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Financial & Managerial Accounting
Found in: Page 314
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Shamara Systems most recently reconciled its bank balance on April 30 and reported two checks outstanding at that time, No. 1771 for $781 and No. 1780 for $1,425.90. The following information is available for its May 31, 2017, reconciliation

From the May 31 Bank Statement PREVIOUS BALANCE TOTAL CHECKS AND DEBITS TOTAL DEPOSITS AND CREDITS CURRENT BALANCE CHECKS AND DEBITS DEPOSITS AND CREDITS 18,290.70 Date 05/01 1771 05/04 No. Amount Date Amount 13,094.80 16,566.80 21,762.70 05/02 1783 05/14 05/04 1782 05/22 1784 05/18 05/26 05/11 05/25 05/25 1787 05/26 1785 05/29 1788 05/31 2,438.00 2,898.00 1,801.80 2,079.00 7,350.00 CM 781.00 382.50 1,285.50 431.80 NSF 8,032.50 63.90 654.00 14.00 SC

From Shamara Systems’s Accounting Records Cash Receipts Deposited Cash Date Debit May 4 2,438.00 14 2,898.00 22 1,801.80 26 2,079.00 31 2,727.30 11,944.10 Cash Disbursements Check Cash No. Credit 1782 1,285.50 1783 382.50 1784 1,449.60 1785 63.90 1786 353.10 1787 8,032.50 1788 644.00 1789 639.50 12,850.60 Cash Acct. No. 101 Date Explanation PR Debit Credit Balance Apr. 30 Balance 16,083.80 May 31 Total receipts R7 11,944.10 28,027.90 31 Total disbursements D8 12,850.60 15,177.30

Additional Information

Check No. 1788 is correctly drawn for $654 to pay for May utilities; however, the recordkeeper misread the amount and entered it in the accounting records with a debit to Utilities Expense and a credit to Cash for $644. The bank paid and deducted the correct amount. The NSF check shown in the statement was originally received from a customer, W. Sox, in payment of her account. The company has not yet recorded its return. The credit memorandum (CM) is from a $7,400 note that the bank collected for the company. The bank deducted a $50 collection expense and deposited the remainder in the company’s account. The collection and expense have not yet been recorded.

Required

2. Prepare the journal entries (in dollars and cents) to adjust the book balance of cash to the reconciled balance.

Answer

Collection expense is debited by $100; Notes Receivable credited by $7,500; Accounts Receivable debited by $431.8; Miscellaneous Expenses debited by $14, and utility Expenses debited by $10.

See the step by step solution

Step by Step Solution

Step-by-Step SolutionStep 1: Introduction to topic

Bank reconciliation statement- A bank reconciliation statement is ready to analyse the bank balance according to the entity's accounting records with the bank statement and adapt to any distinctions between the two balances, for example, bank charges charged by the bank, interest earned, etc.

Step 2: Showing Journal entries

Date

Transaction

Debit($)

Credit($)

May 31

Cash

7,400.00

Collection Expense

100.00

Note Receivable

7,500.00

To record note collection less fee.

31

Accounts Receivable

431.80

Cash

431.80

To charge account for NSF check plus fee.

31

Miscellaneous Expenses

14.00

Cash

14.00

To record bank service fee.

31

Utilities Expense

10.00

Cash

10.00

To correct an entry error.

Most popular questions for Business-studies Textbooks

The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017.

a. On July 31, the company’s Cash account has a $27,497 debit balance, but its July bank statement shows a $27,233 cash balance.

b. Check No. 3031 for $1,482 and Check No. 3040 for $558 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for $382 and Check No. 3069 for $2,281, both written in July, are not among the canceled checks on the July 31 statement.

c. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for $1,270 but was erroneously entered in the accounting records as $1,250.

d. The July bank statement shows the bank collected $8,000 cash on a noninterest-bearing note for Branch, deducted a $45 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.

e. The bank statement shows an $805 charge for a $795 NSF check plus a $10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.

f. The July statement shows a $25 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.

g. Branch’s July 31 daily cash receipts of $11,514 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.

Required

3. Assume that the July 31, 2017, bank reconciliation for this company is prepared and some items are treated incorrectly. For each of the following errors, explain the effect of the error on (i) the adjusted bank statement cash balance and (ii) the adjusted Cash account book balance.

a. The company’s unadjusted Cash account balance of $27,497 is listed on the reconciliation as $27,947.

b. The bank’s collection of the $8,000 note less the $45 collection fee is added to the bank statement cash balance on the reconciliation.

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