Question

Part 1

As the controller of Lynbrook, Inc. you are responsible for preparing the monthly bank reconciliation. Using the information below, prepare the bank reconciliation for January 31, 2020.

1. The ledger account for Cash showed a balance at January 31 of $127,500.

2. The January bank statement showed a closing balance of $108,750.

3. The cash received on January 31 amounted to $28,000. It was left at the bank in the night depository chute after banking hours on January 31 and therefore was not recorded by the bank on the January statement.

4. Also included with the January bank statement was a debit memorandum from the bank for $75 representing service charges for January.

5. A credit memorandum enclosed with the January bank statement indicated that a non-interest- bearing note receivable for $5,000 from Jeff Burkett, left with the bank for collection, had been collected and the proceeds credited to the account of Lynbrook, Inc.

6. Comparison of the paid checks returned by the bank with the entries in the accounting records revealed that check no. 1601 for $519, issued January 15 in payment for office equipment, had been erroneously entered in Lynbrook's records as $915.

7. Examination of the paid checks also revealed that three checks, all issued in January, had not yet been paid by the bank: no. 1611 for $2,000; no. 1625 for $1,250; no. 1630 for $779.

8. Included with the January bank statement was a $100 check drawn by Pat Thomas, a customer of Lynbrook, Inc. This check was marked “NSF.” It had been included in the deposit of January 27 but had been charged back against the company's account on January 31.

Required: a. Prepare a bank reconciliation for Lynbrook, Inc., at January 31, 2020.

b. Prepare journal entries (in general journal form) to adjust the accounts at January 31, 2020.

c. State the amount of cash that should be included in the balance sheet at January 31, 2020.

Part 2

As the controller of Lynbrook, Inc., you decided to create a petty cash fund of $500 on February 1, 2020. Towards the end of February, the following cash receipts/vouchers were in the petty cash box:

• repairs expense $ 92

• postage expense 130

• office supplies 47

• telephone expense 81

• delivery expense 60

In addition to the above cash receipts/vouchers the petty cash box contained $87 in cash. Due to the high use of the petty cash fund during February, it was determined that the petty cash fund should be increased to $850 at the end of February. On February 29, Lynbrook made the decision to replenish the petty cash fund and increase the balance to $850.

Required: Prepare journal entries, in general journal form, to record the following:

a) Establishment of the petty cash fund on February 1

b) Replenishment of the petty cash fund and increase the balance to $850 on February 29.

Answer 1

a. Prepare a bank reconciliation for Lynbrook, Inc., at January 31, 2020
Note: Sl.No. column is provided for your easy reference against question.
Lynbrook, Inc.
Bank Reconciliation Statement
Month End January 31, 2020
Sl.No.:	Particulars	Amount	Amount
1	Cash balance as per ledger on 31st Jan 2020		$ 127,500.00
	Add:
5	Note receivable - Jeff Burkett	$   5,000.00
	Total Additions		$     5,000.00
	Less:
4	January Bank service charge	$       (75.00)
8	Check issued to Pat Thomas but not honored - NFS	$    (100.00)
	Total Deductions		$       (175.00)
	Adjusted Cash Balance		$ 132,325.00
2	Cash balance as per bank on 31st Jan 2020		$ 108,750.00
	Add:
3	Cash in Transit	$ 28,000.00
	Total Additions		$   28,000.00
	Less
7	Check issue but not enchased
	1611	$ (2,000.00)
	1625	$ (1,250.00)
	1630	$    (779.00)
6	Erroneous adjustment for check 1601	$    (396.00)
	Total Deductions		$   (4,425.00)
	Adjusted Cash Balance		$ 132,325.00
		Check	$                 -
b. Prepare journal entries (in general journal form) to adjust the accounts at January 31, 2020
Date	Account	Debit	Credit
1/31/2020	Cash	$   5,000.00
	To Bills receivable		$     5,000.00
	Being amount received against note - "Jeff Burkett"
1/31/2020	Bank Charges	$        75.00
	To Cash		$           75.00
	Being amount paid against bank charges for Jan'2020
1/31/2020	Cash	$      100.00
	To Pat Thomas A/c ( Customer Account)		$         100.00
	Being Pat Thomas check was marked as NFS
		$   5,175.00	$     5,175.00
c. State the amount of cash that should be included in the balance sheet at January 31, 2020.
As per Bank reconciliation statement in question a and per subsequent entries in question b below is the cash balance as on 31st January 2020 in balance sheet.
	Cash Balance		$ 132,325.00