On October 31, 2018, Damon Company’s general ledger shows a checking account bal

Question

On October 31, 2018, Damon Company’s general ledger shows a checking account balance of $8,454. The company’s cash receipts for the month total $74,700, of which $71,390 has been deposited in the bank. In addition, the company has written checks for $72,524, of which $71,324 has been processed by the bank.

The bank statement reveals an ending balance of $13,114 and includes the following items not yet recorded by Damon: bank service fees of $340, note receivable collected by bank of $6,900, and interest earned on the account balance plus from the note of $1,270. After closer inspection, Damon realizes that the bank incorrectly charged the company’s account $1,060 for an automatic withdrawal that should have been charged to another customer’s account. The bank agrees to the error.

Required:

DAMON COMPANY Bank Reconciliation October 31, 2018 Bank's Cash Balance Company's Cash Balance $ 13,114 Per general ledger 3,310Note received (1,200)f Interest earned 1,060 Service fees $8,454 6,900 1,270 (340) Per bank statement Deposits outstanding Checks outstanding Bank error Bank balance per reconciliation 16.264 16,284 Company balance per reconciliation Company balance per 16,284

Explanation / Answer

1. Bank Reconciliation

2. Necessary Journal Entries

Damon Company Bank Reconciliation October 31, 2018 Bank's cash balance Company's cash balance Per Bank Statement 13,114 Per general Ledger 8,454 Add: Deposit in transit (74,700-71,390) 3,310 Less: bank Service fees -340 Less: Outstanding checks (72,524-71,324) -1,200 Add: Note receivable collected by bank 6,900 Add: incorrect charge 1,060 Add: Interest on Note and balance 1,270 Bank balance as per reconciliation 16,284 Company balance per reconciliation 16,284

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