Question

On September 30 the bank statement of Fine Company showed a balance of $7,800. The following information was revealed by comparing the bank statement to the cash balance in Fine's accounting records:

A. Deposits in transit amounted to $3,150
B. Outstanding checks amounted to $6,200
C. A $550 check was incorrectly drawn on Fine's account
D. NSF checks returned by the bank were $750
E. The bank service charge was $29
F. Credit memo for $75 for the collection of one of the company's account receivable
What is the true cash balance?
A) $5,346
B) $5,300
C) $4,596
D) $7,096

Answer 1

B) $5,300

Step-by-step explanation:

The computation of cash balance is shown below:-

True cash balance = Unadjusted bank balance + Deposit in transit + Error in check - Outstanding checks

= $7,800 + $3,150 + $550 - $6,200

= $11,500 - $6,200

= $5,300

Therefore for computing the true cash balance we simply applied the above formula and not considered all other amount as they are not relevant.