The cash account for Stone Systems at July 31, 2016, indicated a balance of $17,

Question

The cash account for Stone Systems at July 31, 2016, indicated a balance of $17,750. The bank statement indicated a balance of $33,650 on July 31, 2016. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:

If a balance sheet were prepared for Stone Systems on July 31, 2016, what amount should be reported as cash?

1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. Whenever there is more than one adjusting item in the bank portion of the reconciliation or the general ledger portion of the bank reconciliation, enter in the order presented in the instructions.

STONE SYSTEMS

Bank Reconciliation

July 31, 2016

1

Cash balance according to bank statement

2

3

4

5

6

Adjusted balance

7

8

Cash balance according to company’s records

9

10

11

12

13

Adjusted balance

2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

1

2

3

4

5

6

3. If a balance sheet were prepared for Stone Systems on July 31, 2016, what amount should be reported as cash?

A. Checks outstanding totaled $17,865. B. A deposit of $9,150, representing receipts of July 31, had been made too late to appear on the bank statement. C. The bank had collected $6,095 on a note left for collection. The face of the note was $5,750. D. A check for $390 returned with the statement had been incorrectly recorded by Stone Systems as $930. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account. E. A check drawn for $1,810 had been incorrectly charged by the bank as $1,180. F. Bank service charges for July amounted to $80.

Explanation / Answer

SOLUTION

(A) Bank Reconciliation statement

(B) Journal Entries-

(C) If a balance sheet were prepared for Stone Systems on July 31, 2016, $24,305.00 should be reported as cash.

Particulars Amount ($) Amount ($) Cash balance according to bank statement 33,650 Add: Deposit of July 31, not recorded by bank 9,150 42,800 Deduct: Outstanding checks 17,865   Bank error in charging check as $1,180 instead of $1,810 630 (18,495) Adjusted balance 24,305 Cash balance according to company's records 17,750 Add: Proceeds of note collected by bank 6,095   Error in recording check 540 6,635 24,385 Deduct: Bank service charges (80) Adjusted balance 24,305

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