Question

Bank Reconciliation and Entries The cash account for Brentwood Bike Co. at May 1 indicated a balance of $12,830. During May, the total cash deposited was $ 64,640 and checks written totaled $60,020. The bank statement indicated a balance of $21,910 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: a. Checks outstanding totaled $9,760. b. A deposit of $7,950, representing receipts of May 31, had been made too late to appear on the bank statement. c. The bank had collected for Brentwood Bike Co. $4,200 on a note left for collection. The face of the note was $3,880. d. A check for $580 returned with the statement had been incorrectly charged by the bank as $850. e. A check for $850 returned with the statement had been recorded by Brentwood Bike Co. as $580. The check was for the payment of an obligation to Adkins Co. on account. f. Bank service charges for May amounted to $40. g. A check for $970 from Jennings Co. was returned by the bank because of insufficient funds. Instructions: 1. Prepare a bank reconciliation as of May 31. Brentwood Bike Co. Bank Reconciliation May 31 Cash balance according to bank statement Add deposit of May 31, not recorded by bank $ 21,910 $ 7,950 Add bank error in charging check as $850 instead of $580 Deduct outstanding checks Adjusted balance Cash balance according to company's records Add note and interest collected by bank Deduct check returned because of insufficient funds Deduct bank service charges Deduct error in recording check n Adjusted balance

Answer 1

Brentwood Bike Cp.
Calculation of bank balance as per books on 31st May	Amount $
Opening Balance	12,830.00
Add: Deposits	64,640.00
Less: Cheque written	60,020.00
Bank balance as per books on 31st May	17,450.00
Answer a
Bank reconciliation statement	Amount $
Balance as per books	17,450.00
Add:
c. Note collected by Bank	4,200.00
Less:
e. Cheque incorrectly recorded (850-580)	270.00
f. Bank service charges	40.00
g. Cheque of Jennings Co. returned	970.00
Reconciled balance as per books	20,370.00

	Amount $
Balance as per bank	21,910.00
Add:
b. Deposit in transit	7,950.00
d. Cheque incorrectly charged (850-580)	270.00
Less:
a. Outstanding cheque	9,760.00
Reconciled balance as per bank	20,370.00

Answer b

Adjusting journal entries
Event	Account	Debit	Credit
c.	Cash	4,200.00
	Note Receivable		3,880.00
	Interest Revenue		320.00
e.	Adkins Co.	270.00
	Cash		270.00
f.	Bank charges	40.00
	Cash		40.00
g.	Jennings Co.	970.00
	Cash		970.00