Question

Chet Refer to the information given below: a. The October 31 cash balance in the general ledger is $799. b. The October 31 balance shown on the bank statement is $352. c. Checks issued but not returned with the bank statement were No. 462 for $23 and No. 483 for $51. d. A deposit made late on October 31 for $443 is included in the general ledger balance but not in the bank statement balance. e. Returned with the bank statement was a notice that a customer's check for $69 that was deposited on October 25 had been returned because the customer's account was overdrawn t. During a review of the checks that were returned with the bank statement, it was noted that the amount of Check No. 471 was $65 but that in the company's records supporting the general ledger balance, the check had been erroneously recorded as a payment of an account payable in the amount of $56. Required: 1. Show the reconciling items in a horizontal model that should be prepared to reflect the reconciling items as on October 31. (Use amounts with + for increases and amounts with - for decreases.) Balance Sheet Liabilities Assets Stockholders' Equity Net Income Reven

Answer 1

a-1 Balance Sheet Liabilities Accounts payable Income Statement Revenues Expenses Assets Accounts receivable Cash + Stockholders' Equity Net Income -$9 +$69 -$78 The following adjustments will be taken place : 1 Accounts receivable (asset) would increase by $69 due to cheque deposited returned because the customer's account was overdrawn. 2 Accounts payable (liability) would decrease by $9 ($65-$56) due to cheque erroneously recorded in the amount of $56 instead of $65 for payment of an accounts payable. 3 Cash (asset) would decrease by $78 ($69 + $9) due to the above two transactions. Debit Credit Event 1 $69 General Journal Accounts Receivable To Cash (To record reconciling item of increase in accounts receivable) $69 2 $9 Accounts Payable To Cash (To record reconciling item of decrease in accounts payable) $9

b. Amount of cash to be included in the October 31 balance sheet for the bank account reconciled Cash balance in the general ledger on October 31 Less: Reconciling items - Accounts receivable $799 $69 $730 $9 $721 Less: Reconciling items - Accounts payable Amount of cash to be included in the October 31 balance sheet Balance as per bank statement on October 31 Add: Deposited cheque in transit $352 $443 $795 Less: Cheques issued but not returned with the bank statement Chq no. 462 $23 Chq no. 483 $51 Adjusted bank balance $74 $721 Amount of cash to be included in the October 31 balance sheet = $721