Cash account at Alphine Sports Co. As of April 30, 2016, it shows a balance of $14,284.88. The bank statement shows a balance of $18,880.45 as of April 30. From the comparison of bank statements between rejected checks and bank memorandums with bookkeeping records, it was found that the reconciliation items were as follows:
a. Outstanding check $5,180.27
b. A deposit of $3,481.70 on April 30 sales receipts has not been included in the bank statement.
c. Check for $620 turned out to be wrongly charged by the bank as $260.
d. Check for $479.30 returned with bank statement incorrectly recorded by Alpine Sports Co for $497.30. The check is for payment of accounts payable to Bray & Son.
e. The bank has invoiced $3,424 against Alpine Sports Co. on the money order submitted to the bank to be billed. The face value of the note is $3,200.
f. The bank administration expense for the month of April is $25.
g. A check for $880 from Shuller Co. was returned (rejected) by the bank due to insufficient funds.
Requested:
1. Prepare a bank reconciliation as of April 30, 2016.
2. Prepare the required journal entries.
Answer (1)
To prepare the bank reconciliation and journal entries, we will first identify the items required for reconciliation based on the data given.
Bank Reconciliation as of April 30, 2016
Bank Statement Balance (April 30): $18,880.45
Add: Deposits in transit
A deposit on April 30 not included in the bank statement: $3,481.70
Subtotal: $22,362.15
Less: Outstanding Checks
Outstanding check: $5,180.27
Adjusted Bank Statement Balance: $17,181.88
Cash Account Balance (Books) (April 30): $14,284.88
Add:
Bank error correction (Check charged as $620 instead of $260): $360
Subtotal: $14,644.88
Less:
Correction of check error (Alpine Sports recorded a check as $497.30 instead of $479.30): $18.00
Bank charge for money order (Note of $3,200 invoiced at $3,424): $224.00
Bank service charge for April: $25.00
Bounced check from Shuller Co. due to insufficient funds: $880.00
Adjusted Book Balance: $17,181.88
The adjusted balances are now equal, confirming that the reconciliation is correct.
Journal Entries
Bank Error Correction:
Debit: Cash $360.00
Credit: Accounts Payable $360.00
Check Recording Error Correction:
Debit: Accounts Payable $18.00
Credit: Cash $18.00
Bank Charge for Money Order:
Debit: Expense $224.00
Credit: Cash $224.00
Bank Service Charge:
Debit: Bank Charges Expense $25.00
Credit: Cash $25.00
Bounced Check (NSF Check):
Debit: Accounts Receivable $880.00
Credit: Cash $880.00
These adjustments and journal entries will ensure the company's financial records align with the bank's records for accurate financial reporting.
