Question

Question 4

The October 31 bank statement of Spooky Halloween Costumes Ltd. (SHC) has just arrived from TD Bank. To prepare the SHC bank reconciliation, you gather the following data:

• SHC’s Cash account shows a balance of $2,256.14 on October 31.
• The October 31 bank balance is $4,023.05.
• The bank statement shows that SHC earned $38.19 of interest on its bank balance during October. This amount was added to SHC’s bank balance.
• SHC pays utilities of $250 and insurance of $100 by EFT.
• The following SHC cheques did not clear the bank by October 31:

  Cheque #	Amount
  237	$46.10
  288	141.00
  291	578.05
  293	11.87
  294	609.51
  295	8.88
  296	101.63

• The bank statement includes a donation of $850, electronically deposited to the bank for SHC.
• The bank statement lists a $10.50 bank service charge.
• On October 31, the SHC treasurer deposited $16.15, which will appear on the November bank statement.
• The bank statement includes a $300 deposit that SHC did not make. The bank added $300 to SHC’s account for another company’s deposit.
• The bank statement includes two charges for returned cheques from donors. One is a $395 cheque received from a donor with the imprint “Unauthorized Signature.” The other is a nonsufficient funds cheque in the amount of $146.67 received from a client.

Prepare the bank reconciliation for SHC.

Journalize the October 31 transactions needed to update SHC’s Cash account. You do not need to include an explanation for each entry.

Answer 1

Answer:

1) Reconciliation Statement for the month October

Spooky Halloween Costumes Ltd. (SHC)
Bank Reconciliation Statement
for the month October
Particulars	Amount
Cash Account Balance as on Oct 31	$2,256.14
Add: Interest Earned (Added to bank balance but not added to Cash Balance)	$38.19
Less: Utilities of $250 and insurance of $100 paid by EFT (Since EFT only reflect in Bank Statement, it is not deducted from Cash Balance. Now deduct it to reconcile the account)	($350.00)
Add: Check deposited but not clear in bank (Since it is not reduced in bank statement & at the time of deposition in bank we reduced this amount in cash balance now we need to add this amount in cash balance)	$1,497.04
Add: Donation electronically received in bank	$850.00
Less: Bank Service Charges	($10.50)
Less: Treasurer deposited $16.15, which will appear on the November bank statement	($16.15)
Add: Another Company's deposit $300 added in bank but not added in cash balance	$300.00
Less: Charges for returned cheque (deducted from bank balance but not cash balance) ($395 + $146.67)	($541.67)
Bank Balance as on Oct 31	$4,023.05

2) Journal Entries to update the Cash A/c..

Transaction # 3: The bank statement shows that SHC earned $38.19 of interest on its bank balance during October. This amount was added to SHC’s bank balance

Cash A/c Dr.           $38.19

    To Interest Revenue          $38.19

Transaction # 4: SHC pays utilities of $250 and insurance of $100 by EFT

Utilities Expenses Dr.        $250

Insurance Expenses Dr.   $100

   To Cash A/c                                 $350

Transaction 5: cheques did not clear the bank by October 31

Cash A/c ……Dr.    $1,497.04

   To Cheques Presented for Clearance       $1,497.04

Transaction 6: The bank statement includes a donation of $850, electronically deposited to the bank for SHC

Cash A/c   Dr. $850

    To Donation Received    $850

Transaction 7: The bank statement lists a $10.50 bank service charge

Service Charges Dr.      $10.50

     To Cash A/c                      $10.50

Transaction 9: bank statement includes a $300 deposit that SHC did not make. The bank added $300 to SHC’s account for another company’s deposit.

Cash A/c Dr.             $ 300

Receivables Account         $300

Transaction 10: The bank statement includes two charges for returned cheques from donors. One is a $395 cheque received from a donor with the imprint “Unauthorized Signature.” The other is a nonsufficient funds cheque in the amount of $146.67 received from a client

Bank Charges A/c   Dr. $541.67

To Cash A/c                         $541.67