The October 31 bank statement of Spooky Halloween Costumes Ltd. (SHC) has just a
ID: 2459138 • Letter: T
Question
The October 31 bank statement of Spooky Halloween Costumes Ltd. (SHC) has just arrived from TD Bank. To prepare the SHC bank reconciliation, you gather the following data:
1. SHC’s Cash account shows a balance of $2,256.14 on October 31.
2. The October 31 bank balance is $4,023.05.
3. The bank statement shows that SHC earned $38.19 of interest on its bank balance during October. This amount was added to SHC’s bank balance.
4. SHC pays utilities of $250 and insurance of $100 by EFT.
5. The following SHC cheques did not clear the bank by October 31:
Cheque #
Amount
237
$46.10
288
141.00
291
578.05
293
11.87
294
609.51
295
8.88
296
101.63
6. The bank statement includes a donation of $850, electronically deposited to the bank for SHC.
7. The bank statement lists a $10.50 bank service charge.
8. On October 31, the SHC treasurer deposited $16.15, which will appear on the November bank statement.
9. The bank statement includes a $300 deposit that SHC did not make. The bank added $300 to SHC’s account for another company’s deposit.
10. The bank statement includes two charges for returned cheques from donors. One is a $395 cheque received from a donor with the imprint “Unauthorized Signature.” The other is a nonsufficient funds cheque in the amount of $146.67 received from a client.
Requirements
1. Prepare the bank reconciliation for SHC.
2. Journalize the October 31 transactions needed to update SHC’s Cash account. You do not need to include an explanation for each entry.
Cheque #
Amount
237
$46.10
288
141.00
291
578.05
293
11.87
294
609.51
295
8.88
296
101.63
Explanation / Answer
Answer:
1) Reconciliation Statement for the month October
2) Journal Entries to update the Cash A/c..
Transaction # 3: The bank statement shows that SHC earned $38.19 of interest on its bank balance during October. This amount was added to SHC’s bank balance
Cash A/c Dr. $38.19
To Interest Revenue $38.19
Transaction # 4: SHC pays utilities of $250 and insurance of $100 by EFT
Utilities Expenses Dr. $250
Insurance Expenses Dr. $100
To Cash A/c $350
Transaction 5: cheques did not clear the bank by October 31
Cash A/c ……Dr. $1,497.04
To Cheques Presented for Clearance $1,497.04
Transaction 6: The bank statement includes a donation of $850, electronically deposited to the bank for SHC
Cash A/c Dr. $850
To Donation Received $850
Transaction 7: The bank statement lists a $10.50 bank service charge
Service Charges Dr. $10.50
To Cash A/c $10.50
Transaction 9: bank statement includes a $300 deposit that SHC did not make. The bank added $300 to SHC’s account for another company’s deposit.
Cash A/c Dr. $ 300
Receivables Account $300
Transaction 10: The bank statement includes two charges for returned cheques from donors. One is a $395 cheque received from a donor with the imprint “Unauthorized Signature.” The other is a nonsufficient funds cheque in the amount of $146.67 received from a client
Bank Charges A/c Dr. $541.67
To Cash A/c $541.67
Spooky Halloween Costumes Ltd. (SHC) Bank Reconciliation Statement for the month October Particulars Amount Cash Account Balance as on Oct 31 $2,256.14 Add: Interest Earned (Added to bank balance but not added to Cash Balance) $38.19 Less: Utilities of $250 and insurance of $100 paid by EFT (Since EFT only reflect in Bank Statement, it is not deducted from Cash Balance. Now deduct it to reconcile the account) ($350.00) Add: Check deposited but not clear in bank (Since it is not reduced in bank statement & at the time of deposition in bank we reduced this amount in cash balance now we need to add this amount in cash balance) $1,497.04 Add: Donation electronically received in bank $850.00 Less: Bank Service Charges ($10.50) Less: Treasurer deposited $16.15, which will appear on the November bank statement ($16.15) Add: Another Company's deposit $300 added in bank but not added in cash balance $300.00 Less: Charges for returned cheque (deducted from bank balance but not cash balance) ($395 + $146.67) ($541.67) Bank Balance as on Oct 31 $4,023.05Related Questions
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