Question

Problem 7-9A Preparing a bank reconciliation and recording adjustments LO6

Stewart Recording Studio, owned by Ron Stewart, showed the following bank reconciliation at March 31:

Stewart Recording Studio
Bank Reconciliation
March 31, 2020
Bank statement balance				$	22,300	Book balance	$	31,225
Add:
Deposit of March 31 in transit					10,090
				$	32,390
Deduct:
Outstanding cheques:
#14	$	846
#22		319			1,165
Adjusted bank balance				$	31,225	Adjusted book balance	$	31,225

Cash								Acct. No. 101
Date			Explanation	PR	Debit		Credit	Balance
2020
March	31		Balance					31,225
April	30			CR17	72,084			103,309
	30			CD13			92,828	10,481

A list of deposits made and cheques written during April, taken from the Cash Receipts Journal and Cash Disbursements Journal, is shown below:

Deposits Made
April	7		$	696
	13			4,640
	18			5,952
	23			14,022
	27			1,766
	30			45,008
Total April Cash Receipts			$	72,084

Cheques Written
No.	23		$	5,246
	24			3,178
	25			948
	26			316
	27			4,312
	28			4,900
	29			20,006
	30			41,880
	31			420
	32			11,622
Total April Cash Disbursements			$	92,828

The following bank statement is available for April:

Bank Statement
To: Stewart Recording Studio						April 30, 2020 Bank of Canada
Cheques/Charges						Deposits/Credits			Balance
									22,300
#31	04/03		420			04/03	10,090		31,970
#28	04/07		9,400			04/07	696		23,266
#26	04/13		316			04/13	4,640		27,590
NSF	04/18		14,474			04/18	5,952		19,068
#24	04/23		3,178			04/23	14,022		29,912
#23	04/27		5,246			04/27	1,766		26,432
#29	04/30		20,006			04/30	122,000		128,426
PMT	04/30		16,204						112,222
INT	04/30		546						111,676
SC	04/30		179						111,497
NSF = Not Sufficient Funds		SC = Service Charge				PMT = Payment of Principal on the loan			INT = Interest on Bank Loan

• In reviewing cheques returned by the bank, the bookkeeper discovered that cheque #28, for delivery expense, was recorded in the Cash Disbursements Journal correctly as $4,900.
• The NSF cheque for $14,474 was that of customer Oprah Winney, deposited in March.
• On the bank statement, the payment for $16,204 is regarding a note payable.
• There is also a deposit of $122,000 dated April 30. It is an investment made by the owner into the business (the bank transferred the funds electronically from the owner’s personal account to his business account, which is why it was not recorded in the Cash Receipts Journal).

Required:
a. Prepare a bank reconciliation for Stewart Recording Studio at April 30.

b. Prepare the necessary journal entries to bring the General Ledger Cash account into agreement with the adjusted balance on the bank reconciliation.

Answer 1

			Bank Reconciliation
			At December 31
Bank Statement					Company's books
Bank statement balance				111,497	ending balance as per Cash account				10,481
Addittions:					Addittions
Deposit in transit				45,008	investment by owner				122,000
error in recording delivery cheque				4500
				161,005					132,481
Deduct					Deduct:
Oustanding cheques					NSF			14,474
Cheque #14			846		service charge			179
Cheque #22			319		payment of loan			16,204
Cheque #25			948		interest on bank loan			546
Cheque#27			4,312
Cheque # 30			41,880
Cheque #32			11,622
				59,927					31,403
Up-to-date Cash balance				101,078					101,078
Journal Entries
Date	General Journal				Debit	Credit
30-Apr	Accounts receivable				14,474
	Cash					14,474
30-Apr	Bank service charges/Misc expense				179
	cash					179
30-Apr	Interest expense				546
	cash					546
30-Apr	Notes payable				16,204
	cash					16,204
30-Apr	Cash				122,000
	Owner's capital,Ron Stewart					122,000