Transcript
The general ledger of Michelle Co. Ltd. showed a cash balance of $ 21,195 on 31 December 20X2, while the bank showed a balance of $ 60,600. he following facts were available:
a. The bank collected $ 12,160 as a direct deposit for one of Michelle’s customer as a pay-ment on account. A $ apay-mentonaccount.A $ 30 fee was charged by the bank for administration. Michelle has yet to record either of these amounts.
b. Michelle paid a utilities bill of $ 460 through direct transfer from its bank account but has not yet recorded the payment.
c. There was an outstanding deposit of $ 18,000 at the end of December.
d. The bank had charged a cheque of $ 3,800, written by Mitchell Corp., to Michelle’s bank account. he bank has been contacted about the error, and will reverse the cheque in January.
e. A deposit of $ 1,650 from a customer on account was recorded by Michelle for $ 3,900. he bank noticed the error and deposited the correct amount of money, but the deposit is incorrectly recorded on Michelle’s books.
f. Michelle’s bank account shows a deposit of $ 34,000 in December, which is an increase in Michelle’s bank loan. he amount has not been recorded by Michelle.
g. At the end of November, outstanding cheques were $ 8,485. his month, cheques were issued for $ 200,000, and cheques of $ 190,900 cleared the bank account.
Required:
1. Prepare a bank reconciliation, in good form, at the end of December 20X2.
2. Prepare any adjusting journal entries required as a result of the reconciliation.
SOLUTION
Requirement 1
Bank Reconciliation, 31 December 20x2
Bank Books
Balances, 31 December $60,600 $21,195
Additions:
Outstanding deposit 18,000
Account receivable collected 12,160
Loan increase 34,000
Bank error 3,800
Deductions:
Cheques outstanding ($8,485 + $200,000 - $190,900) (17,585)
Deposit recording error ($1,650 - $3,900) (2,250)
Utility bill payment (460)
Bank service charge ___(30)
Correct cash balance $64,815 $64,615
Requirement 2
Journal entries from bank reconciliation:
Cash 33,560
Account receivable 12,160
Notes payable 34,000
Accounts receivable (payment on account) 1,800
Cash 1,800
Utilities expense 460
Bank service charge expense 30
Cash ……………………………………………….. 405
