Question

Peterson Company's general ledger shows a cash balance of $7,850 on May 31. May cash receipts of $1,250, included in the general ledger balance, are placed in the night depository at the bank on May 31 and processed by the bank on June 1. The bank statement dated May 31 shows an NSF check for $200 and a service fee of $50. The bank processes all checks written by the company by May 31 and lists them on the bank statement, except for one check totaling $1,640. The bank statement shows a balance of $7,990 on May 31. Prepare a bank reconciliation to calculate the correct ending balance of cash on May 31.

Answer 1

To calculate the correct ending balance of cash on May 31, reconcile the company's general ledger balance with the bank statement balance by adding cash receipts, subtracting the NSF check and service fee, and subtracting the unprocessed check from the general ledger balance.

Step-by-step explanation:

To calculate the correct ending balance of cash on May 31, we need to reconcile the company's general ledger balance with the bank statement balance.

1. Start with the general ledger cash balance of $7,850.
2. Add cash receipts that were placed in the night depository on May 31, but processed by the bank on June 1. In this case, the May cash receipts of $1,250 should be added to the general ledger balance.
3. Subtract the NSF check for $200 and the service fee of $50 from the bank statement balance. These are deductions from the bank statement balance.
4. Finally, subtract the one check totaling $1,640 that is not listed on the bank statement. This deduction is necessary because the check has not yet been processed by the bank.

Calculation:

General ledger balance + Cash receipts - NSF check - Service fee - Unprocessed check = Correct ending balanc

Using the given information, the correct ending balance can be calculated as follows:

$7,850 + $1,250 - $200 - $50 - $1,640 = $6,210

Therefore, the correct ending balance of cash on May 31 is $6,210.