Question

Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2018 bank statement included the following information:

Balance, July 1, 2018	$	57,553
Deposits		181,000
Checks processed		(194,110	)
Service charges		(50	)
NSF checks		(1,950	)
Monthly loan payment deducted directly by bank from account (includes $370 in interest)		(4,070	)
Balance, July 31, 2018	$	38,373

The company’s general ledger account had a balance of $40,973 at the end of July. Deposits outstanding totaled $7,800 and all checks written by the company were processed by the bank except for those totaling $8,570. In addition, a $3,500 July deposit from a credit customer was recorded as a $350 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $50 disbursement was incorrectly processed by the bank as a $500 disbursement.

Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Answer 1

Bank balance to Corrected Balance
Balance per bank statement					38,373
Add:	Deposits oustanding				7,800
less:	Checks oustanding				8,570
Add:	Check incorrectly processed				450
Corrected cash balance					38,053
Book Balance to Corrected Balance
Balance per books					40,973
less:	Automatic montlhy loan payment				4,070
Add:	Error in recording cash receipt				3150
less:	NSF				1,950
less:	Service charge				50
Corrected cash balance					38,053
Account titles & explanations					Debit	Credit
Loan payable					3700
interest expense					370
cash						4,070
cash					3150
Accounts receivable						3150
Accounts receivable					1,950
cash						1,950
Service charge					50
cash						50