Question

The cash records and bank statement for the month of May for Diaz Entertainment are shown below. DIAZ ENTERTAINMENT Cash Account Records May 1, 2018, to May 31, 2018 Cash Balance Cash Balance - May 31, 2018 May 1, 2018Deposits $5,420 $11,340 $5.380 Date Desc. Date No 5/7 471Legal tees 5/12 472 Property tax 515 473 Salaries 5/22 474 Advertising 5/30 475 Supplies 5/31 476 Salaries 5/3 S 1,320 $ 1160 1.530 3.460 1360 2,380 2.850 3,040 3.460 $11,340 $11,380 PO. Box 162647 Bowlegs, OK 74830 (405) 369-CASH MIDWEST BANK Looking Out For You Member FDIC Account Holder Diaz Entertalnment 124 Saddle Blvd. Bowlegs, OK 74830 Account Number 7772854360 Statement Date: May 31, 2018 Beginning Balance May 1, 2018 S 6,120 Deposits and Credits and Deblts Ending Balance May 31, 2018 $ 6,716 $9.562 $ 8,966 Deposits and Credits Withdrawals and Debits Daily Balance Amount Amount Desc. Date 1320 DEP 1750 DEP 2.380 DEP 200 NOTE 5/11 469 $ 410 CHK 51 290 CHK 52 1160 CHK 5/4 260 NSF 5/9 1530 CHK 511 3.460 CHK 5/12 460 EFT 518 1360 CHK 5/20 $ 5,710 5,420 6,740 5.580 7070 5/18 5/20 5/20 46 2.850 DEP 5/12 518 4.460 5.246 6,736 $ 6,716 6 INT 5V25 36 S 5/25 $ 9.562 $8,966 Desc. DEP Customer deposit INT Interest earned CHK Customer check SF Service fees NSF Nonsufficient funds NOTE Note collected EFT Electronic funds transfer Desc. DEP Customer deposit INT Interest earned CHK Customer check SF Service fees NSF Nonsufficient funds NOTE Note collected EFT Electronic funds transfer Additional information a. The difference in the beginning balances in the company's records and the bank statement relates to checks #469 and #470, which are outstanding as of April 30, 2018 (prior month). b. The bank made the EFT on May 20 in error. The bank accidentally charged Diaz for payment that should have been made on another account

Prepare a bank reconciliation for Diaz's checking account on May 31, 2018 and record the necessary cash adjustments in journal seen in image.

Answer 1

Solution:

Diaz Entertainment
Bank Reconciliation - May 31, 2018
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$6,716.00	Ending Balance as per cash books	$5,380.00
Additions:		Additions:
Outstanding Deposits	$3,040.00	Interest earned	$16.00
Bank Error	$460.00	Note collection (Including interest)	$1,246.00
Deductions:		Deductions:
Outstanding Checks	-$3,870.00	NSF Cheque	-$260.00
		Service charge	-$36.00
Up to date cash balance as per bank	$6,346.00	Up to date cash balance as per books	$6,346.00

Journal Entries - Diaz Entertainment
Date	Particulars	Debit	Credit
31-May	Cash Dr	$1,286.00
	To Note receivables		$1,200.00
	To Interest revenue		$62.00
	(To record note and interest collection by bank)
31-May	Accounts receivables Dr	$260.00
	Service fees expense Dr	$36.00
	To Cash		$296.00
	(To record NSF check and service charges)