Question

Problem 8-5A Preparing a bank reconciliation and recording adjustments LO P3

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Chavez Company most recently reconciled its bank statement and book balances of cash on August 31 and it reported two checks outstanding, No. 5888 for $1,028 and No. 5893 for $494. Check No. 5893 was still outstanding as of September 30. The following information is available for its September 30 reconciliation.

From the September 30 Bank Statement

PREVIOUS BALANCE 16,828 TOTAL CHECKS AND DEBITS 9,617 TOTAL DEPOSITS AND CREDITS 11,270 CURRENT BALANCE 18,453 CHECKS AND DEBITS Date No. Amount 09/03 5888 1,28 09/04 5992 719 09/07 5991 1,824 69/17 680 NSF 89/20 5995 937 09/22 5993 399 09/22 5984 2,099 29/28 5997213 09/29 5999 1,897 DEPOSITS AND CREDITS Date Amount 29/05 1,193 09/12 2,226 09/21 4,893 09/25 2,351 89/30 12 IN 09/30 1,485 CM From Chavez Company's Accounting Records Cash Receipts Deposited Cash Date Debit Sept. 5 1 ,193 12 2,226 4,893 2,351 1,682 11,455 30

Additional Information

1. (a) Check No. 5904 is correctly drawn for $2,090 to pay for computer equipment; however, the recordkeeper misread the amount and entered it in the accounting records with a debit to Computer Equipment and a credit to Cash of $2,060.
2. (b) The NSF check shown in the statement was originally received from a customer, S. Nilson, in payment of her account. Its return has not yet been recorded by the company.
3. (c) The credit memorandum (CM) is from the collection of a $1,485 note for Chavez Company by the bank. The collection is not yet recorded.

Prepare journal entries to adjust the book balance of cash to the reconciled balance. (If no entry is required for a transaction/event, select "No journal entry required" in the first account field.)

Answer 1

Bank Reconciliation is a process of identifying the difference that exist between the company's bank balance as per bank statement supplied by bank and cash balance as per company's accounting records. Chavez Company Bank Reconciliation September 30 Particulars $18,453 Book Balance Particulars Bank Statement Balance Add: Amount Amount Amount Amount $17,404 Add: $1,682 Bank Collection of Account Receivable $1,485 $12 Deposit in Transit $1,497 $18,901 Interest Income $20,135 Deduct: Deduct Error in posting [$2090-$2060] $494 $982 $388 $30 $600 Outstanding Check 5893 Outstanding Check 5906 Outstanding Check 5908 Total Deduction Adjusted Bank Balance NSF Check ($1,864) Total Deduction $18,271 Adjusted Book Balance ($630) $18,271 Particulars No Entry required No Entry required (No entry required for Sep 30 deposit) Cash Interest Income (To record interest received from Bank) Date Sep 30 Debit Credit Sep 30 $12 $12 $1,485 Sep 30 Cash Notes Receivable (To record collection of note receivable) No Entry required No Entry required (No entry required outstanding checks) Accounts Receivable $1,485 Sep 30 Sep 30 $600 Cash (To Record NSF check) Computer Equipment Cash (To record rectification entry) $600 Sep 30 $30 $30