Question

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,350. During May, the total cash deposited was $66,800 and checks written totaled $62,020. The bank statement indicated a balance of $22,650 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

Checks outstanding totaled $10,090.

A deposit of $8,220, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,340 on a note left for collection. The face of the note was $4,010.

A check for $270 returned with the statement had been incorrectly charged by the bank as $720.

A check for $970 returned with the statement had been recorded by Brentwood Bike Co. as $790. The check was for the payment of an obligation to Adkins Co. on account.

Bank service charges for May amounted to $60.

A check for $1,000 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	$
Add bank error in charging check as $720 instead of $270
		$
Deduct bank service charges
Adjusted balance		$
Cash balance according to company's records		$
Add note and interest collected by bank
		$
Deduct bank error in charging check as $720 instead of $270	$
Deduct bank service charges
Deduct error in recording check
Adjusted balance		$

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

a. May 31
b. May 31

3. If a balance sheet were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Answer 1

1
Brentwood Bike Co.
Bank Reconciliation
May 31
Cash balance according to bank statement		22650
Add deposit of May 31, not recorded by bank	8220
Add bank error in charging check as $720 instead of $270	450	8670
		31320
Deduct outstanding checks		10090
Adjusted balance		21230
Cash balance according to company's records		18130
Add note and interest collected by bank		4340
		22470
Deduct: Check returned because of insufficient funds	1000
Deduct:Bank service charges	60
Deduct:Error in recording check	180	1240
Adjusted balance		21230
2
	Debit	Credit
Cash	4340
Notes Receivable		4010
Interest Revenue		330
Accounts Payable-Adkins Co.	180
Accounts Receivable-Jennings Co.	1000
Miscellaneous expense	60
Cash		1240
3
Amount reported as Cash $21230