a. Checks outstanding totaled $61,280.
b. A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement.
c. The bank collected $42,000 on a $40,000 note, including interest of $2,000.
d. A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
e. A check drawn for $240 had been erroneously charged by the bank as $420.
f. Bank service charges for April amounted to $145.
Instructions
1. Prepare a bank reconciliation.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?
Answer:
1.
Cash balance according to bank statement$388,600
Add: Deposit of April 30, not recorded by bank $42,500
Bank error in charging check as $420 instead
of $240180 42,680
Deduct outstanding checks61,280
Adjusted balance$370,000
Cash balance according to company’s records $334,985
Add note and interest collected by bank42,000
Deduct: Error in recording check$ 6,840
Bank service charges145 6,985
Adjusted balance$370,000
2.
Apr. 30 Cash42,000
Notes Receivable40,000
Interest Revenue2,000
30 Accounts Payable—Targhee Supply Co. 6,840
Miscellaneous Expense145
Cash6,985
3. $370,000; the adjusted balance from the bank reconciliation should be reported
as cash on the April 30 balance sheet for American Medical Co.