The cash account for Capstone Medical Co. at November 30, 2016, indicated a bala

Question

The cash account for Capstone Medical Co. at November 30, 2016, indicated a balance of $89,620. The bank statement indicated a balance of $128,660 on November 30, 2016. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

3. If a balance sheet were prepared for Capstone Medical Co. on November 30, 2016, what amount should be reported as cash?

$____________

A. Checks outstanding totaled $32,700. B. A deposit of $18,550, representing receipts of November 30, had been made too late to appear on the bank statement. C. The bank collected $26,750 on a $25,000 note, including interest of $1,750. D. A check for $1,500 returned with the statement had been incorrectly recorded by Capstone Medical Co. as $150. The check was for the payment of an obligation to ABC Supply Co. for a purchase on account. E. A check drawn for $490 had been erroneously charged by the bank as $940. F. Bank service charges for November amounted to $60.

Explanation / Answer

1)

Bank reconciliation statement is as follows:

Particulars

Amount

Amount

Cash balance according to bank statement

128,660

Add:

Deposit of Nov,30 not recorded by bank

18,550

Error in charging a check as $940 instead of 490

450

19,000

Deduct:

Outstanding checks

-32,700

Adjusted balance

114,960

Cash balance according to company's records

89,620

Add:

Proceeds of note collected by bank, including $1750 interest

26,750

Deduct:

Error in recording check (1500-150)

-1,350

Bank service charges

-60

-1,410

Adjusted balance

114,960

2)

The journal entries are as follows:

S.no.

Account title and equation

Debit

Credit

1

Cash

26750

Notes receivable

25000

Interest revenue

1750

(To record the notes receivable)

2

Miscellaneous Administrative Expense

60

Accounts Payable - Capstone Medical Co

1350

Cash

1410

(To record the payment)

3)

The amount to be reported on Nov 30, 2016, balance sheet is $114,960.

Particulars

Amount

Amount

Cash balance according to bank statement

128,660

Add:

Deposit of Nov,30 not recorded by bank

18,550

Error in charging a check as $940 instead of 490

450

19,000

Deduct:

Outstanding checks

-32,700

Adjusted balance

114,960

Cash balance according to company's records

89,620

Add:

Proceeds of note collected by bank, including $1750 interest

26,750

Deduct:

Error in recording check (1500-150)

-1,350

Bank service charges

-60

-1,410

Adjusted balance

114,960

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