Question

Oscar’s Red Carpet Store maintains a checking account with Academy Bank. Oscar’s sells carpet each day but makes bank deposits only once per week. The following provides information from the company’s cash ledger for the month ending February 28, 2021.

	Date	Amount				No.	Date	Amount
Deposits:	2/4	$	1,850		Checks:	321	2/2	$	3,850
	2/11		1,450			322	2/8		600
	2/18		2,350			323	2/12		1,650
	2/25		3,250			324	2/19		1,350
Cash receipts:	2/26-2/28		750			325	2/27		400
		$	9,650			326	2/28		900
						327	2/28		1,050
Balance on February 1		$	5,950					$	9,800
Receipts			9,650
Disbursements			(9,800	)
Balance on February 28		$	5,800

Information from February's bank statement and company records reveals the following additional information:

1. The ending cash balance recorded in the bank statement is $8,395.
2. Cash receipts of $750 from 2/26–2/28 are outstanding.
3. Checks 325 and 327 are outstanding.
4. The deposit on 2/11 includes a customer's check for $400 that did not clear the bank (NSF check).
5. Check 323 was written for $2,500 for advertising in February. The bank properly recorded the check for this amount.
6. An automatic withdrawal for Oscar's February rent was made on February 4 for $1,300.
7. Oscar's checking account earns interest based on the average daily balance. The amount of interest earned for February is $115.
8. In January, one of Oscar's suppliers, Titanic Fabrics, borrowed $4,300 from Oscar. On February 24, Titanic paid $4,450 ($4,300 borrowed amount plus $150 interest) directly to Academy Bank in payment for January's borrowing.
9. Academy Bank charged service fees of $120 to Oscar’s for the month.

Required:
1. Prepare a bank reconciliation for Oscar's checking account on February 28, 2021. (Amounts to be deducted should be indicated with a minus sign. Total entries to the same account together when entering in the bank reconciliation.)

2. Record the necessary cash adjustments. (If no entry is required for a transaction/event, select "No Journal Entry Required" in the first account field. Total entries to the same account together when entering in the journal entry worksheet.)

Answer 1

1. Bank reconciliation statement

Bank's cash balance	Amount ($)	Company's cash balance	Amount ($)
Per bank statement	8,395	Per general ledger	5,800
Add: Deposits outstanding	750	Less: NSF check	-400
	9,145	Less: Company error (2,500-1,650)	-850
Less: Checks outstanding		Less: EFT for rent	-1,300
Check No. 325	-400	Add: Interest earned	115
Check No. 327	-1,050	Add: Note collected	4,300
		Add: Interest on note	150
		Less: Service fees	-120
Bank balance per reconciliation	7,695	Company balance per reconciliation	7,695

2.

Date	Account	Debit	credit
1	Accounts receivable	400
	cash		400
2	Rent expense	1,300
	cash		1,300
3	cash	115
	interest revenue		115
4-a	cash	4,300
	note receivable		4,300
	[Being note collected]
b	cash	150
	interest revenue		150
	[Being interest accrued on note collected]
5	Bank charges	120
	cash		120
6	advertising expense	850
	cash		850