Question

The following data were accumulated for use in reconciling the bank account of Creative Design Co. for August 20Y6:

1. Cash balance according to the company’s records at August 31, $24,270.2. Cash balance according to the bank statement at August 31, $32,278.3. Checks outstanding, $14,668.4. Deposit in transit, not recorded by bank, $7,170.5. A check for $58 in payment of an account was erroneously recorded in the check register as $580.6. Bank debit memo for service charges, $12.A. Prepare a bank reconciliation, using the format shown in
B. If the balance sheet were prepared for Creative Design Co. on August 31 what amount should be reported for cash?
C. Must a bank reconciliation always balance (reconcile)
A) NoB) Yes.
Amount DescriptionsAdjusted balanceBank service chargeBank error in charging check as $58 instead of $580Bank error in charging check as $580 instead of $58Deposit in transit, not recorded by bankError in recording check as $58 instead of $580Error in recording check as $580 instead of $58Outstanding checksTotal adjustments

Answer 1

Creative Design Co.

A. Bank Reconciliation Statement as of August 31:

Balance as per bank statement $32,278

Deposit in transit, $7,170

Checks outstanding, ($14,668)

Balance as per adjusted cash bal. $24,780

B. The amount that should be reported for cash is $32,278.

C. B) Yes. A bank reconciliation must always balance (reconcile), otherwise, the purpose of the reconciliation is defeated.

Step-by-step explanation:

a) Data and Calculations:

1. Cash balance according to the company’s records at August 31, $24,270.

2. Cash balance according to the bank statement at August 31, $32,278

3. Checks outstanding, $14,668

4. Deposit in transit, not recorded by bank, $7,170

5. A check for $58 in payment of an account was erroneously recorded in the check register as $580.

6. Bank debit memo for service charges, $12

Cash Book Adjustment:

August 31 balance $24,270

add overstatement of check 522

less bank charges 12

Adjusted balance $24,780