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, 2018.

Date 2/2 Deposits: Checks: Date 2/4 2/11 2/18 2/25 2/26- 2/28 Amount $ 2,700 2,300 3,200 4,100 No. 321 322 323 324 2/8 2/12 2/19 Amount $ 4,700 400 2,500 2,200 Cash receipts: 1,600 325 2/27 200 326 327 2/28 2/28 700 1,900 $ 13,900 $12,600 Balance on February 1 Receipts $ 6,800 13,900 (12,600) Disbursements Balance on February 28 $ 8,100

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

a. The ending cash balance recorded in the bank statement is $13,145.
b. Cash receipts of $1,600 from 2/26-2/28 are outstanding.
c. Checks 325 and 327 are outstanding.
d. The deposit on 2/11 includes a customer's check for $200 that did not clear the bank (NSF check).
e. Check 323 was written for $2,800 for advertising in February. The bank properly recorded the check for this amount.
f. An automatic withdrawal for Oscar's February rent was made on February 4 for $1,100.
g. Oscar's checking account earns interest based on the average daily balance. The amount of interest earned for February is $20.
h. In January, one of Oscar's suppliers, Titanic Fabrics, borrowed $6,000 from Oscar. On February 24, Titanic paid $6,250 ($6,000 borrowed amount plus $250 interest) directly to Academy Bank in payment for January's borrowing.
i. Academy Bank charged service fees of $125 to Oscar’s for the month.

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Answer 1

Answer to Question 1
	Oscar's Red carpet Store
	Bank reconciliation statement
	February 28,2018
		Amount in $
	Particulars
	Cash balance as per Company books	8100
	Less :
	Cash receipts are outstanding	-1600
	Check deposits on 2/11 not cleared	-200
	Check 323 amount under recorded In Company books	-300
	Automatic rent withdrawal not recorded in company books	-1100
	Bank charges	-125
	Add:
	Check 325 & 327 are outstanding	2100
	Interest earned not recorded in company books	20
	Repayment of borrowings with interest by Titanic directly into bank	6250
	Cash balance as per Bank Statement	13145
Answer to Question 2
	Journal entries	Debit	Credit
1	Bank/ cash	1600
	To Trade receivable		1600
	(Being cash receipts from trade receivable)
2	Bank / cash	200
	To trade receivable		200
	(Being cash receipts from trade receivable)
3	Bank/ cash	20
	To interest income		20
	(Being interest received )
4	Bank/ Cash	6000
	To Loans & advance /Titanic borrower		6000
5	Bank/ Cash	250
	To interest income		250
	(Being interest received on loan and advances from Titanic