Question

The cash account for American Medical Co. at April 30 indicated a balance of $89,775. The bank statement indicated a balance of $125,160 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:A. Checks outstanding totaled $31,540.B. A deposit of $18,000, representing receipts of April 30, had been made too late to appear on the bank statement.C. The bank collected $24,075 on a $22,500 note, including interest of $1,575.D. A check for $1,700 returned with the statement had been incorrectly recorded by American Medical Co. as $170. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.E. A check drawn for $290 had been erroneously charged by the bank as $920.F. Bank service charges for April amounted to $70.Instructions1. Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. "Deduct:" or "Add:" will automatically appear if it is required.2. Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.3. If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

Answer 1

1. Adjusted bank balance $112,250

Adjusted cash balance $112,250

2.April 30

Dr Cash $24,075

Cr Note receivable $22,500

Cr Interest revenue $1,575

April 30

Dr Accounts payable - Targhee Supply Co $1,530

Cr Cash $1,530

April 30

Dr Bank service charges $70

Cr Cash $70

3. $112,250

Step-by-step explanation:

1. Preparation of a bank reconciliation

AMERICAN MEDICAL CO.

Bank ReconciliationApril 30

Cash balance according to bank statement $125,160

Add Deposit in transit $18,000

Add Correction of bank error $630

Less Checks outstanding totaled ($31,540)

Adjusted balance $112,250

Cash balance according to company’s records $89,775

Add Bank collection of note and interest 24,075

Less Bank service charges ($70)

Correction of book error ($1,530)

Adjusted balance $112,250

2. Preparation of the journal entries

April 30

Dr Cash $24,075

Cr Note receivable $22,500

Cr Interest revenue $1,575

($24,075-$22,500)

April 30

Dr Accounts payable - Targhee Supply Co $1,530

Cr Cash $1,530

April 30

Dr Bank service charges $70

Cr Cash $70

3. Based on the bank reconciliation the amount that should be reported as cash will be $112,250