The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:
A. | Checks outstanding totaled $61,280. |
B. | A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement. |
C. | The bank collected $42,000 on a $40,000 note, including interest of $2,000. |
D. | A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account. |
E. | A check drawn for $240 had been erroneously charged by the bank as $420. |
F. | Bank service charges for April amounted to $145. |
Instructions | |
1. | Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required. |
2. | Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles. |
3. | If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash? |
American Medical Co. |
|||||
Bank Reconciliation |
|||||
April 30 |
|||||
Bank statement balance |
388,600 |
Book balance |
334,985 | ||
Add: |
Add: |
||||
Deposit in transit |
42,500 |
Note receivable | 40,000 | ||
Correction of bank error |
180 |
Interest | 2,000 | ||
42,680 |
42,000 | ||||
$431,280 |
$376,985 |
||||
Deduct: |
Deduct: |
||||
Outstanding check |
-61,280 |
Bank service charge |
-145 |
||
Correction of book error | -6,840 | ||||
-61,280 |
-6,985 |
||||
Adjusted bank balance |
$370,000 |
Adjusted book balance |
$370,000 |
2.
Date |
Account Titles and Explanation |
Debit |
Credit |
Aprilr 30 |
Cash |
$42,000 |
|
Note receivable |
$40,000 |
||
Interest revenue |
$2,000 |
||
( To record note receivable) |
|||
April 30 |
Accounts payable - Targhee supply co. |
$6,840 |
|
Cash | $6,840 | ||
( To record accounts payable) |
|||
April 30 |
Bank service charge |
$145 |
|
Cash |
$145 |
||
( To record safety deposit rent) |
3. Amount should be reported as cash = $370,000
Kindly comment if you need further assistance. Thanks‼!
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