The bank statement for the checking account of Management Systems Inc. (MSI) sho

Question

The bank statement for the checking account of Management Systems Inc. (MSI) showed a December 31, 2018, balance of $14,632.12. Information that might be useful in preparing a bank reconciliation is as follows a. Outstanding checks were $1,320.25 b. The December 31, 2018, cash receipts of $575 were not deposited in the bank until January 2, 2019 C. One check written in payment of rent for $246 was correctly recorded by the bank but was recorded by MSI as a $264 disbursement. d. In accordance with prior authorization, the bank withdrew $450 directly from the checking account as payment on a mortgage note payable. The interest portion of that payment was $350. MSI has made no entry to record the automatic payment. e. Bank service charges of $14 were listed on the bank statement. f. A deposit of $875 was recorded by the bank on December 13, but it did not belong to MSI. The deposit should have been made to g. The bank statement included a charge of $85 for an NSF check. The check was returned with the bank statement and the company h. MSI maintains a $200 petty cash fund that was appropriately reimbursed at the end of December the checking account of MIS, Inc. will seek payment from the customer i. According to instructions from MSI on December 30, the bank withdrew $10,000 from the account and purchased U.S. Treasury bills for MSI. MSI recorded the transaction in its books on December 31 when it received notice from the bank. Half of the Treasury bills mature in two months and the other half in six months Required 1. Prepare a bank reconciliation for the MSI checking account at December 31, 2018. You will have to compute the balance per books 2. Prepare any necessary adjusting journal entries indicated 3. What amount would MSI report as cash and cash equivalents in the current asset section of the December 31, 2018, balance sheet?

Explanation / Answer

Bank Reconciliation 31-Dec Bank statement Company's Book Bank statement Balance $14,632.12 Additions:   Deposit of Dec 31 $575 ending balance per cash account 13542.87 575 (13011.87-18+549) Deductions $15,207 Add Outstanding checks 1320.25 Error made by company for rent 18 18 Deposit error to the account 875 2195.25 (264-246) Deductions Adjusted Bank Balance $13,011.87 NSF 85 Mortgage payment -notes payable 450 service charges 14 549 Adjusted Book balance (same as bank reconciliation amt) $13,011.87 ans 2 Accounts Title Dr Cr Cash 18 Rent expenses 18 Accounts receivable 85 Interest expenses 350 Notes payable 100 Bank service charges 14 Cash 549 ans 3 Checking account $13,011.87 Add; Petty cah 200 Add: Treasury bills (10000*50%) 5000 Total cash and cash equivalents $18,211.87

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