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Horngren'S Financial And Managerial Accounting
Found in: Page 425

Short Answer

Preparing a bank reconciliation and journal entries

The October 31 bank statement of Wyndham’s Healthcare has just arrived from State

Bank. To prepare the bank reconciliation, you gather the following data:

a. The October 31 bank balance is $6,290.

b. The bank statement includes two charges for NSF checks from customers. One is

for $370 (#1), and the other is for $180 (#2).

c. The following Wyndham’s checks are outstanding at October 31:

Check No. Amount

237 $ 120

288 140

291 570

294 570

295 30

296 110

d. Wyndham’s collects from a few customers by EFT. The October bank statement

lists a $2,200 EFT deposit for a collection on account.

e. The bank statement includes two special deposits that Wyndham’s hasn’t recorded

yet: $900 for dividend revenue and $100 for the interest revenue Wyndham’s

earned on its bank balance during October.

f. The bank statement lists a $80 subtraction for the bank service charge.

g. On October 31, the Wyndham’s treasurer deposited $270, but this deposit does

does not appear on the bank statement.

h. The bank statement includes a $750 deduction for a check drawn by Multi-State

Freight Company. Wyndham’s notified the bank of this bank error.

i. Wyndham’s Cash account shows a balance of $3,200 on October 31.

Requirements

1. Prepare the bank reconciliation for Wyndham’s Healthcare at October 31, 2018.

2. Journalize any required entries from the bank reconciliation. Include an explanation for each entry.

The adjusted balance of the bank reconciliation statement is $4,770.

See the step by step solution

Step by Step Solution

Step 1: Definition of bank reconciliation statement

The bank reconciliation statement is the statement prepared to remove the errors of bank balance and cash book balance.

Step 2: Bank reconciliation statement

Wyndham’s Healthcare
Bank Reconciliation Statement
October 31
Bank SideBook Side

Particulars

Amount

Particulars

Amount

Balance as per bank

$6,290

Balance as per cash book

$3,200

Add:

Add:

Outstanding Deposits

$270

Dividend Revenue

$900

Bank Error

$750

Interest Revenue

$100

EFT Collection

$2,200

Deductions:

Deductions:

Outstanding Checks

$1,540

NSF Cheque

$560

Service Charge

$80

Adjusted Balance on October 31

$5,770

Adjusted Balance on October 31

$5,770

In the bank reconciliation statement, the opening balance as per bank and cashbook is $6,290 and $3,200. You add the outstanding deposit and deduct the outstanding checks to find the adjusted balance on the bank side. You add rent receipts and note collection to the book balance on the book side. After this, you deduct the NSF check, incorrect recording of the check, EFT payment, and service charge. After making these adjustments on both sides, you got the adjusted balance of $5,770.

Step 3: Journal Entries

Date

Particulars

Debit

Credit

October 31

Cash

$900

Dividend Revenue

$900

(To record the dividend revenue)

October 31

Cash

$100

Interest Revenue

$100

(To record the interest revenue)

October 31

Accounts Receivable

$550

Cash

$550

(To record NSF Check)

October 31

Cash

$2,200

Accounts Receivable

$2,200

(To record the receipt of account receivable)

October 31

Bank Charges

$80

Cash

$80

(To record the payment of bank charges)

The first and the second entry is passed to the dividend and interest revenue.

The third entry is passed on recording the NSF checks.

The fourth entry is passed on recording the collection accounts receivable.

The fifth entry is passed on recording the payment of bank charges.

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