Question

Gibson Energy Ltd.’s general ledger account for Cash in Bank showed the following at December 31, 2019:

Answer 1

Answer:

1. Adjusted cash balance = Adjusted bank statement balance = $133,620.

2. See the adjusting journal entries and explanation in part 2. below.

Explanation:

Note: The data in the question are merged and they are first sorted in the attached excel file before the questions are answered as follows:

1. Complete the bank reconciliation at December 31, 2019.

The bank reconciliation is presented in two ways as follows:

a) Starting with cash book balance

Gibson Energy Ltd.

Bank Reconciliation  

at 31 December 2019  

Particulars                                                                  Amount ($)    

Cash book bal. at 31 Dec. yet to be reconciled          62,000

Add:

Collected note receivable from XYZ Corp                  80,000

Less:  

Dishonored NSF check                                                 (7,000)

Overdraft interest expense                                            (1,320)

Bank service charge                                                         (60)  

Adjusted cash balance at Dec 31                             133,620  

b) Starting with bank statement balance

Gibson Energy Ltd.

Bank Reconciliation  

at 31 December 2019  

Particulars                                                                       Amount ($)    

Bank statement bal. at Dec 31 yet to reconciled              131,620

Add:  

Cash deposited on December 9th yet be credited          85,000

Cash deposited on December 31 yet be credited            15,000

Check #52094 wrongly drawn                                           62,000

Less:

Outstanding checks 233                                                    (83,000)

Outstanding checks 239                                                    (77,000)  

Adjusted bank statement balance at Dec. 31                 133,620  

2. Prepare the adjusting journal entries required to make the Cash in Bank account in the general ledger agree with the adjusted cash balance on the December 31 bank reconciliation. Include descriptions.

Date      Accounts title & explanation              DR ($)           CR ($)  

31 Dec 19    Cash                                                80,000  

                   Note Receivable                                                     78,049

                   Interest on note receivable                                       1,951

                  (To record note receivable & int. collected from XYZ)    

31 Dec 19   Overdraft interest expense                1,320

                  Service charge                                        60

                  Cash                                                                           1,380

                   (To record interest expense and bank charges)                  

31 Dec 19   Account Receivable                           7,000

                    Cash                                                                           7,000

                  (To record NSF check dishonored)                                      

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