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Bank reconciliation and entries Beeler Furniture Company 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 June 30, 20Y2, 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. CASH ACCOUNT: Balance as of June 1 $9,517.40 CASH RECEIPTS FOR MONTH OF JUNE 9,223.76 DUPLICATE DEPOSIT TICKETS: Date and amount of each deposit in June: CHECKS WRITIEN: Number and amount of each check issued in June: BANK RECONCILIATION FOR PRECEDING MONTH: Beeler Furniture Company Bank Reconciliation May 31,20Y2 Cash balance according to bank statement $9,447.20 Adjustments: Deposit of May 31 not recorded by bank $ 690.25 Outstanding Check No. 731 (162.15) Outstanding Check No. 736 (345.95) Outstanding Check No. 738 (251.40) Outstanding Check No. 739 (60.55) Total adjustments (129.80) Adjusted balance $9,317.40 Cash balance according to company’s records $9,352.50 Adjustments: Bank service charges (35.10) Adjusted balance $9,317.40 JUNE BANK STATEMENT: Instructions 1. Prepare a bank reconciliation as of June 30, 20Y2. 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. 3. What is the amount of cash that should appear on the balance sheet as of June 30, 20Y2? 4. Assume that a canceled check for $390 has been incorrectly recorded by the bank as $930. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.

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Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207

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Chapter
Section
BuyFindarrow_forward

Financial & Managerial Accounting

14th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337119207
Chapter 7, Problem 7.5APR
Textbook Problem
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Bank reconciliation and entries

Beeler Furniture Company 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 June 30, 20Y2, 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.

CASH ACCOUNT:  
Balance as of June 1 $9,517.40
CASH RECEIPTS FOR MONTH OF JUNE 9,223.76
DUPLICATE DEPOSIT TICKETS:  
Date and amount of each deposit in June:  

Chapter 7, Problem 7.5APR, Bank reconciliation and entries Beeler Furniture Company deposits all cash receipts each Wednesday , example  1

CHECKS WRITIEN:

Number and amount of each check issued in June:

Chapter 7, Problem 7.5APR, Bank reconciliation and entries Beeler Furniture Company deposits all cash receipts each Wednesday , example  2

BANK RECONCILIATION FOR PRECEDING MONTH:

Beeler Furniture Company

Bank Reconciliation

May 31,20Y2

Cash balance according to bank statement   $9,447.20
Adjustments:    
Deposit of May 31 not recorded by bank $ 690.25  
Outstanding Check No. 731 (162.15)  
Outstanding Check No. 736 (345.95)  
Outstanding Check No. 738 (251.40)  
Outstanding Check No. 739 (60.55)  
Total adjustments   (129.80)
Adjusted balance   $9,317.40
Cash balance according to company’s records   $9,352.50
Adjustments:    
Bank service charges   (35.10)
Adjusted balance   $9,317.40

JUNE BANK STATEMENT:

Chapter 7, Problem 7.5APR, Bank reconciliation and entries Beeler Furniture Company deposits all cash receipts each Wednesday , example  3

Instructions

  1. 1. Prepare a bank reconciliation as of June 30, 20Y2. 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.
  3. 3. What is the amount of cash that should appear on the balance sheet as of June 30, 20Y2?
  4. 4. Assume that a canceled check for $390 has been incorrectly recorded by the bank as $930. Briefly explain how the error would be included in a bank reconciliation and how it should be corrected.

To determine

(a)

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 BF as at July 30, 20Y2.

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 BF

(c)

To determine

To report:  Amount of cash in the balance sheet on June 30.

(d)

To determine

To explain: The error to be included in the bank reconciliation.

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Chapter 7 Solutions

Financial & Managerial Accounting
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