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Question E7-24

Expert-verified
Intermediate Accounting (Kieso)
Found in: Page 369

Short Answer

(Bank Reconciliation and Adjusting Entries) Angela Lansbury Company deposits all receipts and makes all payments by check. The following information is available from the cash records.

June 30 Bank Reconciliation Statement

Balance per bank

$7,000

Add: Deposit in transit

1,540

Less: Outstanding checks

(2,000)

Balance per books

$6,540

Month of July Results

Per Bank

Per Books

Balance July 31

$8,650

$9,250

July Deposits

5,000

5,810

July Checks

4,000

3,100

July note collected (not included in July deposits)

1,000

-

July bank service charge

15

-

July NSF check from a customer, returned by the bank (recorded by bank as a charge)

335

-

Instructions

(a) Prepare a bank reconciliation going from balance per bank and balance per book to correct cash balance.

(b) Prepare the general journal entry or entries to correct the Cash account.

Answer

The correct balance is $9,900.

See the step by step solution

Step by Step Solution

Definition of Bank Reconciliation Statement

A bank reconciliation statement can be defined as the statement prepared by the business entity to correct the balance of the cash account of the business entity.

Bank Reconciliation Statement

Particular

Amount $

Balance as per bank passbook

$8,650

Add:

Deposit in Transit

2,350

Less:

Outstanding checks

(1,100)

Correct Bank balance

$9,900

Balance as per book

$9,250

Add:

Collection of notes

1,000

Less:

Service charge

(15)

NSF checks

(335)

Correct cash balance

$9,900

Working note:

Calculation of deposit in transit:

Particular

Amount $

Deposit as per book

$5,810

Less: deposit as per bank

(5,000)

810

Add: Deposit in transit as per reconciliation

1,540

Deposit in transit

$2,350

Calculation of outstanding checks:

Particular

Amount $

Checks issued as per book

$3,100

Less: Checks cleared by bank in July

(4,000)

Add: Outstanding checks in BRS

2,000

Outstanding checks

$1,100

Journal Entries for Correcting the Cash Account

Date

Accounts and Explanation

Debit $

Credit $

30 June

Cash

$650

Office Expense

$15

Accounts receivables

$335

Note receivable

$1,000

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