Question

Pen Paint Company's unadjusted book balance at September 30 is $6,900. The Company's bank statement reveals bank service charges of $50. Two credit memos are included in the bank statement: one for $700 which represents a collection of an account receivable that the bank made for Pen Paint and one for $100 which represents the amount of interest that Pen Paint had earned on its interest-bearing checking account in June. Finally, a comparison of the Company's records with the bank statement revealed $500 of deposits in transit and $300 of outstanding checks. Based on this information, Pen Paint's true cash balance is

7850
7650
7700
None

Answer 1

Pen Paint Company's true cash balance at September 30 is $7,850 after accounting for bank service charges, credit memos, deposits in transit, and outstanding checks.

Step-by-step explanation:

To calculate the true cash balance of Pen Paint Company, we need to adjust the unadjusted book balance for the items mentioned. Here is how we can calculate it:

• Start with the unadjusted book balance: $6,900.
• Subtract bank service charges: $6,900 - $50 = $6,850.
• Add the credit memos (collections and interest): $6,850 + $700 + $100 = $7,650.
• Add deposits in transit: $7,650 + $500 = $8,150.
• Subtract outstanding checks: $8,150 - $300 = $7,850.

The true cash balance for Pen Paint Company at September 30 is $7,850.