a. Checks outstanding totaled $7,440.
b. A deposit of $2,880, representing receipts of August 31, had been made too late to appear on the bank statement.
c. The bank had collected for Fit Bike Co. $2,080 on a note left for collection. The face of the note was $2,000.
d. A check for $580 returned with the statement had been incorrectly charged by the bank as $850.
e. A check for $640 returned with the statement had been recorded by Fit Bike Co. as $460. The check was for the payment of an obligation to Brown Co. on account.
f. Bank service charges for August amounted to $20.
g. A check for $900 from Murdock Co. was returned by the bank due to insufficient funds.
Instructions
1. Prepare a bank reconciliation as of August 31.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Fit Bike Co. on August 31, 2014, what amount should be reported as cash?
Answers:
1.
FIT BIKE CO.
Bank Reconciliation
August 31, 2014
Cash balance according to bank statement $12,550
Add: Deposit of August 31, not recorded by bank $2,880
Bank error in charging check as $850 instead
of $580 270 3,150
$15,700
Deduct outstanding checks 7,440
Adjusted balance $ 8,260
Cash balance according to company’s records* $ 7,280
Add proceeds of note collected by bank, including
$80 interest 2,080
$ 9,360
Deduct: Check returned because of insufficient funds $ 900
Bank service charges 20
Error in recording check 180 1,100
Adjusted balance $ 8,260
* Cash balance, August 1……………………………………………… $ 12,190
Plus cash deposited in August……………………………………… 28,100
Less checks written in August……………………………………… (33,010)
Balance per company’s books, August 31………………………… $ 7,280
2.
Cash 2,080
Notes Receivable 2,000
Interest Revenue 80
Accounts Payable—Brown Co. 180
Accounts Receivable—Murdock Co. 900
Miscellaneous Expense 20
Cash 1,100
3. $8,260; the adjusted balance from the bank reconciliation should be reported
as cash on the August 31, 2014, balance sheet for Fit Bike Co.