The Agricultural Genetics Company's Cash account in its general ledger reported a balance of $6,782 on May 31, 2017. The company's bank statement from Western Bank reported a balance of $6,405 on the same date.
A comparison of the details in the bank statement with the details in the Cash account revealed the following facts.
1. The bank statement included a debit memo of $40 for bank service charges.
2. Cash sales of $836 on May 18 were deposited in the bank. The journal entry to record the cash sales and the deposit slip to deposit the cash were incorrectly made out for $886. The bank correctly credited Agricultural Genetics Company for the correct amount.
3. The April 30 deposit of $2,190 was included on the May bank statement. The deposit had been placed in the
bank's night deposit vault on April 30.
4. The May 31 deposit of $2,416 was not included on the May bank statement. The deposit had been placed in the bank's night deposit vault on May 31.
5. Cheques #928 for $180 and #1014 for $236 were outstanding on April 30. Of these, #928 cleared the bank in May. All of the cheques written in May except for #1127 for $105 and #1195 for $235 had cleared the bank by May 31.
6. On May 18, the company issued cheque #1151 for $685 to L. Kingston, on account. The cheque, which cleared the bank in May, was incorrectly journalized and posted by Agricultural Genetics Company for $658.
7. A review of the bank statement revealed that Agricultural Genetics Company received $2,200 of electronic payments from customers on account in May. The bank had also credited the company's account with $80 of interest revenue on May 31. The bank charged a $20 collection fee. Agricultural Genetics Company had no
previous notice of these amounts.
8. On May 31, the bank statement showed an NSF charge of $680 for a cheque issued by Pete Dell, a customer, to Agricultural Genetics Company on account.
Instructions
(a) Prepare the bank reconciliation at May 31.
(b) Prepare the necessary adjusting entries at May 31.
Taking It Further
What would you say to the Agricultural Genetics Company's bank manager, who is concerned that the company's May 31 Cash account balance shows a different amount than the May 31 bank statement?