PR 8-4A Bank reconciliation and entries The cash account for Brentwood Bike Co.

Question

PR 8-4A Bank reconciliation and entries The cash account for Brentwood Bike Co. at May 1 indicated a balance of $34,250. During May, the total cash deposited was $140,300, and checks written totaled $138,880. The bank state- ment indicated a balance of $43,525 on May 31. Comparing the bank statement, the checks, and the accompanying memos with the records revealed the following reconciling items. a. Checks outstanding totaled $6,440. b. A deposit of $1,850 representing receipts of May 31 had been made too late to appear OBJ. 5 c. The bank had collected for Brentwood Bike Co. $5,250 on a note left for collection d. A check for $390 returned with the statement had been incorrectly charged by the e. A check for $210 returned with the statement had been recorded by Brentwood Bike on the bank statement. The face of the note was $5,000. bank as $930. Co. as $120. The check was for the payment of an obligation to Adkins Co. on account. Continued)

Explanation / Answer

1.

W.Note

2.

3. $39,475; the adjusted balance from the bank reconciliation should be reported as cash on the May 31 balance sheet for Brentwood Bike Co.

BRENTWOOD BIKE CO. Bank Reconciliation May 31 Cash balance according to bank statement 43525 Add: Deposit of May 31, not recorded by bank 1850 Add: Bank error in charging check as $930 instead of $390 540 Deduct Outstanding checks 6440 Adjusted balance 39475 Cash balance according to company’s records* 35670 Add : Note and interest collected by bank 5250 Deduct: Check returned because of insufficient funds 1325 Deduct: Bank service charges 30 Deduct: Error in recording check 90 Adjusted balance 39475

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