Question

On May 31, Company O's general ledger shows a cash balance of $5,123. The May 31 bank statement shows a balance of $4,905. Other information is available as follows:

1. A May 31 deposit of $300 does not appear on the bank statement; but a $3 service charge does.
2. A customer's $40 insufficient funds check has been returned with the bank statement.
3. Outstanding checks of $10, $15, and $100 are identified on May
What is the correct cash balance on May 31?

a) $4,905
b) $5,080
c) $5,166
d) $5,204

Answer 1

To calculate the correct cash balance on May 31, adjust the balance shown on the bank statement by subtracting outstanding checks and adding deposits that do not appear on the statement. The correct cash balance on May 31 is $5,080.

Step-by-step explanation:

To calculate the correct cash balance on May 31, we need to adjust the balance shown on the bank statement to reflect any outstanding checks and deposits.

Starting with the cash balance on the bank statement ($4,905), we subtract the outstanding checks ($10, $15, and $100) which have not yet been deducted by the bank, and add the deposit of $300 that does not appear on the bank statement. We also subtract the $3 service charge and the $40 insufficient funds check.

Therefore, the correct cash balance on May 31 is $5,080.