Question

El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at the end of each month. The November 30, 2016, reconciliation of the bank balance is as follows:

Balance per bank, November 30		$3,231
Add: Deposits outstanding		1,200
Less: Checks outstanding
#363	$123
#365	201
#380	56
#381	86
#382	340	(806)
Adjusted balance per bank, November 30		$3,625

The company's general ledger checking account showed the following for December:

Balance, December 1	$ 3,625
Receipts	42,650
Disbursements	(41,853)
Balance, December 31	$ 4,422

The December bank statement contained the following information:

Balance, December 1	$3,231
Deposits	43,000
Checks processed	(41,918)
Service charges	(22)
NSF checks	(440)
Balance, December 31	$3,851

The checks that were processed by the bank in December include all of the outstanding checks at the end of November except for check#365. In addition, there are some December checks that had not been processed by the bank by the end of the month. Also, you discover that check#411 for $320 was correctly recorded by the bank but was incorrectly recorded on the books as a $230 disbursement for advertising expense. Included in the bank's deposits is a $1,300 deposit incorrectly credited to the company's account. The deposit should have been posted to the credit of the Los Gatos Company. The NSF checks have not been redeposited and the company will seek payment from the customers involved.

Required:

1. Prepare a bank reconciliation for the El Gato checking account at December 31, 2016.
2. Prepare any necessary adjusting journal entries indicated.

Answer 1

i)	EI Gato painting Corp
	Bank Reconciliation Statement
	Month Ended December 31
	Cash Balance as per bank statement	3851
	Add: Deposit Outstanding	2150
	Less: BANK ERROR	-1300
	Less: Outstanding checks	-831
	Adjusted Cash Balance	3870
	Cash balance as per books	4422
	Less: Bank Service charges	-22
	Error Rectification	-90
	NSF Checks	-440
	Adjusted Cash Balance	3870
ii)	Journal enttry
	Account NAME	Debit
	Advertisement Expense	90
	Bank Charges	22
	Accounts Receivable	440
	To bank		552
	(being adjustment entry passed)