On August 31, 2019, the balance in the checkbook and the Cash account of the Dry

Question

On August 31, 2019, the balance in the checkbook and the Cash account of the Dry Creek Bed and Breakfast was $12,362. The balance shown on the bank statement on the same date was $13,242. Notes a. The firm's records indicate that a $1,540 deposit dated August 30 and a $710 deposit dated August 31 do not appear on the bank statement. b. A service charge of $8 and a debit memorandum of $365 covering an NSF check have not yet been entered in the firm's records. (The check was issued by Art Corts, a credit customer.) c. The following checks were issued but have not yet been paid by the bank Check 712, $119 Check 713, $134 Check 716, $247 Check 736, $586 Check 739, $ 87 Check 741, $129 d. A credit memorandum shows that the bank collected a $2,129 note receivable and interest of $72 for the firm. These amounts have not yet been entered in the firm's records. Required 1. Prepare a bank reconciliation statement for the firm as of August 31. 2. Record general journal entries for items on the bank reconciliation statement that must be journalized. Analyze: What effect did the journal entries recorded as a result of the bank reconciliation have on the fundamental accounting equation?

Explanation / Answer

Bank Reconciliation Statement: Balance as per bank statement 13242 Additions Deposit in transit 2250 Subtotal 15492 Deductions: Outstanding checks 1302 Adjusted balance as per Bank statement 14,190 Balance as per Cash book 12362 Additions: Collection of note receivable 2201 Subtotal 14563 Less: Deduction NSF check 365 Service charges 8 373 Adjusted balance as per Cash book 14,190 Journal entries: 1. For deposit in transit: NO entry 2. For outstanding checks: No entry 3. Collection of Notes receivable with interest Cash account Dr. 2201      Notes receivabble Account 2129      Interest revenue 72 4. For NSF check: Accounts receivable Account Dr. 365       Cash account 365 5. For service charges Misc expense account Dr. 8       Cash account 8 Rreq c: Net effect increase by $1828

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