The cash book of Pepper Company shows $26,100 at end of December 2021.

The statement from Athens Bank on 31 December showed a balance of $25,930. A comparison of the bank statement with Cash account revealed the following facts.

i. The bank collected a note receivable of $2200 for Pepper on December 15.

ii. The December 31 receipts were deposits in a night deposit vault on December 31. These deposits were recorded by the bank in January 2021.

iii. Check outstanding on December 31 totaled $1210.

iv. On December 31, the bank statement showed an NSF charge of $680 for a check received by the company from A Quinn, a customer, on account.

v. Peppers accountant found that there was a bank service charge of $200 after receiving the bank statement of December 2021.

Required:

a) Prepare a bank reconciliation as of December 31.

b) Write the necessary adjusting entries after bank reconciliation

Solution.

a) Pepper Company

Bank Reconciliations 31 December 2021

Cash balance per bank statement	$25,930
Add: Deposit in transit (note ii)
Less: Outstanding checks (note iii)
Adjusted cash balance	$27,420

Cash balance per cash book	$26,100
Add: Collection of note receivable (note i)
Less: NSF check (note iv) Bank service charge (note v)
Adjusted cash balance	$27,420

b) Adjusting entries at end of December 2020

Dec 31

The cash book of Pepper Company shows $26,100 at end of December 2021.

The statement from Athens Bank on 31 December showed a balance of $25,930. A comparison of the bank statement with Cash account revealed the following facts.

i. The bank collected a note receivable of $2200 for Pepper on December 15.

ii. The December 31 receipts were deposits in a night deposit vault on December 31. These deposits were recorded by the bank in January 2021.

iii. Check outstanding on December 31 totaled $1210.

iv. On December 31, the bank statement showed an NSF charge of $680 for a check received by the company from A Quinn, a customer, on account.

v. Peppers accountant found that there was a bank service charge of $200 after receiving the bank statement of December 2021.

Required:

a) Prepare a bank reconciliation as of December 31.

b) Write the necessary adjusting entries after bank reconciliation

Solution.

a) Pepper Company

Bank Reconciliations 31 December 2021

Cash balance per bank statement	$25,930
Add: Deposit in transit (note ii)
Less: Outstanding checks (note iii)
Adjusted cash balance	$27,420

Cash balance per cash book	$26,100
Add: Collection of note receivable (note i)
Less: NSF check (note iv) Bank service charge (note v)
Adjusted cash balance	$27,420

b) Adjusting entries at end of December 2020

Dec 31