Consider the following situations for Company A: Situation #1: On the June 30 ba
ID: 2493227 • Letter: C
Question
Consider the following situations for Company A:
Situation #1:
On the June 30 bank reconciliation, deposits in transit total $720. During July, the Cash account in the general ledger shows deposits of $15,750. The bank statement for July shows that $15,600 in deposits were received during the month.
Situation #2:
On the June 30 bank reconciliation, outstanding checks were $680. During the month of July, the Cash account in the general ledger shows that $17,200 of checks were issued. The bank statement showed that $16,400 of checks cleared the bank in July.
Situation #3:
In September, deposits per the bank statement totaled $26,700, deposits per books were $25,400, and deposits in transit at September 30 were $2,100.
Situation #4:
In September, cash disbursements per books were $23,700, checks clearing the bank were $25,000, and outstanding checks at September 30 were $2,100.
In all 4 situations, there were no bank debit or credit memos. Also, no Cash account errors were made by either the bank of the company.
In situation #2, the outstanding checks at July 31 were $ ___________.
a. $2,100
b. $1,540
c. $1,480
d. $1,870
e. None of these answers are correct
Explanation / Answer
Answer:
In situation 2:
1. Cheques outstanding as per bank recociliation June 30 = $ 680 (cheques issued by Company not presented in bank);
2. Cheques issued by the Company during July = $ 17,200
3. Cheques cleared by bank in July = $ 16,400
Therefore, outstanding cheques at July 31 = $ 680 + $ 17,200 - $ 16,400 = $ 1,480
Option d. is the correct answer.