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Bank reconciliation and entries Sunshine Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of July 31, 20Y0, have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account. BANK RECONCILIATION FOR PRECEDING MONTH: JULY BANK STATEMENT: Instructions 1. Prepare a bank reconciliation as of July 31, 20Y0. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales. All checks are written to satisfy accounts payable. 2. Journalize the necessary entries. The accounts have not been closed. 3. What is the amount of cash that should appear on the balance sheet as of July 31, 20Y0? 4. Assume that a canceled check for $180 has been incorrectly recorded by the bank as $1,800. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.

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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 5PB
Textbook Problem
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Bank reconciliation and entries

Sunshine Interiors deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of July 31, 20Y0, have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account.

Chapter 7, Problem 5PB, Bank reconciliation and entries Sunshine Interiors deposits all cash receipts each Wednesday and , example  1

BANK RECONCILIATION FOR PRECEDING MONTH:

Chapter 7, Problem 5PB, Bank reconciliation and entries Sunshine Interiors deposits all cash receipts each Wednesday and , example  2

JULY BANK STATEMENT:

Chapter 7, Problem 5PB, Bank reconciliation and entries Sunshine Interiors deposits all cash receipts each Wednesday and , example  3

Instructions

  1. 1. Prepare a bank reconciliation as of July 31, 20Y0. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales. All checks are written to satisfy accounts payable.
  2. 2. Journalize the necessary entries. The accounts have not been closed.
  3. 3. What is the amount of cash that should appear on the balance sheet as of July 31, 20Y0?
  4. 4. Assume that a canceled check for $180 has been incorrectly recorded by the bank as $1,800. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.

(1)

To determine

Prepare the Bank reconciliation of Company SI as at July 31, 20Y5.

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.

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

  • ■ Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
  • ■ Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare bank reconciliation of Company SI as at July 31, 20Y5.

Company SI
Bank Reconciliation
July 31, 20Y5
ParticularsAmount ($)Amount ($)
Cash balance as per bank statement 11,601.41
Add:   
Deposit of July 31, not recorded by bank 1,177.84
Less: Outstanding checks   
No : 613137.50 
No : 628837.70 
No : 633310.081,285,.28
Adjusted cash balance per bank 11,494.00
   
Cash balance as per books 7,664.00
Add:   
Notes and interest receivable collected by bank4,160.00 
Error in July 23 deposit 18.00 
Error in recording check no.627 63.004,241.00
Less:   
Checks returned because of insufficient funds  375.00 
Bank service charges 36...

(2)

To determine

Prepare the adjusting journal entries for Company SI.

(3)

To determine

Determine the amount of cash in the balance sheet on June 30.

(4)

To determine

Explain the manner in which the error should be included in the bank reconciliation and the manner in which it should be corrected.

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Chapter 7 Solutions

Financial And Managerial Accounting
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