On August 31, 2019, the balance in the checkbook and the Cash account of the Dry
ID: 2539532 • Letter: O
Question
On August 31, 2019, the balance in the checkbook and the Cash account of the Dry Creek Bed and Breakfast was $12,981. The balance shown on the bank statement on the same date was $13,897.
Notes
The firms records indicate that a $1,500 deposit dated August 30 and a $701 deposit dated August 31 do not appear on the bank statement.
A service charge of $8 and a debit memorandum of $270 covering an NSF check have not yet been entered in the firm’s records. (The check was issued by Art Corts, a credit customer.)
The following checks were issued but have not yet been paid by the bank:
A credit memorandum shows that the bank collected a $2,094 note receivable and interest of $53 for the firm. These amounts have not yet been entered in the firm’s records.
Required:
Prepare a bank reconciliation statement for the firm as of August 31.
Record general journal entries for items on the bank reconciliation statement that must be journalized.
Analyze:
What effect did the journal entries recorded as a result of the bank reconciliation have on the fundamental accounting equation?
Explanation / Answer
Answer 1. Dry Creek Bed Bank Recocilation Aug 31, 2019 Bank's Cash Balance Company's Cash Balance Per Bank Statement 13,897.00 Per General Ledger 12,981.00 Add: Add: Deposit not recorded by bank Notes Collected by Bank Directly 2,094.00 30-Aug 1,500.00 Interest on Notes Collected 53.00 2,147.00 31-Aug 701.00 2,201.00 16,098.00 15,128.00 Less: Less: Outstanding Checks Bank Service Charges (8.00) Check # 712 (110.00) NSF Check (270.00) (278.00) Check # 713 (125.00) Check # 716 (238.00) Check # 736 (577.00) Check # 739 (78.00) Check # 741 (120.00) (1,248.00) Bank Balance after Reconcilation 14,850.00 Company Balance per Reconcilation 14,850.00 Answer 2. Journal Entry Date Particulars Dr. Amt. Cr. Amt. 1 Cash 2,147.00 Notes Receivable 2,094.00 Interest Revenue 53.00 (To Record Note collected by bank) 2 Accounts Receivable 270.00 Cash 270.00 (To record NSF Check) 3 Bank Charges 8.00 Cash 8.00 (To record bank service charge) No entry is Recorded for 1 Deposit in Transit 2 Outstanding Checks 3 Bank errors Answer 3. Accounting Equation: S.no. Assets = Liabilities + Equity 1 Cash 2,147.00 = - Interest Revenue 53.00 Notes Receivable (2,094.00) = = 2 Accounts Receivable 270.00 = - - Cash (270.00) = 3 Cash (8.00) Bank Charges (8.00)
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