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Bank reconciliation and entries The cash account for Brentwood Bike Co. at May 1, 2016, indicated a balance of $34,250. During May, the total cash deposited was $140,500, and checks written totaled $138,880. The bank statement indicated a balance of $43,525 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items: a. Checks outstanding totaled $6,440. b. A deposit of $ 1,850 representing receipts of May 31, had been made too late to appear on the bank statement. c. The bank had collected for Brentwood Bike Co. $5,250 on a note left for collection. The face of the note was $5,000. d. A check for $390 returned with the statement had been incorrectly charged by the bank as $930. e. A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as Si20. The check was for the payment of an obligation to Adkins Co. on account. f. Bank service charges for May amounted to $30. g. A check for $1,325 from Jennings Co. was returned by the bank due to insufficient funds. Instructions 1. Prepare a bank reconciliation as of May 31. 2. Journalize die necessary entries. The accounts have not been closed. 3. If a balance sheet were prepared for Brentwood Bike Co. on May 31. 2016, what amount should be reported as cash?

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Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307

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BuyFindarrow_forward

Financial & Managerial Accounting

13th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781285866307
Chapter 7, Problem 7.4APR
Textbook Problem
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Bank reconciliation and entries

The cash account for Brentwood Bike Co. at May 1, 2016, indicated a balance of $34,250. During May, the total cash deposited was $140,500, and checks written totaled $138,880. The bank statement indicated a balance of $43,525 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

a. Checks outstanding totaled $6,440.

b. A deposit of $ 1,850 representing receipts of May 31, had been made too late to appear on the bank statement.

c. The bank had collected for Brentwood Bike Co. $5,250 on a note left for collection. The face of the note was $5,000.

d. A check for $390 returned with the statement had been incorrectly charged by the bank as $930.

e. A check for $210 returned with the statement had been recorded by Brentwood Bike Co. as Si20. The check was for the payment of an obligation to Adkins Co. on account.

f. Bank service charges for May amounted to $30.

g. A check for $1,325 from Jennings Co. was returned by the bank due to insufficient funds.

Instructions

1. Prepare a bank reconciliation as of May 31.

2. Journalize die necessary entries. The accounts have not been closed.

3. If a balance sheet were prepared for Brentwood Bike Co. on May 31. 2016, what amount should be reported as cash?

(a)

To determine

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.

To prepare: Bank reconciliation of Company BB as at May 31, 2016.

Explanation of Solution

  • The deposits which are not recorded by the bank are referred to as deposits in transit. Since the deposits in transit are not reflected on the bank statement, the company should add deposits in transit to cash balance per bank, while preparation of bank reconciliation statement.
  • Outstanding checks are the checks that are issued by the company, but not yet paid by the bank. When the check is issued for payment, the company deducts the cash balance immediately. But the bank deducts only when the cash is paid for the issued check...

(b)

To determine

To prepare: Adjusting journal entries for Company BB

(c)

To determine

To report:  Amount of cash in the balance sheet on May 31, 2016.

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Chapter 7 Solutions

Financial & Managerial Accounting
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Ch. 7 - Internal control element Identify each of the...Ch. 7 - Internal control elements Identify each of the...Ch. 7 - Items on company's bank statement The following...Ch. 7 - Items on companys bank statement The following...Ch. 7 - Bank reconciliation The following data were...Ch. 7 - Bank reconciliation The following data were...Ch. 7 - Petty cash fund Prepare journal entries for each...Ch. 7 - Petty cash fund Prepare journal entries for each...Ch. 7 - Ratio of cash to monthly cash expenses Financial...Ch. 7 - Ratio of cash to monthly cash expenses Financial...Ch. 7 - Sarbanes-Oxley internal control report Using...Ch. 7 - Internal Controls Faith Cassen has recently been...Ch. 7 - Internal Controls Ramonas Clothing is a retail...Ch. 7 - Internal Controls for bank lending Pacific Bank...Ch. 7 - Internal Controls One of the largest losses in...Ch. 7 - Internal controls An employee of JHT Holdings,...Ch. 7 - Internal controls All-Around Sound Co. discovered...Ch. 7 - Financial statement fraud A former chairman, CFO,...Ch. 7 - Internal control of cash receipts The procedures...Ch. 7 - Internal control of cash receipts Sergio Flores...Ch. 7 - Internal control of cash receipts The mailroom...Ch. 7 - Entry for cash sales; cash short The actual cash...Ch. 7 - Entry for cash sales; cash over The actual cash...Ch. 7 - Internal control of cash payments Abbe Co. is a...Ch. 7 - Internal control of cash payments Paragon Tech...Ch. 7 - Bank reconciliation Identify each of the following...Ch. 7 - Entries based on bank reconciliation Which of the...Ch. 7 - Bank reconciliation The following data were...Ch. 7 - Entries for bank reconciliation Using the data...Ch. 7 - Entries for note collected by bank Accompanying a...Ch. 7 - Bank reconciliation An accounting clerk for...Ch. 7 - Bank reconciliation Identify the errors in the...Ch. 7 - Using bank reconciliation to determine cash...Ch. 7 - Petty cash fund entries Journalize the entries to...Ch. 7 - Variation in cash flows Mattel, Inc., designs,...Ch. 7 - Cash to monthly cash expenses ratio During 2016,...Ch. 7 - Cash to monthly cash expenses ratio Capstone...Ch. 7 - Cash to monthly cash expenses ratio Amicus...Ch. 7 - Evaluating internal control of cash T he following...Ch. 7 - Transactions for petty each, cash short and over...Ch. 7 - Bank reconciliation and entries The cash account...Ch. 7 - Bank reconciliation and entries The cash account...Ch. 7 - Bank reconciliation and entries Beeler Furniture...Ch. 7 - Evaluating internal control of cash The following...Ch. 7 - Transactions for petty cash, cash short and over...Ch. 7 - Bank reconciliation and entries The cash account...Ch. 7 - Bank reconciliation and entries The cash account...Ch. 7 - Bank reconciliation and entries Sunshine Interiors...Ch. 7 - Ethics and professional conduct in business During...Ch. 7 - Internal controls The following is an excerpt from...Ch. 7 - Internal controls The following is an excerpt from...Ch. 7 - Ethics and professional conduct in business Doris...Ch. 7 - Bank reconciliation and internal control The...Ch. 7 - Cash to monthly cash expenses ratio TearLab Corp....

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