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Chapter 6: 6QS_e (page 306)

Nolan Company 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 a \(22,352 debit balance. Nolan’s June 30 bank statement shows \)21,332 on deposit in the bank. Prepare a bank reconciliation for the company using the following information.
e. The bank statement included a $23 credit for interest earned on the company’s cash in the bank.

Short Answer

Expert verified

Answer

Add $23 is the book balance as interest earned.

Step by step solution

01

Step-by-Step SolutionStep 1: Meaning of Bank Reconciliation Statement

A bank reconciliation statement is prepared to reconcile the entity's bank balance as per the bank account with the balance as per their records.

02

Bank Reconciliation Statement-

Book Balance

Add:

Interest earned

$23

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Most popular questions from this chapter

When a store purchases merchandise, why are individual departments not allowed to directly deal with suppliers?

Nolan Company 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 a \(22,352 debit balance. Nolan’s June 30 bank statement shows \)21,332 on deposit in the bank. Prepare a bank reconciliation for the company using the following information.

c. In reviewing the bank statement, a \(90 check written by the company was mistakenly recorded in the company’s books at \)99.

An internal control system consists of all policies and procedures used to protect assets, ensure reliable accounting, promote efficient operations, and urge adherence to company policies. Evaluate each of the following statements and indicate which are true and which are false regarding the objectives of an internal control system.

4. Separating the responsibility for a transaction between two or more individuals or departments will not help prevent someone from creating a fictitious invoice and paying the money to herself or himself.

What internal control procedures would you recommend in each of the following situations?

1. A concession company has one employee who sells towels, coolers, and sunglasses at the beach. Each day, the employee is given enough towels, coolers, and sunglasses to last through the day and enough cash to make change. The money is kept in a box at the stand.

Kiona Co. set up a petty cash fund for payments of small amounts. The following transactions involving the petty cash fund occurred in May (the last month of the company’s fiscal year).May 1 Prepared a company check for \(300 to establish the petty cash fund.15 Prepared a company check to replenish the fund for the following expenditures made since May 1.

a. Paid \)88 for janitorial expenses.

b. Paid \(53.68 for miscellaneous expenses.

c. Paid postage expenses of \)53.50.

d. Paid \(47.15 to The County Gazette (the local newspaper) for advertising expense.

e. Counted \)62.15 remaining in the petty cashbox.

16 Prepared a company check for \(200 to increase the fund to \)500.

31 The petty cashier reports that \(288.20 cash remains in the fund. A company check is drawn to replenish the fund for the following expenditures made since May 15.

f. Paid postage expenses of \)147.36.

g. Reimbursed the office manager for mileage expense, \(23.50.

h. Paid \)34.75 in delivery expense for products to a customer, terms FOB destination.

31 The company decides that the May 16 increase in the fund was too large. It reduces the fund by \(100, leaving a total of \)400.

Required

Analysis Component

2. Explain how the company’s financial statements are affected if the petty cash fund is not replenished and no entry is made on May 31.

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