Harrison Company maintains a checking account at the First N

Harrison Company maintains a checking account at the First National City Bank. The bank provides a bank statement along with canceled checks on the last day of each month. The July 2018 bank statement included the following information:

The company’s general ledger account had a balance of $40,278 at the end of July. Deposits outstanding totaled $7,100 and all checks written by the company were processed by the bank except for those totaling $8,500. In addition, a $2,800 July deposit from a credit customer was recorded as a $280 debit to cash and credit to accounts receivable, and a check correctly recorded by the company as a $70 disbursement was incorrectly processed by the bank as a $700 disbursement.

Required:
1. Prepare a bank reconciliation for the month of July.
2. Prepare the necessary journal entries at the end of July to adjust the general ledger cash account.

Solution

Required 1)
Bank balance to corrected balance
Balance per bank statement                          $38,178
Add: Deposit outstanding                                $7,100
Less: check outstanding                                 ($8,500)
Add: Bank error in recording check               $630          
Corrected cash balance                                   $37,408

Book balance to corrected balance
Balance per book                                               $40,278
Add: error in recording cash receipt              $2,520
Less: services charges                                      ($70)
Less: NSF checks                                                ($1600)
Less: Automatic monthly loan payment          ($3,720)
Corrected cash balance                                     $37,408

Required 2)
                                                       Debit               credit
1)       cash                                    $2,520
            Accounts receivable                                $2,520

2) Miscellaneous expenses        $70
     Accounts receivable              $1600
     Interest expense                  $620
      Note payable                         $3100
           Cash                                                            $5,390

Explanation
1) Bank error in recording check - ($700 - $70) = $630
2)Error in recording cash receipt -($2800- $280)=$2,520
3) Note payable - ($3720 -$620) = $3100