Question

On August 31, Year 1, the general ledger of a company shows a balance for cash of $7,844. Cash receipts yet to be deposited into the checking account total $3,238, and checks written by the academy but not yet processed by the bank total $1,325. The company's balance of cash does not reflect a bank service fee of $25 and interest earned on the checking account of $36. These amounts are included in the balance of cash of $5,942 reported by the bank as of the end of August. Required: 1. Prepare a bank reconciliation to calculate the correct ending balance of cash on August 31, Year 1. (Amounts to be deducted should be indicated with a minus sign.)

Answer 1

To reconcile the company's cash balance, adjustments were made for cash receipts pending deposit, outstanding checks, bank service fees, and interest earned, resulting in an adjusted book balance of $9,768.

Step-by-step explanation:

Bank Reconciliation

To prepare a bank reconciliation to calculate the correct ending balance of cash on August 31, Year 1, the following adjustments need to be made:

Book balance of cash as per company records: $7,844

Add: Cash receipts not yet deposited: +$3,238

Less: Outstanding checks not yet processed: -$1,325

Less: Bank service fee: -$25

Add: Interest earned on checking account: +$36

The calculated book balance after adjustments will be:

$7,844 (initial book balance) + $3,238 (receipts) - $1,325 (outstanding checks) - $25 (bank fee) + $36 (interest) = $9,768 (adjusted book balance).

Since the bank balance reported is $5,942 and we have accounted for all outstanding items, the reconciled cash balance should be $9,768.

Answer 2

Correct ending balance 7855

Step-by-step explanation:

Cash 7844

Books

Cash receipts pending on bank -3238

Checks written 1325

Banks

Bank service fee -25

Interest earned 36

Bank conciliation 5942

Bank account 5942

7844

Correct ending balance 7855