Bank Reconciliation and Entries The cash account for Pala Me

Bank Reconciliation and Entries

The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $14,380. The bank statement indicated a balance of $16,970 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

Checks outstanding totaled $6,110.

A deposit of $6,360, representing receipts of June 30, had been made too late to appear on the bank statement.

The bank collected $3,310 on a $3,140 note, including interest of $170.

A check for $770 returned with the statement had been incorrectly recorded by Pala Medical Co. as $700. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.

A check drawn for $40 had been erroneously charged by the bank as $400.

Bank service charges for June amounted to $40.

Required:

1. Prepare a bank reconciliation.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound transaction, if an amount box does not require an entry, leave it blank.

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?
$

Pala Medical Co.
Bank Reconciliation
June 30, 20Y1
Cash balance according to bank statement		$
Adjustments:
	$
Total adjustments
Adjusted balance		$
Cash balance according to company\'s records		$
Adjustments:
	$
Total adjustments
Adjusted balance		$

Solution

Bank reconciliation Bank balance 16970 Add Deposit in transit 6360 Error by bank 360 Total 23690 Less Outstanding checks 6110 Adjusted bank balance 17580 Cash balance 14380 Add Notes collected 3140 Interest revenue 170 3310 Less Error in recording 70 Service charges 40 110 Adjusted cash balance 17580 Journal entry Increase in cash 1 Cash 3310               Notes receivable 3140              Interest revenue 170 Decrease in cash 2 Accounts payable 70 Misc. expense 40              Cash 110 Misc. expense 144              Cash 144 3 Cash reported as 17580