Question

Bank Reconciliation and Entries

The cash account for American Medical Co. at April 30 indicated a balance of $11,320. The bank statement indicated a balance of $13,120 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

1. Checks outstanding totaled $4,720.
2. A deposit of $4,920, representing receipts of April 30, had been made too late to appear on the bank statement.
3. The bank collected $2,560 on a $2,430 note, including interest of $130.
4. A check for $770 returned with the statement had been incorrectly recorded by American Medical Co. as $700. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
5. A check drawn for $50 had been erroneously charged by the bank as $500.
6. Bank service charges for April amounted to $40.

Required:

1. Prepare a bank reconciliation.

Answer 1

1. Bank reconciliation:

Balance as per cash account		11,320.00
Add: Receivables collected by bank	2,430.00
Add: Interest	130.00	2,560.00
		13,880.00
Deduct: Incorrect recording of check (770-700)	70.00
Deduct: Bank service charge	40.00	110.00
Adjusted balance		13,770.00
Balance as per bank		13,120.00
Add: deposits of 4920	4,920.00
Add: Erronous charge (500-50)	450.00	5,370.00
		18,490.00
Deduct: Checks outstanding	4,720.00	4,720.00
Adjusted balance		13,770.00