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Chapter 6: 1SP_1 (page 315)

SP 6 Santana Rey receives the March bank statement for Business Solutions on April 11, 2018. The March 31 bank statement shows an ending cash balance of \(67,566. A comparison of the bank statement with the general ledger Cash account, No. 101, reveals the following.

a. S. Rey notices that the bank erroneously cleared a \)500 check against her account in March that she did not issue. The check documentation included with the bank statement shows that this check was actually issued by a company named Business Systems.

b. On March 25, the bank lists a \(50 charge for the safety deposit box expense that Business Solutions agreed to rent from the bank beginning March 25.

c. On March 26, the bank lists a \)102 charge for printed checks that Business Solutions ordered from the bank.

d. On March 31, the bank lists \(33 interest earned on Business Solutions’s checking account for the month of March.

e. S. Rey notices that the check she issued for \)128 on March 31, 2018, has not yet cleared the bank.

f. S. Rey verifies that all deposits made in March do appear on the March bank statement.

g. The general ledger Cash account, No. 101, shows an ending cash balance per books of $68,057 as of March 31 (prior to any reconciliation).

Required

1. Prepare a bank reconciliation for Business Solutions for the month ended March 31, 2018.

Short Answer

Expert verified

Answer

The adjusted bank balance and adjusted book balance are $67,210.

Step by step solution

01

Step-by-Step SolutionStep 1: Introduction to topic

Bank Reconciliation- In accounting, bank reconciliation is a process in which the balance as per the accounting records reconcile with the balance as per the bank statement.

02

Statement showing the Bank reconciliation

Bank statement balance$66,866
Book balance$67,340
Add

Add
Bank errorDeposits in Transit480 0
 Bank interest 33______

67,346

67,373
Deduct

Deduct
Outstanding Check 136
Safety deposit Adjusted bank balanceAdjusted book balance$67,210Rental.................………. $53

______


Charge for checks….… $110 163
Adjusted bank balance$67,210

Adjusted book balance

$67,210





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Most popular questions from this chapter

Del Gato Clinic deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on June 30, 2017, its Cash account shows an \(11,589 debit balance. Del Gato Clinic’s June 30 bank statement shows \)10,555 on deposit in the bank. Prepare a bank reconciliation for Del Gato Clinic using the following information:

a. Outstanding checks as of June 30 total \(1,829.

b. The June 30 bank statement lists a \)16 bank service charge.

c. Check No. 919, listed with the cancelled checks, was correctly drawn for \(467 in payment of a utility

bill on June 15. Del Gato Clinic mistakenly recorded it with a debit to Utilities Expense and a credit to Cash in the amount of \)476.

d. The June 30 cash receipts of $2,856 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement.

Good accounting systems help with the management and control of cash and cash equivalents.

3. Identify five principles of effective cash management.

Shamara Systems most recently reconciled its bank balance on April 30 and reported two checks outstanding at that time, No. 1771 for \(781 and No. 1780 for \)1,425.90. The following information is available for its May 31, 2017, reconciliation

From the May 31 Bank Statement PREVIOUS BALANCE TOTAL CHECKS AND DEBITS TOTAL DEPOSITS AND CREDITS CURRENT BALANCE CHECKS AND DEBITS DEPOSITS AND CREDITS 18,290.70 Date 05/01 1771 05/04 No. Amount Date Amount 13,094.80 16,566.80 21,762.70 05/02 1783 05/14 05/04 1782 05/22 1784 05/18 05/26 05/11 05/25 05/25 1787 05/26 1785 05/29 1788 05/31 2,438.00 2,898.00 1,801.80 2,079.00 7,350.00 CM 781.00 382.50 1,285.50 431.80 NSF 8,032.50 63.90 654.00 14.00 SC

From Shamara Systems’s Accounting Records Cash Receipts Deposited Cash Date Debit May 4 2,438.00 14 2,898.00 22 1,801.80 26 2,079.00 31 2,727.30 11,944.10 Cash Disbursements Check Cash No. Credit 1782 1,285.50 1783 382.50 1784 1,449.60 1785 63.90 1786 353.10 1787 8,032.50 1788 644.00 1789 639.50 12,850.60 Cash Acct. No. 101 Date Explanation PR Debit Credit Balance Apr. 30 Balance 16,083.80 May 31 Total receipts R7 11,944.10 28,027.90 31 Total disbursements D8 12,850.60 15,177.30

Additional Information

Check No. 1788 is correctly drawn for \(654 to pay for May utilities; however, the recordkeeper misread the amount and entered it in the accounting records with a debit to Utilities Expense and a credit to Cash for \)644. The bank paid and deducted the correct amount. The NSF check shown in the statement was originally received from a customer, W. Sox, in payment of her account. The company has not yet recorded its return. The credit memorandum (CM) is from a \(7,400 note that the bank collected for the company. The bank deducted a \)50 collection expense and deposited the remainder in the company’s account. The collection and expense have not yet been recorded.

Required

2. Prepare the journal entries (in dollars and cents) to adjust the book balance of cash to the reconciled balance.

Blues Music Center had the following petty cash transactions in March of the current year. March 5 Wrote a \(250 check, cashed it, and gave the proceeds and the petty cashbox to Jen Rouse, the petty cashier.

6 Paid \)12.50 COD shipping charges on merchandise purchased for resale, terms FOB shipping point. Blues uses the perpetual system to account for merchandise inventory.

11 Paid \(10.75 in delivery expense on merchandise sold to a customer, terms FOB destination.

12 Purchased office file folders for \)14.13 that are immediately used.

14 Reimbursed Bob Geldof, the manager, \(11.65 for office supplies purchased and used.

18 Purchased office printer paper for \)20.54 that is immediately used.

27 Paid \(45.10 COD shipping charges on merchandise purchased for resale, terms FOB shipping point.

28 Paid postage expense of \)18.

30 Reimbursed Geldof \(56.80 for mileage expense.

31 Cash of \)61.53 remained in the fund. Sorted the petty cash receipts by accounts affected and

exchanged them for a check to reimburse the fund for expenditures.

31 The petty cash fund amount is increased by \(50 to a total of \)300.

Required

3. Prepare the journal entries (in dollars and cents) for part 2 to both (a) reimburse and (b) increase the fund amount

Choose from the following list of terms/phrases to best complete the following statements.

a. Cash c. Outstanding check e. Bank reconciliation

b. Cash equivalents d. Liquidity f. Current assets

3. The __________ category includes short-term, highly liquid investment assets that are readily convertible to a known cash amount and sufficiently close to their due dates so that their market value is not sensitive to interest rate changes.
See all solutions

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