Bank Reconciliation and Entries The cash account for Coastal Bike Co. at October

Question

Bank Reconciliation and Entries

The cash account for Coastal Bike Co. at October 1, 20Y9, indicated a balance of $13,590. During October, the total cash deposited was $67,610 and checks written totaled $62,780. The bank statement indicated a balance of $22,920 on October 31, 20Y9. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

Checks outstanding totaled $10,210.

A deposit of $8,320, representing receipts of October 31 had been made too late to appear on the bank statement.

The bank had collected for Coastal Bike Co. $4,390 on a note left for collection. The face of the note was $4,060.

A check for $270 returned with the statement had been incorrectly charged by the bank as $720.

A check for $520 returned with the statement had been recorded by Coastal Bike Co. as $250. The check was for the payment of an obligation to Rack Pro Co. on account.

Bank service charges for October amounted to $50.

A check for $1,010 from Bay View Condos was returned by the bank due to insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of October 31, 20Y9.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Coastal Bike Co. on October 31, 20Y9, what amount should be reported as cash?
$

Coastal Bike Co. Bank Reconciliation October 31, 20Y9 Cash balance according to bank statement $ Adjustments: $ Total adjustments Adjusted balance $ Cash balance according to company's records $ Adjustments: $ Total adjustments Adjusted balance $

Explanation / Answer

Bank reconciliation Bank balance 22920 Add Deposit in transit 8320 Error by bank 450 Total 31690 Less Outstanding checks 10210 Adjusted bank balance 21480 Cash balance 18420 Add Notes collected 4060 Interest revenue 330 4390 Less Error in recording 270 Service charges 50 Chq returned 1010 1330 Adjusted cash balance 21480 Journal entry Increase in cash 1 Cash 4390               Notes receivable 4060              Interest revenue 330 Decrease in cash 2 Accounts payable 270 Misc. expense 50 Accounts receivable 1010              Cash 1330 Misc. expense 144              Cash 144 3 Cash reported as 21480

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