Question

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $97,456. The bank statement indicated a balance of $127,960 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $30,050.
b. A deposit of $19,720, representing receipts of June 30, had been made too late to appear on the bank statement.
c. The bank collected $22,149 on a $20,700 note, including interest of $1,449.
d. A check for $1,450 returned with the statement had been incorrectly recorded by Pala Medical Co. as $145. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.
e. A check drawn for $290 had been erroneously charged by the bank as $920.
f. Bank service charges for June amounted to $40.

Required:
a. Prepare a bank reconciliation.
b. Journalize the necessary entries.
c. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?

Answer 1

Answer:

a.

cash account balance $97,456

note collected by bank $22,149

error in journalizing check ($1,305)

bank service charges ($40)

reconciled cash balance $118,260

bank account balance $127,960

outstanding checks ($30,050)

deposit in transit $19,720

error in processing check $630

reconciled bank balance $118,260

b.

Dr Cash 22,149

    Cr Notes receivable 20,700

    Cr Interest revenue 1,449

Dr Accounts payable 1,305

    Cr Cash 1,305

Dr Bank fees expense 40

    Cr Cash 40

c. cash balance $118,260