Question

10 1/13 (Bank Reconciliation and Adiustine Entries) The cash account of Aguilar Co. showed a ledo balance of $3,969.85 on June 30, 2014. The bank statement as of that date showed a balance of $4,150. Upon comparing the statement with the cash records, the following facts were determined. 1. There were bank service charges for June of $25. 2. A bank memo stated that Bao Dai's note for $1,200 and interest of $36 had been collected on June 29, and the bank had made a charge of $5.50 on the collection. (No entry had been made on Aguilar's books when Bao Dai's note was sent to the bank for collection.) 3. Receipts for June 30 for $3,390 were not deposited until July 2. 4. Checks outstanding on June 30 totaled $2,136.05. 5. The bank had charged the Aguilar Co.'s account for a customer's uncollectible check amounting to $253.20 on June 29. 6. A customer's check for $90 had been entered as $60 in the cash receipts journal by Aguilar on June 15. 7. Check no. 742 in the amount of $491 had been entered in the cash journal as $419, and check no. 747 in the amount of $58.20 had been entered as $582. Both checks had been issued to pay for purchases of equipment. Instructions (a) Prepare a bank reconciliation dated June 30, 2014, proceeding to a correct cash balance. (b) Prepare any entries necessary to make the books correct and cominte

Answer 1

Part - A)

The correct cash balance can be computed using both bank balance and book balance.

1). Correct cash balance using bank balance:

= Bank balance + Deposit in transit - Outstanding balance

= $4,150 + $3,390 - $2,136.50

= $5,403.95

2). Correct cash balance using book balance:

= Book balance - Service charges - Charges of note collection - Error corrected in check no. 742 + Error corrected on check no. 747 + Interest revenue + Note collected + Correction in check collected - NSF Check

= $3,969.85 - $25 - $5.50 - ($491 - $419) + ($582 - $58.20) + $1,200 + $36 + ($90 - $60) - $253.20

= $5,403.95

Part - B)

The journal entries required are as follows:

1)

Cash A/c Dr. $1,789.80

To Accounts receivable A/c Cr. $30

To Note receivable A/c Cr. $1,200

To Interest A/c Cr. $36

To Accounts payable A/c Cr. $523.80

Note:

Accounts payable = $582 - $58.20

= $523.80

2)

Accounts receivable A/c Dr. $253.20

Service charge A/c Dr. $30.50

Accounts payable A/c Dr. $72

To Cash A/c Cr. $355.70

Note:

Accounts payable = $491 - $419

= $72