Question

15% 11:34 p.m. The following information is available for Unique Globe, as of May 31, 2011: a. Cash on the books as of May 31 amounted to $43,784.16. Cash on the bank statement for the same date was $53,451.46. b.A deposit of $5,220.94, representing cash receipts of May 31, did not appear on the bank statement. c. Outstanding checks totaled $3,936.80. d. A check for $1,920.00 returned with the statement was recorded incorrectly in the check register as $1,380.00 The check was for a cash purchase of merchandise e. The bank service charge for May a mounted to $30. f. The bank collected $12,200.00 for Unique Globe, on a note. The face value of the note was $12,000.00. g. An NSF check for $178.56 from a customer, Eve Lay, was returned with the statement. h. The bank mistakenly charged to the company account a check for $750.00 drawn by another company i. The bank reported that it had credited the account for $250.00 in interest on the average balance for May Required 1. Prepare a bank reconciliation for Unique Globe, Inc., as of May 31, 2011. 2. Prepare the entries in journal form necessary to adjust the accounts. 3. What amount of cash should appear on Unique Globe's balance sheet as of May 31? 4. Why is a bank reconciliation considered an important control over cash? Step-by-step solution

Answer 1

Answer:

(1.)

Bank reconciliation for Unique Globe, inc, as of May 31,2011
Step 1
	Balance as per Bank Statement on May 31		53,451.46
	Adjustments :
	Deposit in transit	+	5,220.94
	Outstanding Check	-	3,936.80
	Error in bank statement	+	750.00
	Adjusted/corrected balance per bank		55,485.60
Step -2
	Balance as per Books on May 31		43,784.16
	Adjustments :
	NSF Checks $ Fee	-	178.56
	Bank service charges	-	30.00
	Interest earned	+	250.00
	Note receivable collected by bank (excess amount)	+	12,200.00
	Error in Company's cash account	-	540.00
	Adjusted / corrected balance per book		55,485.60

(2.) Journal Entry

Account title	Debit	Credit
Account Receivable	178.56
Cash		178.56
(Being NSF Check returned)
Bank Service charge	30
Cash		30
(Being bank charges accounted for )
Cash	250
Interest earned		250
(Being interest credited)
Cash	200
Note Receivable		200
Account Receivable	540
Cash		540
(Error in company bools of account = 1920 - 1380 = 540)

3. Amount of cash should appear on Unique Globe's balance sheet as of May 31 = $55485.60

4. Bank reconciliation considered an important control over cash because it identify the error in bank statement and error made by company.