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Bank reconciliation The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6: 1. Cash balance according to the company’s records at August 31, $42,920. 2. Cash balance according to the bank statement at August 31, $56,300. 3. Checks outstanding, $25,390. 4. Deposit in transit not recorded by bank, $13,325. 5. A check for $150 in payment of an account was erroneously recorded in the check register as $1,500. 6. Bank debit memo for service charges, $35. a. Prepare a bank reconciliation, using the format shown in Exhibit 13. b. If the balance sheet were prepared for Creative Design Co. on August 31, what amount should be reported for cash? c. Must a bank reconciliation always balance (reconcile)?

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Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663

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Chapter
Section
BuyFindarrow_forward

Financial And Managerial Accounting

15th Edition
WARREN + 1 other
Publisher: Cengage Learning,
ISBN: 9781337902663
Chapter 7, Problem 18E
Textbook Problem
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Bank reconciliation

The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:

  1. 1. Cash balance according to the company’s records at August 31, $42,920.
  2. 2. Cash balance according to the bank statement at August 31, $56,300.
  3. 3. Checks outstanding, $25,390.
  4. 4. Deposit in transit not recorded by bank, $13,325.
  5. 5. A check for $150 in payment of an account was erroneously recorded in the check register as $1,500.
  6. 6. Bank debit memo for service charges, $35.
  7. a. Prepare a bank reconciliation, using the format shown in Exhibit 13.
  8. b. If the balance sheet were prepared for Creative Design Co. on August 31, what amount should be reported for cash?
  9. c. Must a bank reconciliation always balance (reconcile)?

a.

To determine

Compute the adjusted balance on the bank reconciliation.

Explanation of Solution

Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare bank reconciliation statement of Company CD.

Company CD
Bank Reconciliation Statement
August 31, 20Y6
ParticularsAmount ($)Amount ($)
Cash balance according to bank statement $56,300
Adjustments: 

b.

To determine

Compute the amount of cash to be shown by Company CD on the balance sheet.

c.

To determine

Comment on the balances always being reconciled in the bank reconciliation.

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Chapter 7 Solutions

Financial And Managerial Accounting
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