Question

Bank Reconciliation

The following information is available to assist you in preparing a bank reconciliation for Karen's Catering on March 31:

1. The balance on the March 31 bank statement is $6,506.10.
2. Not included on the bank statement is a $423 deposit made by Karen's late on March 31.
3. A comparison between the canceled checks listed on the bank statement and the company records indicated that the following checks are outstanding at March 31:
   

   No. 112	$42.92
   No. 117	307.00
   No. 120	10.58
   No. 122	73.58

4. The bank acts as a collection agency for checks returned for insufficient funds. The March bank statement indicates that one such check in the amount of $45.00 was collected and deposited and a collection fee of $2.18 was charged.
5. Interest earned on the checking account and added to Karen's account during March was $4.30. Miscellaneous bank service charges amounted to $22.
6. A comparison between the deposits listed on the bank statement and the company's books revealed that a customer's check in the amount of $1,250 appears on the bank statement in March but was never added to the customer's account on the company's books.
7. The comparison of checks cleared per the bank statement with those per the books revealed that the wrong amount was charged to the company's account for a check. The amount of the check was $990. The proof machine encoded the check in the amount of $909, the amount charged against the company's account.

Required:

Enter all amounts rounded to the nearest cent.

1. Determine the balance on the books before any adjustments as well as the corrected balance to be reported on the balance sheet.

Karen's Catering
Bank Reconciliation
March 31
Balance per bank statement, March 31			$
Deduct:
No. 112	$
No. 117
No. 120
No. 122		$
Adjusted balance, March 31			$
Balance per books, March 31			$
		$
		$
Adjusted balance, March 31			$

2. What should Karen, the owner of Karen's Catering, do as a result of the bank error and why?

1. It is illegal for her to not tell the bank about the error and she could face jail time and penalties.
2. It is unethical for her not to tell the bank and payee about the error and to pay the amount owed.
3. Since the bank made the error, the bank has to absorb the cash they did not charge her account for.
4. It is neither illegal nor unethical to wait to see if the bank catches its error.

Answer 1

Karen catering BRS
Cash Balance according to statement		6506.1
Add: Deposit in transit		423
Less:- Outstanding Checks
No. 112	42.92
No. 117	307
No. 120	10.58
No. 122	73.58
		434.08
Adjusted Balance		6495.02
Cash Balance according to books		5300.9	Answer
Add:-			( 6495.02 + 103 - 1297.12 )
Note collection net of fee ( 45 - 2.18 )	42.82
Interest	4.3
Deposit by customer	1250	1297.12
Less:-
Service charges	22
Error ( 990 - 909 )	81	103
Adjusted Balance		6495.02	( taken from above )
Answer 2 - Option b is correct
as it is expected from Karen to tell the bank about the error.
It is not legally binding but it will display his sincerity and honesty.