Harrison Company maintains a checking account at the First National City Bank. T

Question

Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2018 bank statement included the following information:

The company’s general ledger account had a balance of $39,938 at the end of July. Deposits outstanding totaled $6,900 and all checks written by the company were processed by the bank except for those totaling $8,480. In addition, a $2,600 July deposit from a credit customer was recorded as a $260 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $60 disbursement was incorrectly processed by the bank as a $600 disbursement.

Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Balance, July 1, 2018 $ 56,428 Deposits 180,100 Checks processed (193,210 ) Service charges (60 ) NSF checks (1,500 ) Monthly loan payment deducted directly by bank from account
(includes $520 in interest) (3,620 ) Balance, July 31, 2018 $ 38,138

Explanation / Answer

Bank Balance to Corrected Balance Balance per bank statement 38138 Add: Deposits outstanding 6900 Less: Checks outstanding -8480 Add: Bank error in recording check 540 Corrected cash balance 37098 Book Balance to Corrected Balance Balance per books 39938 Add: Error in recording cash receipt 2340 Less: Service charges -60 Less: NSF checks -1500 Less: Automatic monthly loan payment -3620 Corrected cash balance 37098 2 Cash 2340      Accounts receivable 2340 Miscellaneous expense 60 Accounts receivable 1500 Interest expense 520 Note payable 3100        Cash 5180

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