Bank Reconciliation and Entries The cash account for Pala Medical Co. at June 30

Question

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $11,025. The bank statement indicated a balance of $12,910 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

Checks outstanding totaled $4,650.

A deposit of $4,840, representing receipts of June 30, had been made too late to appear on the bank statement.

The bank collected $2,520 on a $2,390 note, including interest of $130.

A check for $660 returned with the statement had been incorrectly recorded by Pala Medical Co. as $600. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

A check drawn for $40 had been erroneously charged by the bank as $400.

Bank service charges for June amounted to $25.

Required:

1. Prepare a bank reconciliation.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?
$

Pala Medical Co. Bank Reconciliation June 30, 20Y1 Cash balance according to bank statement $ Adjustments: $ Total adjustments Adjusted balance $ Cash balance according to company's records $ Adjustments: $ Total adjustments Adjusted balance $

Explanation / Answer

1.

2.

3. Balance will show adjusted cash balance which is $13,460

Pala Medical Co Bank Reconciliation June 30, 20Y1 Cash balance according to bank statement $ 12,910 Adjustments Deduct: Outstanding checks $ (4,650) Add: Deposit in transit $   4,840 Add: Bank error ($400-$40) $       360 Total adjustments $        550 Adjusted balance $ 13,460 Cash balance according to company's records $ 11,025 Adjustments Add: Note collected by bank $   2,390 Add: Interest on note $       130 Less: Error in recording of on account payment $       (60) Less: Bank service charges $       (25) Total adjustments $    2,435 Asjusted balance $ 13,460

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