Brentwood Bike Co. | ||
Bank Reconciliation | ||
May 31 | ||
Cash balance according to bank statement | $ | |
Add deposit of May 31, not recorded by bank | $ | |
Add bank error in charging check as $940 instead of $490 | ||
$ | ||
Deduct outstanding checks | ||
Adjusted balance | $ | |
Cash balance according to company's records | $ | |
Add note and interest collected by bank | ||
$ | ||
Deduct check returned because of insufficient funds | $ | |
Deduct bank service charges | ||
Deduct error in recording check | ||
Adjusted balance | $ |
2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.
a. May 31 | Cash | ||
Notes Receivable | |||
Interest Revenue | |||
b. May 31 | Accounts Payable-Adkins Co. | ||
Accounts Receivable-Jennings Co. | |||
Miscellaneous Expense | |||
Cash |
3. If a balance sheet is prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$
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