Question

The following information relates to Liberty Limited's Cash account. The reconciled cash balance from June's bank reconciliation is $18,920. During the month of July, Liberty recorded cash receipts of $21.700 and cash payments of $24,300 in the general ledger Cash account.

An examination of the company's July bank statement shows a balance of $19,260 on July 31; outstanding cheques $3,630; deposits in transit $1,450; EFT collections on account that were not yet recorded on the books $2,170; NSF cheque $1,270; NSF fee $50; and bank service charges $90.
Instructions
a. Calculate Liberty's cash balance per books at July 31, immediately prior to preparing the July bank reconciliation. Show clear solution. b: Prepare the bank reconciliation at July 31. c. Prepare the necessary journal entries required on July 31 for Liberty.

Answer 1

Answer:Answer~

Explanation:a. The cash balance per books at July 31 can be calculated by adding cash receipts and subtracting cash payments from the reconciled cash balance at the end of June:

Cash balance per books at July 31 = Reconciled cash balance from June + Cash receipts - Cash payments

Cash balance per books at July 31 = $18,920 + $21,700 - $24,300

Cash balance per books at July 31 = $16,320

b. Bank Reconciliation at July 31:

Liberty Limited's Bank Reconciliation

July 31

Balance per bank statement $19,260

Add: Deposits in transit $1,450

Deduct: Outstanding cheques $3,630

Adjusted balance per bank $17,080

Balance per books $16,320

Add: EFT collections on account $2,170

Deduct: NSF cheque $1,270

Deduct: Bank service charges $90

Adjusted balance per books $17,130

c. Necessary journal entries required on July 31 for Liberty:

1. To record the deposit in transit:

Debit Cash $1,450

Credit Accounts Receivable (or Sales) $1,450

2. To record the NSF cheque:

Debit Accounts Receivable $1,270

Credit Cash $1,270

3. To record the bank service charges:

Debit Bank service charges expense $90

Credit Cash $90