Question

Kelly Company's unadjusted bank balance on May 31 is $9,500. An analysis of the bank statement revealed $1,400 of deposits in transit and $900 of outstanding checks. In addition, the bank statement showed a $200 NSF check. Based on this information, Kelly's true cash balance is

a. $9,000
b. $9,800
c. $10,000
d. $10,100

Answer 1

Kelly's true cash balance is $10,000(option c).

Step-by-step explanation:

To determine the true cash balance for Kelly Company, we start with the unadjusted bank balance on May 31, which is $9,500.

Next, adjustments need to be made for deposits in transit and outstanding checks:

- Deposits in transit: $1,400 (These are deposits made by Kelly Company but have not yet been recorded by the bank.)

- Outstanding checks: $900 (These are checks issued by Kelly Company but have not yet been presented for payment by the recipients.)

To calculate the adjusted balance:

Unadjusted bank balance ($9,500) + Deposits in transit ($1,400) - Outstanding checks ($900) = Adjusted bank balance

$9,500 + $1,400 - $900 = $10,000

Therefore, after considering the deposits in transit and deducting outstanding checks from the unadjusted bank balance, Kelly's true cash balance is $10,000(option c).