Question

The following information is available to reconcile Branch Company’s book balance of cash with its bank statement cash balance as of July 31, 2017.

a. On July 31, the company’s Cash account has a \(27,497 debit balance, but its July bank statement shows a \)27,233 cash balance.

b. Check No. 3031 for \(1,482 and Check No. 3040 for \)558 were outstanding on the June 30 bank reconciliation. Check No. 3040 is listed with the July canceled checks, but Check No. 3031 is not. Also, Check No. 3065 for \(382 and Check No. 3069 for \)2,281, both written in July, are not among the canceled checks on the July 31 statement.

c. In comparing the canceled checks on the bank statement with the entries in the accounting records, it is found that Check No. 3056 for July rent expense was correctly written and drawn for \(1,270 but was erroneously entered in the accounting records as \)1,250.

d. The July bank statement shows the bank collected \(8,000 cash on a noninterest-bearing note for Branch, deducted a \)45 collection expense, and credited the remainder to its account. Branch had not recorded this event before receiving the statement.

e. The bank statement shows an \(805 charge for a \)795 NSF check plus a \(10 NSF charge. The check had been received from a customer, Evan Shaw. Branch has not yet recorded this check as NSF.

f. The July statement shows a \)25 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received.

g. Branch’s July 31 daily cash receipts of $11,514 were placed in the bank’s night depository on that date but do not appear on the July 31 bank statement.

Required

2. Prepare the journal entries necessary to bring the company’s book balance of cash into conformity with the reconciled cash balance as of July 31, 2017.

Short answer

Rent expense $20 debited; Collection expense $45 debited; Notes receivables $8,000 credited; Accounts Receivable $805 debited; and Miscellaneous Expenses $25 debited.

Step-by-step solution

Introduction to topic

Book Balance: A book balance is a cash balance of an organisation that can be seen from its accounting records. It includes all those transactions that are still not settled through the bank.

Journal entries

Date	Transactions	Debit($)	Credit($)
July 31	Rent Expense	20
	Cash		20
	To correct an entry error.
July 31	Cash	7,955
	Collection Expense	45
	Note Receivable		8,000
	To record note collection less fees.
July31	Accounts Receivable	805
	Cash		805
	To charge account for NSF check plus fees.
July 31	Miscellaneous Expenses	25
	Cash		25
	To record bank service fee.