Question

Adjusted balance: $32,630 Show Me How EX 8-18 Bank reconciliation OBJ. 5 The following data were accumulated for use in reconciling the bank account of Mathers Co. for July: 1. Cash balance according to the company's records at July 31, $32,110. 2. Cash balance according to the bank statement at July 31, $31,350. 3. Checks outstanding, $2,870. 4. Deposit in transit, not recorded by bank, $4,150. 5. A check for $170 in payment of an account was erroneously recorded in the check register as $710. 6. Bank debit memo for service charges, $20. a. Prepare a bank reconciliation, using the format shown in Exhibit 13. b. If the balance sheet is prepared for Mathers Co, on July 31, what amount should be reported for cash? c. Must a bank reconciliation always balance (reconcile)?

Answer 1

8-18:

Balance as per company's records		32,110
Add:
Difference in error (710-170)	540
		32,650
less:
Service sharges	20
Adjusted book balance		32,630

Balance as per bank's records		31,350
Add:
Deposit in transit	4,150
		35,500
less:
Outstanding checks	2,870
Adjusted bank balance		32,630

(b) The amount that will be reported in Balance sheet will be $32,630

(c) Yes, a bank reconciliation should always balance.

8-22:

(a) The error in the following reconciliation is that outstanding checks are added instead of being deducted and deposits not recorded by bank are deducted instead of being added while adjusting the bank balance. Similarly there are few errors when the book balance is adjusted. For instance service charges should be deducted and not added.

(b):

Balance as per bank's records		16,185
Add:
Deposit not recorded by bank	6,600
		22,785
less: Outstanding checks
1,067	575
1,106	470
1,110	1,050
1,113	910	3,005
Adjusted bank balance		19,780

Balance as per company's records		8,985
Add:
Error in recording June 17 deposit	5,400
Proceeds of note collected by bank
Principal	6,000
Interest	300	11,700
		20,685
less:
Service charges	15
Check returned because of insufficient funds	890	905
Adjusted book balance		19,780