Question

Rick Hall owns a card shop called Hall's Cards. The following cash information is available for the month of August, Year 1. As of August 31, the bank statement shows a balance of $16,140. The August 31 unadjusted balance in the cash account of Hall's Cards is $14,100. A review of the bank statement revealed the following information:

1. A deposit of $4,150 on August 31, Year 1, does not appear on the August bank statement.
2. It was discovered that a check to pay for baseball cards was correctly written and paid by the bank for $4,500 but was recorded on the books as $5,400.
3. When checks written during the month were compared with those paid by the bank, three checks amounting to $5,370 were found to be outstanding.
4. A debit memo for $80 was included in the bank statement for the purchase of a new supply of checks.

Required:

a. Prepare a bank reconciliation at the end of August showing the true cash balance.

Answer 1

To prepare a bank reconciliation at the end of August, we need to analyze the differences between the bank statement and the company's cash account.

Step-by-step explanation:

To prepare a bank reconciliation at the end of August and determine the true cash balance for Hall's Cards, we need to analyze the differences between the bank statement and the company's cash account.

The following adjustments need to be made:

1. Add the deposit of $4,150 on August 31 that does not appear on the bank statement.
2. Deduct the incorrect recording of the check for baseball cards on the books as $5,400 instead of $4,500.
3. Add the outstanding checks that were not paid by the bank, totaling $5,370.
4. Deduct the debit memo for the purchase of new checks of $80.

By making these adjustments, we can calculate the true cash balance of Hall's Cards at the end of August.