The Lerner Company reconciles its one bank account on a monthly basis. The compa
ID: 2596837 • Letter: T
Question
The Lerner Company reconciles its one bank account on a monthly basis. The company follows the procedure of reconciling the balance as reported on the bank statement and the balance per books to a corrected balance. The corrected balance appears on the balance sheet. The facts stated below are provided in preparing a bank reconciliation for the month of December. Decide which of the five answer choices best indicates how each fact should be handled in the December 31st bank reconciliation. Answer choices: (A) An addition to the balance per bank. (B) A deduction from the balance per bank. (C) An addition to the balance per books. (D) A deduction from the balance per books. (E) Should not appear in the reconciliation. 1) Accompanying the December bank statement was a cancelled check for $90 of Lexner Company which had been charged to Lerner Company's account. 2) A deposit of $380 made on November 30th was recorded by the bank on December 1st Lerner Company discovered that a December check recorded in the cash payments journal as $286 was actually drawn for $268. This check was cleared by the bank in December. 3) The bookkeeper of Lerner Company had recorded a $90 check received from a customer (J. Andrews) on December 29th as $190 4)Explanation / Answer
1) A) An addition to the balance per bank, since the bank has debited such cheque which has been cancelled by its customer. Error in bank statement which has to be corrected.
2) A) An addition to the balance per bank, since the bank has nor credited such deposit on the date of actual deposit.
3) C) An addition to balance as per books, since there has been an excess payment of $18 (286-268) recorded in the book, which needs to be added back.
4) D) A deduction from balance as per books, since there has been an excess receipt being recorded as $190 instead of $90, thus $100 has to be deducted from the balance as per books.
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