Bank Reconciliation and Entries The cash account for Brentwood Bike Co. at May 1

Question

Bank Reconciliation and Entries

The cash account for Brentwood Bike Co. at May 1 indicated a balance of $13,040. During May, the total cash deposited was $64,720 and checks written totaled $60,090. The bank statement indicated a balance of $21,940 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

Checks outstanding totaled $9,770.

A deposit of $7,960, representing receipts of May 31, had been made too late to appear on the bank statement.

The bank had collected for Brentwood Bike Co. $4,210 on a note left for collection. The face of the note was $3,880.

A check for $490 returned with the statement had been incorrectly charged by the bank as $940.

A check for $850 returned with the statement had been recorded by Brentwood Bike Co. as $580. The check was for the payment of an obligation to Adkins Co. on account.

Bank service charges for May amounted to $60.

A check for $970 from Jennings 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 (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Brentwood Bike Co. on May 31, what amount should be reported as cash?
$

Brentwood Bike Co. Bank Reconciliation May 31 Cash balance according to bank statement $ Add deposit of May 31, not recorded by bank $ Add bank error in charging check as $940 instead of $490 $ Deduct outstanding checks Adjusted balance $ Cash balance according to company's records $ Add note and interest collected by bank $ Deduct bank error in charging check as $940 instead of $490 $ Deduct bank service charges Deduct error in recording check Adjusted balance $

Explanation / Answer

1. Bank Reconciliation as of may 1 is as prepared below:

2.

Journal entries

3. Amount reported as cash in the balance sheet will be $20,580

Brentwood Bike Co. Bank Reconciliation May-31 Particulars Amount ($) Amount ($) Cash balance according to Bank Statement 21,940 Add: Deposit of May 31, not recorded by Bank 7,960 Bank Error in charging check $940 instead of $490 450 8,410 Less: outstanding checks: 9,770 Adjusted cash balance per bank 20,580 Cash balance according to company's records (13,040+64,720-60,090) 17,670 Add: Proceeds of note collected by bank , including $330 interest 4,210 4,210 Less: Check returned because of insufficient funds 970 Error in recording check 270 Bank Service charges 60 1,300 Adjusted cash balance as per books 20,580

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