The accountant for Anchor Corp. was preparing a bank reconciliation as of Februa

Question

The accountant for Anchor Corp. was preparing a bank reconciliation as of February 28, 2014. The following items were identified: Anchor's book balance $42,000 Outstanding checks 11300 Interest earned on checking accounts = 75 Customer's NSF check returned by the bank = 325 There was also an error in recording a customer's check (which was deposited). The check was recorded by Anchor as $427, but the correct amount of $101 was recorded by the bank. Anchor's adjusted cash balance at February 28, 2014 is: Your Answer:

Explanation / Answer

Particulars Amount (in$) Remarks for understanding Anchor's book balance 42,000 Add: outstanding cheque 11,300 Assuming these are cheques issued by Anchor, the cheque amount was deducted from book balance but since they are outstanding, the amount from bank balance has not been deducted. As such added back for reconciliation Add: interest earned on checking accounts 75 Interest on account is included in bank balance but required to be included in book balance Add: customer NSF cheque returned by bank 325 When cheque was issued, it was reduced from book balance but since cheque has been returned now, it is required to be added back Add: Error in customer cheque 326 More amount was deducted from book balance when cheque was issued hence extra amount added back now so as to match with bank balance Adjusted balance 54,026

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