Question

A​ company's bank statement balance is $ 3,400 and shows a service charge of $ 12​, interest earned of $ 7​, and an NSF check for $ 240. Deposits in transit total $ 1,000​; outstanding checks are $ 675. The​ company's bookkeeper erroneously recorded a check received from a customer as a $ 145 check when it was actually a $ 120 check. This created a book error of $ 25.

(1) What is the adjusted bank balance?
(2) What was the book balance of cash before the reconciliation?

Answer 1

a. $3,725

b. $3,945

Step-by-step explanation:

a. The computation of the adjusted cash balance is shown below:

= Bank statement balance + Deposits in transit - outstanding checks

= $3,400 + $1,000 - $675

= $3,725

b. The computation of the book balance of cash before the reconciliation is shown below:

= Adjusted cash balance + service charge + NSF checks - interest earned - recording error

= $3,725 + $12 + $240 - $7 - $25

= $3,945