TERM EXAMProblemExercise 3 10 Points Bank Reconciliation PAG

-TERM EXAM-Problem/Exercise 3 10 Points Bank Reconciliation PAGE 7 efollowing information is available for Rosemary Corporation Inc. as of May The 2014 Cash on the books as of May 31 amounted to $42,754.16. Cash on the bank statement for the same date was $52,351.46. b. A deposit of $5,220 94, representing cash receipts of May 31, did not appear on the bank statement. C. Outstanding checks tota d. A check for $1,920.00 returned with the statement was recorded as $1,380.00. The check was for utilities. e. The bank service charge for May amounted to $25.00 f. The bank collected $12,360.00 for Swdona on a note. The face value of the note was $12,000.00 g. An NSF check for $183.56 from a customer, Chad Smith, was returned with the statement h. The bank mistakenly deducted a check for $850.00 that was drawn by Fox Corporation i. The bank reported a credit of $120.00 for interest on the average balance. Required 1. Prepare a bank reconciliation for ROSEMARY as of May 31, 2014 Prepare the necessary entries in journal form from the reconciliation. 3. State the amount of cash that should appear on ROSEMARY\'S balance sheet as of May31. 4. User Insight: Why is a bank reconciliation a necessary internal control? 2. Required-YOU MUST ANSWER ALL FOUR QUESTIONS Required-Bank Rec must include all explanations and dollar amounts on the appropriate lines Additionally on bank rec form you must sub-total where necessary

Solution

Answer 1. ROSEMARY CORPORATION INC. Bank Recocilation May 31, 2014 Bank\'s Cash Balance Company\'s Cash Balance Per Bank Statement          52,351.46 Per General Ledger      42,754.16 Add: Add: Deposits not recorded by bank              5,220.94 Proceeds of note collected by bank          12,000.00 Bank Error - Amt. wrongly deducted From A/c                  850.00            6,070.94 Interest on Note Collected by Bank                360.00 Bank Interest Recd.                120.00      12,480.00          58,422.40      55,234.16 Less: Less: Outstanding Checks          (3,936.80) Bank Service Charges                (25.00) NSF Check - Chad Smith              (183.56) Correct Check for Utilities              (540.00)          (748.56) Bank Balance after Reconcilation          54,485.60 Company Balance per Reconcilation      54,485.60 Answer 2. Journal Entry Date Particulars Dr. Amt.   Cr. Amt. 31-May Cash                                                                    12,120.00    Notes Receivables    12,000.00    Interest Revenue          120.00 (To record note collection less fees) 31-May Accounts Rec. - Chad Smith          183.56    Cash          183.56 (To Charge account for NSF check) 31-May Utilities Expenses          540.00     Cash          540.00 (To correct an entry Utilities Expenses) 31-May Bank Charges            25.00    Cash            25.00 (To record the bank charges) 31-May Cash          120.00    Interest Revenue          120.00 (To record the bank interest received) No entry is Recorded for 1 Deposit in Transit 2 Outstanding Checks 3 Bank errors Answer 3. Adjusted Cash Balance of $54,485.60 should appear on the Balance Sheet Answer 4. The advantages of Bank reconciliation statement are: 1. It provides management with the information on current cashflow position, 2. Helps track unpaid checks seperating from those have already been paid, 3. Avoid duplicate payments, 4. Detect errors in a timely manner and get them corrected in time, 5. Check bank charges and fees if any are inappropriately posted or over charged, 6. identify unauthorized transactions posted if any, intentionally or unintentionally and take appropriate necessary action in time.