Bank Reconciliation and Entries The cash account for Brentwood Bike Co. at May 1

Question

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $14,890. During May, the total cash deposited was $75,330 and checks written totaled $69,940. The bank statement indicated a balance of $25,540 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

Checks outstanding totaled $11,370.

A deposit of $9,270, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,900 on a note left for collection. The face of the note was $4,520.

A check for $360 returned with the statement had been incorrectly charged by the bank as $630.

A check for $410 returned with the statement had been recorded by Brentwood Bike Co. as $140. The check was for the payment of an obligation to Adkins Co. on account.

Bank service charges for May amounted to $70.

A check for $1,130 from Jennings Co. was returned by the bank because of insufficient funds.

Instructions:

1. Prepare a bank reconciliation as of May 31.

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 Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Brentwood Bike Co. Bank Reconciliation May 31 Cash balance according to bank statement $ $ $ Adjusted balance $ Cash balance according to company's records $ $ $ Adjusted balance $

Explanation / Answer

bank reconciliation Statement: Cash balance as per bank statement: 25540 Adjustment: Less: Checks outstanding -11370 Add: Deposits in transit 9270 Add: Error in check recording 270 Adjusted balance in Bank Statement 23710 Balance as per Books 20280 (14890+75330-69940) Adjustment: Add: Notes collected along with int. 4900 Less: Error in recoding the issued check -270 Less: Bank Service charges -70 Less: NSF check -1130 Adjusted balance as per books 23710 Journal entries: Accounts title and explanations Debit $ Credit $ Cash Account Dr. 4900     Notes receivable 4520     Interest revenue 380 Accounts payable-Adkins co. Dr. 270        Cash Account 270 Misc. Expense Account Dr. 70       Cash Account 70 Accounts receivable-Jennings Dr. 1130         Cash Account 1130 Balance to be shown in balance sheet: $ 23710

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