At the end of October Brown Co. received the following bank statement and report
ID: 2460418 • Letter: A
Question
At the end of October Brown Co. received the following bank statement and reported the following information in its general ledger regarding cash transactions.
Bank Statement – October
Description
Transaction
Posting date
Amount
Comment
Cash balance, October 1
1,000
Charges: check #254
Oct.12
(170)
Check#256
Oct.20
(350)
NSF check
Oct.22
(70)
Bad check in deposit posted Oct. 16, was a customer’s payment on account
Service charge
Oct.16
300
Deposits: Night Deposit
Oct. 16
300
Interest Paid
Oct.31
10
The bank account pays interest on the average balance.
Cash Balance, October 31
700
Brown Co. General Ledger Cash activity – October
Description
Transaction
Posting date
Amount
Comment
Cash balance, October 1
1,000
Debits: Check#254
Oct.10
(170)
Check#255
Oct.12
(240)
Check#256
Oct.18
(530)
Correct check amount = $350, this was a payment to settle a vendor account (liability).
Credits: Deposit
Oct. 15
300
Placed in bank night depositary at 9:00 p.m.
Deposit
Oct.31
600
Placed in bank night depositary at 9:00 p.m.
Cash balance, October 31
960
21. When Brown Co. prepared the cash reconciliation which reconciles the general ledger(book) balance of cash and computes the correct (adjust) amount of cash, how will the interest earned on the bank account be used?
a. The interest earned will be added to the book amount of cash to compute the correct amount of cash.
b. The interest earned will be subtracted from the book amount of cash to compute the correct amount of cash.
c. The interest earned will not be used in the reconciliation for the book amount of cash.
d. Interest earned is typically used to adjust the bank amount of cash.
e. None of the above
22. When Brown Co. Prepared the cash reconciliation which reconciles the general ledger (book) balance of cash and computes the correct (adjust) amount of cash, how will the October 31 bank deposit of $600 be used?
a. The bank deposit will be added to the book amount of cash to compute the correct amount of cash.
b. The bank deposit will be subtracted from the book amount of cash to compute the correct amount of cash.
c. The bank deposit will not be used in the reconciliation for the book amount of cash.
d. A bank deposit not yet recorded by the bank will be subtracted from the bank amount of cash to compute the correct amount of cash.
e. none of the above.
23. What is the correct (adjust) amount of cash at month end?
a. $900 b. $940. c. $1,060 d. $1,070 e. none of the above
24. The journal entry to correct the recording of check #256 in the company's accounting records would be:
Journal entry
a.
No entry is needed to correct the company’s records
b.
Cash 180
Accounts payable 180
c.
Miscellaneous expense 180
Accounts payable 180
d.
Miscellaneous expense 180
Cash 180
e.
None of the above
Bank Statement – October
Description
Transaction
Posting date
Amount
Comment
Cash balance, October 1
1,000
Charges: check #254
Oct.12
(170)
Check#256
Oct.20
(350)
NSF check
Oct.22
(70)
Bad check in deposit posted Oct. 16, was a customer’s payment on account
Service charge
Oct.16
300
Deposits: Night Deposit
Oct. 16
300
Interest Paid
Oct.31
10
The bank account pays interest on the average balance.
Cash Balance, October 31
700
Explanation / Answer
21. When Brown Co. prepared the cash reconciliation which reconciles the general ledger(book) balance of cash and computes the correct (adjust) amount of cash, how will the interest earned on the bank account be used?
a. The interest earned will be added to the book amount of cash to compute the correct amount of cash
When Brown Co. Prepared the cash reconciliation which reconciles the general ledger (book) balance of cash and computes the correct (adjust) amount of cash, how will the October 31 bank deposit of $600 be used
d. A bank deposit not yet recorded by the bank will be subtracted from the bank amount of cash to compute the correct amount of cash.
24. The journal entry to correct the recording of check #256 in the company's accounting records would be:
Cash 180
Accounts payable 180
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