Which of the reconciling items listed in Exercise 7-16 require an entry in the c
ID: 2488255 • Letter: W
Question
Which of the reconciling items listed in Exercise 7-16 require an entry in the company's accounts? The following data were accumulated for use in reconciling the hank account of Zek's Co. for May 2016: Cash balance according to the company's records at May 31. 2016, $22,110. Cash balance according to the bank statement at May 31, 2016, $29,650. Checks outstanding. $13,875. Deposit in transit, not recorded by bank. $6,770. A check for $50 in payment of an account was erroneously recorded in the check register as $500. bank debit memo for service charges, $15. Prepare a bank reconciliation, using the format shown in Exhibit 13. If the balance sheet were prepared for Zek's Co. on May 31, 2016, what amount should be reported for cash? Must a bank reconciliation always balance (reconcile)?
Explanation / Answer
a.
Zek's Co.
Bank Reconciliation
May 31, 2016
Cash balance according to bank statement
$ 29,650
Add: Deposit in transit on May 2016
$ 6,770
$ 36,420
Deduct: Outstanding checks
$ 13,875
Adjusted balance
$ 22,545
Cash balance according to company’s records
$ 22,110
Add: Error in recording Check as $500 instead of $50
$ 450
$ 22,560
Deduct: Bank service charges
$ 15
Adjusted balance
$ 22,545
b.
Amount to be reported as cash = $22,545
c.
Yes, the purpose of bank reconciliation is to reconcile the cash balance as per company’s records and as per bank statement. Hence to serve its purpose, it shall always reconcile.
Zek's Co.
Bank Reconciliation
May 31, 2016
Cash balance according to bank statement
$ 29,650
Add: Deposit in transit on May 2016
$ 6,770
$ 36,420
Deduct: Outstanding checks
$ 13,875
Adjusted balance
$ 22,545
Cash balance according to company’s records
$ 22,110
Add: Error in recording Check as $500 instead of $50
$ 450
$ 22,560
Deduct: Bank service charges
$ 15
Adjusted balance
$ 22,545
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