Question

On July 31, 2020, Vaughn Company had a cash balance per books of $6,132.05. The statement from Dakota State Bank on that date showed a balance of $7,748.15. A comparison of the bank statement with the Cash account revealed the following facts.

1. The bank service charge for July was $25.
2. The bank collected $1,720 for Keeds Company through electronic funds transfer.
3. The July 31 receipts of $1,297.50 were not included in the bank deposits for July. These receipts were deposited by the company in a night deposit vault on July 31.
4. Company check No. 2480 issued to L. Taylor, a creditor, for $391 that cleared the bank in July was incorrectly entered as a cash payment on July 10 for $319.
5. Checks outstanding on July 31 totaled $1,866.60.
6. On July 31, the bank statement showed an NSF charge of $576 for a check received by the company from W. Krueger, a customer, on account.

Required:
Prepare the bank reconciliation as of July 31.

Answer 1

To prepare the bank reconciliation as of July 31, start with the cash balance per books of $6,132.05 and make adjustments for deposits in transit, outstanding checks, bank errors, and transactions that were recorded differently. After making these adjustments, compare the adjusted cash balance per books with the balance shown on the bank statement. The bank reconciliation shows a difference of $994.20 between the two balances.

Step-by-step explanation:

To prepare the bank reconciliation as of July 31, we will need to compare the cash balance per books with the balance shown on the bank statement and make adjustments for any differences. Here are the steps:

1. Start with the cash balance per books of $6,132.05.
2. Add any deposits in transit that haven't been included on the bank statement. In this case, the receipts of $1,297.50 deposited on July 31 are not included on the bank statement. So, add $1,297.50 to the cash balance per books to get $7,429.55.
3. Deduct any outstanding checks that haven't cleared the bank by July 31. In this case, the outstanding checks total $1,866.60. So, subtract $1,866.60 from the cash balance per books to get $5,562.95.
4. Make adjustments for any bank errors or transactions that were recorded differently. In this case:

• Subtract the bank service charge of $25 from the cash balance per books to get $5,537.95.
• Add the amount collected for Keeds Company through electronic funds transfer of $1,720 to the cash balance per books to get $7,257.95.
• Adjust the incorrectly recorded check to L. Taylor. The original payment was for $319, but it should have been recorded as $391. So, add $72 to the cash balance per books to get $7,329.95.
• Subtract the NSF charge of $576 from the cash balance per books to get $6,753.95.

Compare the adjusted cash balance per books with the balance shown on the bank statement. The bank statement balance is $7,748.15. There is still a difference of $994.20. This difference might be due to other bank errors or transactions that need to be resolved.

So, the bank reconciliation as of July 31 shows a difference of $994.20 between the cash balance per books and the bank statement balance.

Answer 2

Answer and Explanation:

The preparation of the bank reconciliation as of July 31 is presented below;

Cash balance as per bank statement $7,748.15

Add: deposit in transit $1,297.50

Less: outstanding checks $1,866.60

Adjusted cash balance per bank $7,179.05

Cash balance as per books $6,132.05

Add: electronic fund transfer received $1,720

Less: error ($391 - $319) -$72

Less: service charges - $25

Less: NSF charges - $576

Adjusted bank balance per books $7,179.05