Question

Spade Inc.'s bank statement from Hollow Bank at July 31, 2019, gives the following information. $18,400 71,000 68,678 $ Balance, July 1 August deposits Checks cleared in July Bank credit memorandum: Interest earned 25 Bank debit memorandum: Safety deposit box fee Service charge Balance, July 31 50 20,692 45 A summary of the Cash account in the ledger for July shows the following: balance, July 1, $18,700, receipts $74,000; disbursements $73,570; and balance, July 31, $19,130. Analysis reveals that the only reconciling items on the June 30 bank reconciliation were a deposit in transit for $4,800 and outstanding checks of $4,500. In addition, you determine that there was an error involving a company check drawn in July: A check for $400 to a creditor on account that cleared the bank in July was journalized and posted for $40.

Instructions

a) Determine deposits in transit.

b) Determine outstanding checks. (Hint: You need to correct disbursements for the check error.)

Answer 1

a) Determine deposits in transit. Deposits per bank statement in July 31 Less: Deposits in transit, June 30 Deposited in July S71,000 $4,800 S66,200 Deposits per books in July Less: Deposited in July Deposits in transit, July 31 $74,000 S66,200 $7,800 b) Determine outstanding checks. S68,678 Checks clearing bank in July 31 Less: Outstanding checks, June 30 Check error ($400 - $40) $4,500 $360 Checks cleared in July $63,818 S73,570 S63,818 Cash disbursements per books Less: Checks cleared in July Outstanding checks, July 31 $9,752