Question

Bank Reconciliation

On July 31, Arthur Company’s Cash in Bank account had a balance of $8,112.62.
On that date, the bank statement indicated a balance of $10,170.62.
A comparison of returned checks and bank advices revealed the following:

1. Deposits in transit July 31 amounted to $3,316.12.
2. Outstanding checks July 31 totaled $1,251.12.
3. The bank erroneously charged a $215.00 check of Solomon Company against the Arthur bank account.
4. A $15 bank service charge has not yet been recorded by Arthur Company.
5. Arthur neglected to record $4,000.00 borrowed from the bank on a ten percent six-month note. The bank statement shows the $4,000.00 as a deposit.
6. Included with the returned checks is a memo indicating that J. Martin’s check for $610.00 had been returned NSF. Martin, a customer, had sent the check to pay an account of $660.00 less a $50 discount.
7. Arthur Company recorded a $107.00 payment for repairs as $1,070.00.

Required

a. Prepare a bank reconciliation for Arthur Company at July 31.

b. Prepare the journal entry (or entries) necessary to bring the Cash in Bank account into agreement with the reconciled cash balance on the bank reconciliation.

Note: Do not round answers - enter using two decimal places, when needed.

ARTHUR COMPANY Bank Reconciliation July 31
AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksProceeds of noteService chargeReconciled cash balance		Answer		Balance from general ledger				Answer
Add:	AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksProceeds of noteService chargeReconciled cash balance	Answer		Add:	AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksProceeds of noteService chargeReconciled cash balance			Answer
Add:	Bank error- Solomon Company check				Answer
	charged against Arthur Company's account	Answer			Answer			Answer
		Answer						Answer
Less:	AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksProceeds of noteService chargeReconciled cash balance	Answer		Less:	AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksProceeds of noteService chargeReconciled cash balance			Answer
				Less:	NSF Check			Answer
AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksProceeds of noteService chargeReconciled cash balance		Answer		AnswerDeposits not credited by bankEnding balance from bank statementOutstanding checksProceeds of noteService chargeReconciled cash balance				Answer

GENERAL JOURNAL
Date		Description	Debit	Credit
July	31	AnswerAccounts ReceivableCash in BankMiscellaneous ExpenseNotes PayableRepairs ExpenseSales Discounts	Answer	Answer
		AnswerAccounts ReceivableCash in BankMiscellaneous ExpenseNotes PayableRepairs ExpenseSales Discounts	Answer	Answer
		To record proceeds of note.
	31	AnswerAccounts ReceivableCash in BankMiscellaneous ExpenseNotes PayableRepairs ExpenseSales Discounts	Answer	Answer
		AnswerAccounts ReceivableCash in BankMiscellaneous ExpenseNotes PayableRepairs ExpenseSales Discounts	Answer	Answer
		To correct recording of check.
	31	AnswerAccounts ReceivableCash in BankMiscellaneous ExpenseNotes PayableRepairs ExpenseSales Discounts	Answer	Answer
		AnswerAccounts ReceivableCash in BankMiscellaneous ExpenseNotes PayableRepairs ExpenseSales Discounts	Answer	Answer
		To record service charge.
	31	AnswerAccounts ReceivableCash in BankMiscellaneous ExpenseNotes PayableRepairs ExpenseSales Discounts	Answer	Answer
		AnswerAccounts ReceivableCash in BankMiscellaneous ExpenseNotes PayableRepairs ExpenseSales Discounts	Answer	Answer
		Cash in Bank	Answer	Answer
		To reclassify NSF check as an account receivable.

Answer 1

a)
ARTHUR COMPANY
Bank Reconciliation Statement
July. 31
Balance as per Bank Statement	$10,170.62	Balance as per Cash Book	$8,112.62
Add:		Add:
Deposits in transit	$3,316.12	Note borrowed from Bank	$4,000
Error by bank	$215	Error by company ($1,070 - $107)	$963
Less:		Less:
Outstanding Checks	($1,251.12)	Bank Service Charge	($15)
		NSF Check	($610)
Adjusted Balance as per Bank Statement	$12,450.62	Adjusted Balance as per Cash Book	$12,450.62

b)
GENERAL JOURNAL
Date	Description	Debit	Credit
July. 31.	Cash	$4,000
	Notes Payable		$4,000
	(To record proceeds of note)
July. 31.	Cash	$963
	Repair Expenses		$963
	(To correct recording of check)
July. 31.	Bank Service Charges	$15
	Cash		$15
	(To record the service charges)
July. 31.	Accounts Receivable	$610
	Cash		$610
	(To reclassify NSF check as an account receivable)