Question 3 Bank Reconciliation (14 marks) The Duluth Manufacturing Company has a

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Question 3 Bank Reconciliation (14 marks)

The Duluth Manufacturing Company has a business chequing account at the Bank of Ontario. The bank provides a bank statement and cancelled cheques once a month. The cut-off date is the last day of the month. The bank statement for the month of May is summarized as follows:

Balance, May 1, 2016                                                                         $32,120

            Deposits                                                                                 82,140

            Cheques processed                                                                 (78,433)

            Service charges                                                                            (80)

            NSF cheques                                                                            (2,187)

            Note payment collected by bank (includes $120 interest)         1,120

Balance May 31, 2016                                                                                    $34,680

The company’s general ledger cash account has a balance of $35,276 at the end of May. A review of the company records and the bank statement reveals the following:

1. Cash receipts not yet deposited total $2,965.

2. A deposit of $1,020 was made on May 31 that will not be credited to the company’s account until June.

3. All cheques written in April have been processed by the bank. Cheques written in May that have not been    processed by the bank total $5,536.

4. A cheque written for $1,790 was incorrectly recorded by the company as a $790 disbursement. The cheque was for payment to a supplier of raw materials.

Required:

a. Prepare the bank reconciliation for the month of May.

b. Prepare the journal entries required to adjust the general ledger cash account to actual.

Explanation / Answer

a.

b.

*In case interest has been accrued earlier, interest receivable will be credited. If not, interest revenue will be credited.

Duluth Manufacturing Company Bank Reconciliation Statement For the Month of May 2016 Balance as per bank statement 34680 Add: Receipts not deposited 2965 Deposit in transit 1020 3985 38665 Less: Outstanding checks 5536 Adjusted balance as per bank statement 33129 Balance as per books 35276 Add: Note collected by bank 1120 36396 Less: NSF check 2187 Bank service charge 80 Error in recording check 1000 3267 Adjusted balance as per books 33129

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