Question

IL. (20') The December cash record of ABB Insurance follow: Cash Receipts- Cash Payments Check No. Date Cash Debit Cash Credit Dec 3 S 4,150 540 560 2,190 1,870 2416 2417 2418 2419 2420 2421 2422 S 850 160 670 1,690 1,450 1,200 640 16 23 31 ABB Insurance's cash account shows a balance of $16,650 at December 31. On December 31, the received the following bank statement: Bank Statement for December Beginning Balance $14,000 Checks and other Debits Dec. EFT S 400 Dec. 2 NSF 4,150 540 560 2,190 1,700 11 Check NO.2416 19 22 Check NO. 2417 29 Check NO. 2418 31 Check NO. 2419 31 700 850 400 160 670 1,960 EFT 16 24 25 BC SC Ending BalanceSi Notes: BC-bank collection; EFT-electronic funds transfer; NSF-nonsufficient funds check; $18,590 SC-service charge Additional data for the bank reconciliation follows: a. The EFT credit was a receipt of rent. The EFT debit was an insurance payment. b. The NSF check was received from a customer named Dunlap Chemical. c. The $1,700 bank collection was for a note receivable. d. The correct amount of Check 2419 for rent expense is $1,940 instead of S1,490 on cash recor 1) Prepare the bank reconciliation for ABB Insurance as at December 31. 2) Journalize any required entries from the bank reconciliation.

Answer 1

Solution 1:

ABB Insurance
Bank Reconciliation - December 31
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$18,790.00	Ending Balance as per cash books	$16,650.00
Additions:		Additions:
Outstanding cash receipt	$1,870.00	EFT Collection of rent	$400.00
		Bank collection of note receivables	$1,700.00
Deductions:		Deductions:
Outstanding Checks (Check no 2420, 2421, 2422) ($1,450 + $1,200 + $640)	$3,290.00	Incorrect recording of check no 2419 ($1,960 - $1,690)	$270.00
		NSF Check	$700.00
		EFT Payment of insurance	$400.00
		Service charge	$10.00
Up to date cash balance as per bank	$17,370.00	Up to date cash balance as per books	$17,370.00

Solution 2:

Journal Entries - ABB Insurance
Date	Particulars	Debit	Credit
31-Dec	Cash Dr	$400.00
	To Rent revenue		$400.00
	(To record Rent collectioon by bank)
31-Dec	Cash Dr	$1,700.00
	To Note receivables		$1,700.00
	(To record note collection by bank)
31-Dec	Rent expense Dr	$270.00
	To Cash		$270.00
	(To record correction entry for check no 2419)
31-Dec	Accounts receivables Dr	$700.00
	To Cash		$700.00
	(To record NSF Check from customer)
31-Dec	Insurance expense Dr	$400.00
	To Cash		$400.00
	(To record payment of insurance)
31-Dec	Miscellenous Expenses Dr	$10.00
	To Cash		$10.00
	(Being service charges debited by bank)