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 $10,085. The bank statement indicated a balance of $11,420 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 $4,110.

A deposit of $4,280, representing receipts of June 30, had been made too late to appear on the bank statement.

The bank collected $2,230 on a $2,110 note, including interest of $120.

A check for $440 returned with the statement had been incorrectly recorded by Pala Medical Co. as $400. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

A check drawn for $70 had been erroneously charged by the bank as $700.

Bank service charges for June amounted to $55.

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: Deposit of June 30, not recorded by bank $ Bank error in charging check as $700 instead of $70 Outstanding checks Total adjustments Adjusted balance $ Cash balance according to company's records $ Adjustments: Proceeds of note collected by bank, including $120 interest $ Error in recording check. Bank service charges Total adjustments Adjusted balance $

Explanation / Answer

1 Pala Medical Co. Bank Reconciliation June 30, 20Y1 Cash balance according to bank statement 11420 Adjustments: Deposit of June 30, not recorded by bank 4280 Bank error in charging check as $700 instead of $70 630 Outstanding checks -4110 Total adjustments 800 Adjusted balance 12220 Cash balance according to company's records 10085 Adjustments: Proceeds of note collected by bank, including $120 interest 2230 Error in recording check. -40 Bank service charges -55 Total adjustments 2135 Adjusted balance 12220 2 Cash 2230 Notes Receivable 2110 Interest Revenue 120 Accounts Payable-Skyline Supply Co. 40 Miscellaneous Expense 55 Cash 95 3 Amount reported as cash $12220

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