Question

Required Information Problem 6-4A (Static) Preparing a bank reconciliation and recording entries LO P3 [The following information applies to the questions displayed below) The following information is available to reconcile Branch Company's book balance of cash with its bank statement cash balance as of July 31 a. On July 31, the company's Cash account has a $27,497 debit balance, but its July bank statement shows a $27.233 cash balance b. Check Number 3031 for $1.482 Check Number 3065 for $382, and check Number 3069 for $2.281 are outstanding checks as of July 31 c. Check Number 3056 for July rent expense was correctly written and drawn for $1.270 but was erroneously entered in the accounting records as $1.250. d. The July bank statement shows the bank collected $7.955 cash on a note for Branch Branch had not recorded this event before receiving the statement e. The bank statement shows on $805 NSF check. The check had been received from a customer. Evan Show. Branch has not yet recorded this check as NSF. t. The July statement shows a $25 bank service charge. It has not yet been recorded in miscellaneous expenses because no previous notification had been received g. Branch's July 31 dally cash receipts of $11,514 were placed in the bank's night depository on that date but do not appear on the July 31 bank statement Problem 6-4A (Static) Part 1 Required: Prepare the bank reconciliation for this company as of July 31

Answer 1

Bank reconciliation aligns a company's records with bank statements for items like outstanding checks and deposits. Singleton Bank lending to Hank's Auto Supply shows how loans are assets to banks. Banks hold a reserve portion of deposits and can loan out the rest, as demonstrated by a T-account balance sheet setup, which also shows how to calculate a bank's net worth.

Step-by-step explanation:

Bank Reconciliation and Loan Procedures

The process of reconciling a bank statement involves adjusting the bank's and the company's records to match. For example, outstanding checks and deposits in transit are adjusted on the statement, while NSF checks and bank service charges are recorded in the company's books. Similarly, when examining bank operations, such as Singleton Bank lending $9 million to Hank's Auto Supply, we observe the role of this loan as an asset for the bank, since it will generate interest income.

Regarding the deposition of the loan by Hank into First National Bank, it is important to note that banks are required to hold a portion of deposits as reserves. This is demonstrated in the scenario where First National holds 10% of the $9 million deposit as required reserves, with the ability to loan out the remainder.

In the case of creating a T-account for a bank with specified assets and liabilities, the balance sheet would reflect the bank's reserves, loans, and bond holdings against its deposit liabilities, and the net worth (or equity) can be calculated by subtracting liabilities from assets.