Question

The following information pertains to the bank transactions of Oxford Realty as of October 31, 2016 A. Cash per books is $5000. The balance on the bank statement is $4900. B. Outstanding checks totaled $2000. C. Bank service charges for October were $35. D. October 31st deposits of $1500 did not appear on the bank statement E. An NSF check was returned from Dr. Perkins for $100. The bank charged a $25 fee for this bounce. F.The bank mistakenly deducted a check for $400 which was really for McIntosh Realty. G. The bank credited interest for $50 for the month of October H. A check for $321 was processed correctly by the bank. The company had recorded this purchase for advertising expense incorrectly in the amount of $231. !Prepare a formal bank reconciliation for Oxford Realty as of October 31, 2016. 2. Prepare journal entries necessary from the reconciliation.

Answer 1

Oxford Realty Bank Reconciliation statement October 31 Balance as per bank statement Add: Deposit in transit Bank error in deducting check 4,900 1,500 400 1,900 6,800 2,000 Less: Outstanding checks Adjusted Cash Balance 4,800 Balance as per Book Add: Interest revenue 5,000 50 5,050 100 Less: NSF Check Bank service fee (35+25) Error in recording check (321 - 231) Adjusted Cash Balance 90 250 4,800

2) Date Oct. 31 Debit Credit Journal Entries Account Titles and Explanation Cash Interest revenue (to record the interest received from bank) 50 Oct. 31 100 Accounts receivable Cash (to record NSF Check returned from Dr. Perkins) 100 Oct. 31 60 Miscellaneous expense Cash (to record the bank charges) Oct. 31 90 Advertising expense Cash (to rectify the error made in recording check) 90 Note: Bank charges can be recorded as miscellaneous expense or bank service charges