Question

ranson Company received its bank statement for the month ending May 31, 2022, and reconciled the statement balance to the May 31, 2022, balance in the Cash account. The reconciled balance was determined to be $36,400. The reconciliation recognized the following items:

1. A deposit made on May 31 for $22,700 was included in the Cash account balance but not in the bank statement balance.

2. Checks issued but not returned with the bank statement were Number 673 for $4,550 and Number 687 for $9,700.

3. Bank service charges shown as a deduction on the bank statement were $110.

4. Interest credited to Branson Company's account but not recorded on the company's books amounted to $88.

5. Returned with the bank statement was a "debit memo" stating that a customer's check for $3,240 that had been deposited on May 23 had been returned because the customer's account was overdrawn.

6. During a review of the checks that were returned with the bank statement, it was noted that the amount of check Number 681 was $680 but that in the company's records supporting the Cash account balance, the check had been erroneously recorded in the amount of $68.

Required:

Prepare the Bank reconciliation statement for the month ending May 31, 2022.

Note: Total the entries of the same account together, when entering in the bank reconciliation statement.

Answer 1

To reconcile the bank statement balance to the Cash account balance, let's go through the items provided:

1. Deposit made on May 31: This deposit of $22,700 was included in the Cash account balance but not in the bank statement balance. We need to add this amount to the bank statement balance.

Bank Statement Balance: $36,400 + $22,700 = $59,100

2. Checks issued but not returned: Two checks, Number 673 for $4,550 and Number 687 for $9,700, were issued but not yet returned by the bank. We need to deduct these amounts from the bank statement balance.

Bank Statement Balance: $59,100 - $4,550 - $9,700 = $44,850

3. Bank service charges: The bank statement shows a deduction of $110 for bank service charges. We need to deduct this amount from the bank statement balance.

Bank Statement Balance: $44,850 - $110 = $44,740

4. Interest credited to Branson Company's account: The bank statement shows interest credited to the company's account in the amount of $88. Since this amount was not recorded in the company's books, we need to add it to the bank statement balance.

Bank Statement Balance: $44,740 + $88 = $44,828

5. Returned customer's check: The bank statement indicates that a customer's check for $3,240, which had been deposited on May 23, was returned due to an overdrawn account. Since the check was previously included in the bank statement balance, we need to deduct this amount.

Bank Statement Balance: $44,828 - $3,240 = $41,588

6. Erroneous recording of check Number 681: The check was recorded in the company's records supporting the Cash account balance as $68, but it should have been $680. We need to adjust the Cash account balance by $612 (difference between $680 and $68).

Cash Account Balance: $36,400 + $22,700 - $612 = $58,488

After reconciling the bank statement balance and the Cash account balance, we find the following:

Bank Statement Balance: $41,588 Cash Account Balance: $58,488

Based on this reconciliation, the bank statement balance differs from the Cash account balance. It's important to investigate and identify the reasons for these discrepancies, as they could indicate errors or issues that need to be resolved.