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Question P7-13

Intermediate Accounting (Kieso)
Found in: Page 375

Short Answer

(Bank Reconciliation and Adjusting Entries) The cash account of Aguilar Co. showed a ledger balance of $3,969.85 on June 30, 2017. The bank statement as of that date showed a balance of $4,150. Upon comparing the statement with the cash records, the following facts were determined.

1. There were bank service charges for June of $25.

2. A bank memo stated that Bao Dai’s note for $1,200 and interest of $36 had been collected on June 29, and the bank had made a charge of $5.50 on the collection. (No entry had been made on Aguilar’s books when Bao Dai’s note was sent to the bank for collection.)

3. Receipts for June 30 for $3,390 were not deposited until July 2.

4. Checks outstanding on June 30 totaled $2,136.05.

5. The bank had charged the Aguilar Co.’s account for a customer’s uncollectible check amounting to $253.20 on June 29.

6. A customer’s check for $90 (as payment on the customer’s Accounts Receivable) had been entered as $60 in the cash receipts journal by Aguilar on June 15.

7. Check no. 742 in the amount of $491 had been entered in the cash journal as $419, and check no. 747 in the amount of $58.20 had been entered as $582. Both checks had been issued to pay for purchases and were payments on Aguilar’s Accounts Payable.


(a) Prepare a bank reconciliation dated June 30, 2017, proceeding to a correct cash balance.

(b) Prepare any entries necessary to make the books correct and complete.

The correct cash balance is $5,403.95

See the step by step solution

Step by Step Solution

Definition of Bank Reconciliation

Statement prepared by a business entity for tallying the balance of cash as per books and the balance of cash as per bank passbook is known as bank reconciliation. Such differences exist because of timing differences in recording transactions.

Bank reconciliation statement


Amount $

Amount $

Balance as per bank passbook



Deposit in transit



Checks outstanding


Correct balance as per passbook


Balance as per cash book



Collection of note receivable


Error in posting


Error in recording check (check no: 747)



Bank charges


NSF checks charges


Error in recording check no: 742


Correct balance as per cashbook


Journal entries


Accounts and Explanation

Debit $

Credit $

30 June 2017



Collection of note receivable


Accounts receivable


Accounts payable


Interest revenue


31 June 2017

Accounts receivable


Accounts payable


Bank charges




(To record the deductible items not reported in the cash balance)

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