Question

The cash account for Coastal Bike Co. at October 1, 20Y9, indicated a balance of $32,788. During October, the total cash deposited was $139,699, and checks written totaled $138,679. The bank statement indicated a balance of $42,830 on October 31, 20Y9. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

A. Checks outstanding totaled $6,659.
B. A deposit of $1,875 representing receipts of October 31, had been made too late to appear on the bank statement.
C. The bank had collected for Coastal Bike Co. $6,195 on a note left for collection. The face of the note was $5,900.
D. A check for $170 returned with the statement had been incorrectly charged by the bank as $710.
E. A check for $310 returned with the statement had been recorded by Coastal Bike Co. as $130. The check was for the payment of an obligation to Rack Pro Co. on account.
F. Bank service charges for October amounted to $24.
G. A check for $1,213 from Bay View Condos was returned by the bank due to insufficient funds.

Answer 1

1. Adjusted Cash balance according to Bank statement $38,586

Adjusted Cash balance according to company records $38,586

2.

a. Dr Cash $6,195

Cr Note receivable $5,900

Cr Interest revenue $296

b. Dr Accounts payable-Rack pro co $180

Dr Account receivable- Bay View Condos $1,213

Dr Miscellaneous expense $24

Cr Cash $1,417

3.$38,586

Step-by-step explanation:

1. Preparation of a bank reconciliation as of October 1, 20Y9

Cash balance according to Bank statement $42,830

Add Deposits $1,875

Add: Bank error in charging checks as 710instead of $170 $540

Deduct checks outstanding $6,659

ADJUSTED BALANCE $38,586

Cash balance according to company records $33,808 ($32,788+$139,699-$138,679)

Add:Collection of note $6,195

Deduct Error in recording cheque ($310-$130) $180

Deduct Bank service charge $24

Deduct NSF $1,213

ADJUSTED BALANCE $38,586

2. Preparation of the Journal entries

a. Dr Cash $6,195

Cr Note receivable $5,900

Cr Interest revenue $296

($6,195-$5,900)

b. Dr Accounts payable-Rack pro co $180

Dr Account receivable-Bay View Condos $1,213

Dr Miscellaneous expense $24

Cr Cash $1,417

($180+$24+$1,213)

3. Based on the information given If a balance sheet were prepared for Fit Bike Co. on October 1, 20Y9, the amount that should be reported as cash is $38,586