The following information is available to reconcile Litner Co.\'s book balance o
ID: 2491310 • Letter: T
Question
The following information is available to reconcile Litner Co.'s book balance of cash with its bank statement cash balance as of April 30. The April 30 cash balance according to the accounting records is $78,356, and the bank statement cash balance for that date is $83,525.
a. The bank erroneously cleared a $480 check against the account in April that was not issued by Litner. The check documentation included with the bank statement indicates the check was actually issued by Lightning Co.
b. On April 30, the bank issued a credit memorandum for $53 interest earned on Litner's account.
c. When the April checks are compared with entries in the accounting records, it is found that Check No. 1828 had been correctly drawn for $1,530 to pay for advertising but was erroneously entered in the accounting records as $1,350
d. A credit memorandum indicates that the bank collected $10,000 cash on a note receivable for Litner, deducted a $30 collection fee, and credited the balance to the company's Cash account. Litner did not record this transaction before receiving the statement.
e. A debit memorandum of $895 is enclosed with the bank statement for an NSF check for $870 received from a customer. The bank assessed a $25 fee for processing it.
f. Litner's April 30 daily cash receipts of $5,102 were placed in the bank's night depository on that date, but do not appear on the April 30 bank statement.
g. Litner's April 30 cash disbursements journal indicates that Check No. 1837 for $584 and Check No. 1840 for $1,219 were both written and entered in the accounting records, but are not among the canceled checks.
1. Prepare the bank reconciliation for this company as of April 30.
2. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of April 30.
Explanation / Answer
Balance as per cash book 78,356
Add:
Note receivable (10,000 – 30) 9,970
Interest earned 53 10,023
Less:
Error (180)
NSF (870)
Fee processing ( 25) -1,075
Adjusted balance 87,304
Balance as per bank 83,525
Add: Error 480
Add:Deposit in transit 5,102
Less: Outstanding checks -1,803
Adjusted balance 87,304
Journal entries
Cash
9,970
Fees expense
30
To Note receivable
10,000
Cash
53
To interest earned
53
Advertising expense
180
To Cash
180
Account receivable
870
To Cash
870
Miscellaneous expense
25
To Cash
25
Balance as per cash book 78,356
Add:
Note receivable (10,000 – 30) 9,970
Interest earned 53 10,023
Less:
Error (180)
NSF (870)
Fee processing ( 25) -1,075
Adjusted balance 87,304
Balance as per bank 83,525
Add: Error 480
Add:Deposit in transit 5,102
Less: Outstanding checks -1,803
Adjusted balance 87,304
Journal entries
Cash
9,970
Fees expense
30
To Note receivable
10,000
Cash
53
To interest earned
53
Advertising expense
180
To Cash
180
Account receivable
870
To Cash
870
Miscellaneous expense
25
To Cash
25
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