PR 8-4A Bank reconciliation and entries
The cash account for Bravo Bike Co. at May 1, 2012, indicated a balance of $15,085. During May, the total cash deposited was $75,100 and checks written totaled $69,750. The bank statement indicated a balance of $25,460 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $11,360.
b. A deposit of $9,200, representing receipts of May 31, had been made too late to appear on the bank statement.
c. The bank had collected for Bravo Bike Co. $4,725 on a note left for collection. The face of the note was $4,500.
d. A check for $490 returned with the statement had been incorrectly charged by the bank as $940.
e. A check for $410 returned with the statement had been recorded by Bravo Bike Co. as $140. The check was for the payment of an obligation to Portage Co. on account.
f. Bank service charges for July amounted to $40.
g. A check for $1,100 from Elkhart Co. was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of May 31.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Bravo Bike Co. on May 31, 2012, what amount should be reported as cash?
Answer:
1.
BRAVO BIKE CO.
Bank Reconciliation
May 31, 2012
Balance per bank statement............................................... $25,460
Add: Deposit of May 31, not recorded by bank ................ $ 9,200
Bank error in charging check as $940 instead
of $490 ...................................................................... 450 9,650
$35,110
Deduct outstanding checks................................................ 11,360
Adjusted balance................................................................. $23,750
Balance per company’s records ........................................ $20,435*
Add proceeds of note collected by bank,
including $225 interest.................................................... 4,725
$25,160
Deduct: Check returned because of insufficient funds ... $ 1,100
Bank service charges........................................... 40
Error in recording check ...................................... 270 1,410
Adjusted balance................................................................. $23,750
*Cash balance, May 1 ....................................................... $ 15,085
Plus cash deposited in May............................................ 75,100
Less checks written in May ............................................ (69,750)
Balance per company’s books, May 31 ......................... $ 20,435
2. Cash................................................................................ 4,725
Notes Receivable....................................................... 4,500
Interest Revenue........................................................ 225
Accounts Payable—Portage Co. ................................. 270
Accounts Receivable—Elkhart Co. ............................. 1,100
Miscellaneous Administrative Expense ...................... 40
Cash............................................................................ 1,410
3. $23,750; the adjusted balance from the bank reconciliation should be reported
as cash on the May 31, 2012, balance sheet for Bravo Bike Co.
a. Checks outstanding totaled $11,360.
b. A deposit of $9,200, representing receipts of May 31, had been made too late to appear on the bank statement.
c. The bank had collected for Bravo Bike Co. $4,725 on a note left for collection. The face of the note was $4,500.
d. A check for $490 returned with the statement had been incorrectly charged by the bank as $940.
e. A check for $410 returned with the statement had been recorded by Bravo Bike Co. as $140. The check was for the payment of an obligation to Portage Co. on account.
f. Bank service charges for July amounted to $40.
g. A check for $1,100 from Elkhart Co. was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of May 31.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Bravo Bike Co. on May 31, 2012, what amount should be reported as cash?
Answer:
1.
BRAVO BIKE CO.
Bank Reconciliation
May 31, 2012
Balance per bank statement............................................... $25,460
Add: Deposit of May 31, not recorded by bank ................ $ 9,200
Bank error in charging check as $940 instead
of $490 ...................................................................... 450 9,650
$35,110
Deduct outstanding checks................................................ 11,360
Adjusted balance................................................................. $23,750
Balance per company’s records ........................................ $20,435*
Add proceeds of note collected by bank,
including $225 interest.................................................... 4,725
$25,160
Deduct: Check returned because of insufficient funds ... $ 1,100
Bank service charges........................................... 40
Error in recording check ...................................... 270 1,410
Adjusted balance................................................................. $23,750
*Cash balance, May 1 ....................................................... $ 15,085
Plus cash deposited in May............................................ 75,100
Less checks written in May ............................................ (69,750)
Balance per company’s books, May 31 ......................... $ 20,435
2. Cash................................................................................ 4,725
Notes Receivable....................................................... 4,500
Interest Revenue........................................................ 225
Accounts Payable—Portage Co. ................................. 270
Accounts Receivable—Elkhart Co. ............................. 1,100
Miscellaneous Administrative Expense ...................... 40
Cash............................................................................ 1,410
3. $23,750; the adjusted balance from the bank reconciliation should be reported
as cash on the May 31, 2012, balance sheet for Bravo Bike Co.
