On August 31, 2019, the balance in the checkbook and the Cash account of the Dry Creek Bed and Breakfast was $12,316. The balance shown on the bank statement on the same date was $13,217. NotesThe firm’s records indicate that a $1,490 deposit dated August 30 and a $705 deposit dated August 31 do not appear on the bank statement.A service charge of $7 and a debit memorandum of $340 covering an NSF check have not yet been entered in the firm’s records. (The check was issued by Art Corts, a credit customer.)The following checks were issued but have not yet been paid by the bank:  Check 712,$114 Check 713,$129 Check 716,$242 Check 736,$581 Check 739,$82 Check 741,$124    A credit memorandum shows that the bank collected a $2,104 note receivable and interest of $67 for the firm. These amounts have not yet been entered in the firm’s records. Required:Prepare a bank reconciliation statement for the firm as of August 31.Record general journal entries for items on the bank reconciliation statement that must be journalized.Analyze:What effect did the journal entries recorded as a result of the bank reconciliation have on the fundamental accounting equation?

Question
Asked Nov 15, 2019
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On August 31, 2019, the balance in the checkbook and the Cash account of the Dry Creek Bed and Breakfast was $12,316. The balance shown on the bank statement on the same date was $13,217.

 

Notes

  1. The firm’s records indicate that a $1,490 deposit dated August 30 and a $705 deposit dated August 31 do not appear on the bank statement.
  2. A service charge of $7 and a debit memorandum of $340 covering an NSF check have not yet been entered in the firm’s records. (The check was issued by Art Corts, a credit customer.)
  3. The following checks were issued but have not yet been paid by the bank:
     
 
Check 712, $ 114  
Check 713, $ 129  
Check 716, $ 242  
Check 736, $ 581  
Check 739, $ 82  
Check 741, $ 124  

 

  

  1. A credit memorandum shows that the bank collected a $2,104 note receivable and interest of $67 for the firm. These amounts have not yet been entered in the firm’s records.
     

Required:

  1. Prepare a bank reconciliation statement for the firm as of August 31.
  2. Record general journal entries for items on the bank reconciliation statement that must be journalized.


Analyze:
What effect did the journal entries recorded as a result of the bank reconciliation have on the fundamental accounting equation?

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Expert Answer

Step 1

1.

 

Prepare the bank reconciliation statement:

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DRY CREEK BED AND BREAKFAST Bank Reconciliation August 31, 2019 Bank's Cash Balance Company's Cash Balance Particulars Amount Particulars Amount $13,217 Per general Ledger $2,195 $12,316 Per Bank Statement Service charges Deposits outstanding Checks outstanding ($7) ($340) $2,104 ($1,272) NSF Check Notes receivable Interest earned $67 Bank balance per Company balance per reconciliation $14,140 S14,140 reconciliation Working notes Particulars Amount Deposit on August 30 Deposit on August 31 Deposits outstanding $1,490 $705 $2,195 Particulars Amount $114 Check 712 Check 713 $129 $242 Check 716 $581 Check 736 Check 739 $82 $124 Check 741 Checks outstanding S1,272

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Step 2

2.

 

Journalize the entries:

...
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Date Description Debit Credit Service charges $7 $7 Cash (To record the service charges) $340 Accounts receivable Cash $340 (To record the NSF charges) $2,171 Cash $2,104 Note Receivable $67 Interest earned (To record the notes receivable)

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Bank Reconciliation

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