Question

The general ledger of Michelle Company Ltd. showed a cash balance of $21,195 on 31 December 20X2, while the bank showed a balance of $60,600. The following facts were available: a. The bank collected $12,160 as a direct deposit for one of Michelle's customer as a payment on account. A $30 fee was charged by the bank for administration. Michelle has yet to record either of these amounts. b. Michelle paid a utilities bill of $460 through direct transfer from its bank account but has not yet recorded the payment. c. There was an outstanding deposit of $18,000 at the end of December. d. The bank had charged a cheque of $3,800, written by Mitchell Corp., to Michelle's bank account. The bank has been contacted about the error, and will reverse the cheque in January. e. A deposit of $1,650 from a customer on account was recorded by Michelle for $3,900. The bank noticed the error and deposited the correct amount of money, but the deposit is incorrectly recorded on Michelle's books. f. Michelle's bank account shows a deposit of $34,000 in December, which is an increase in Michelle's bank loan. The amount has not been recorded by Michelle. g. At the end of November, outstanding cheques were $8,485. This month, cheques were issued for $200,200, and cheques of $190,900 cleared the bank account.

Accounting Help

Answer 1

SOLUTION :

Requirement 1

Bank Reconciliation, 31 December 20x2

                                                                                                              Bank        Books

Balances, 31 December................................................................... $60,600     $21,195

Additions:

      Outstanding deposit.................................................................     18,000

      Account receivable collected....................................................                       12,160

      Loan increase............................................................................                       34,000

           

      Bank error.................................................................................       3,800

Deductions:

       Cheques outstanding ($8,485 + $200,200 - $190,900)...........    (17,785)

       Deposit recording error ($1,650 - $3,900)...............................                        (2,250)

       Utility bill payment..................................................................                           (460)

       Bank service charge.................................................................                       ___(30)

Correct cash balance....................................................................... $64,615     $64,615

Requirement 2

       Journal entries from bank reconciliation:

       Cash............................................................................................ 46,160

             Account receivable...............................................................                    12,160

             Notes payable.......................................................................                    34,000

            

       Accounts receivable (payment on account)................................    2,250

             Cash .....................................................................................                      2,250

       Utilities expense.........................................................................       460

       Bank service charge expense......................................................         30

                        Cash ………………………………………………..                         490