Question

Instructions:  Given the information provided below, prepare (a) a bank reconciliation in proper format, and (b) the necessary journal entries for the month of September for Rich Company.

1.   Balance per bank on September 30—$24,070

2.   Balance per books on September 30—$19,500

3.   Total outstanding checks at September 30—$3,600

4.   Debit memoranda:

      a.   NSF check from Lee Co.—$540

      b.   Printing company checks—$60

      c.   Payment to bank of $2,400 note owed bank by Rich plus $200 interest.

5.   Credit memorandum: Collection of note receivable for $7,500 plus $560 interest less $60 collection fee.

6.   Errors:

      a.   A check written this month to Nance Co. for office supplies cleared the bank at the correct amount of $680, but was recorded by Rich at $860.

      b.   The bank charged a $210 check of Thome Company against Rich’s account this month.

7.   Deposit in transit on September 30—$3,800.

(a) Bank Reconciliation

(b) Journal Entries (Note: Assume no interest has been accrued on the note.)

Answer 1

(a)

Bank Reconciliation
Balance as per bank statement	$    24,070.00
Add :
Deposit Outstanding	$      3,800.00
Error in check by bank	$          210.00
Deduct :
Checks Outstanding	$      3,600.00
Error in depositing by bank
Corrected Cash Balance	$    24,480.00
Balance as per books	$    19,500.00
Add :
Collection of Note Receivable	$      8,060.00
Error in recording Expense	$          180.00
Deduct :
Payment of Notes Payable	$      2,600.00
Bank Service Charges	$          120.00
NSF Checks	$          540.00
Corrected Book Balance	$    24,480.00

(b)

Account Titles	Debit	Credit
Accounts Receivable	$          540.00
Cash		$           540.00
(NSF Check)
Bank Charges	$          120.00
Cash		$           120.00
(Bank charges)
Notes Payable	$      2,400.00
Interest Expense	$          200.00
Cash		$       2,600.00
(Payment on notes payable)
Cash	$      8,060.00
Notes Receivable		$       7,500.00
Interest Revenue		$           560.00
(Collection of note)
Cash	$          180.00
Office Supplies		$           180.00
(To rectify error)

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