Question

P7-3A On May 31, 2017, Reber Company had a cash balance per books of $6,781.50. The bank statement from New York State Bank on that date showed a balance of $6,404.60. A comparison of the statement with the Cash account revealed the following facts. 1. The statement included a debit memo of $40 for the printing of additional company F a ( checks. 2. Cash sales of $836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $886.15. The bank credited Reber Company for the correct amount. 3. Outstanding checks at May 31 totaled $576.25. Deposits in transit were $2,416.15. 4. On May 18, the company issued check no. 1181 for $685 to Lynda Carsen on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Reber Company for $658. 5. A $3,000 note receivable was collected by the bank for Reber Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note. 6. Included with the canceled checks was a check issued by Stiner Company to Ted Cress for $800 that was incorrectly charged to Reber Company by the bank. 7. On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sue Allison, a customer, to Reber Company on account. Instructions (a) Prepare the bank reconciliation at May 31, 2017. (b) Prepare the necessary adjusting entries for Reber Company at May 31, 2017.

Answer 1

SOLUTION

(A) Bank reconciliation statement

Particulars	Amount ($)	Amount ($)
Cash balance as per bank statement		6,404.60
Add: Error in check	800
Add: Deposit in transit	2,416.15	3,216.15
		9,620.75
Less: Outstanding checks		(576.25)
Adjusted bank balance		9,044.50
Cash balance as per books		6,781.50
Add: Note collected (3,000+80-20)		3,060
		9,841.50
Less: NSF checks	680
Check printing charges	40
Error in recording check (685-658)	27
Error on deposit (886.15-836.15)	50	(797)
Adjusted book balance		9,044.50

(B) Journal entries-

Date	Accounts titles and Explanation	Debit ($)	Credit ($)
May 31	Cash	3,060
	Miscellaneous expense	20
	Notes receivable		3,000
	Interest revenue		80
	(To record the note collection)
May 31	Accounts receivable	680
	Cash		680
	(To record the NSF check)
May 31	Sales revenue	50
	Cash		50
	(To record the service charge)
May 31	Accounts payable	27
	Cash		27
	(To record the correction of error)
May 31	Miscellaneous expense	40
	Cash		40
	(To record the charge for printing checks)