Question

Nolan Company's cash account shows a $22,352 debit balance and its bank statement shows $21,332 on deposit at the close of business on June 30. Outstanding checks as of June 30 total $3,713. The June 30 bank statement lists $41 in bank service charges; the company has not yet recorded the cost of these services. In reviewing the bank statement, a $90 check written by the company was mistakenly recorded in the company’s books as $99. June 30 cash receipts of $4,724 were placed in the bank’s night depository after banking hours and were not recorded on the June 30 bank statement. The bank statement included a $23 credit for interest earned on the company’s cash in the bank. The company has not yet recorded interest earned. Prepare a bank reconciliation using the above information

Answer 1

To reconcile Nolan Company's bank statement, the bank statement balance and the company's book balance are both adjusted for outstanding checks, deposits in transit, bank service charges, interest earned, and recording errors, resulting in a reconciled balance of $22,343.

Step-by-step explanation:

To prepare a bank reconciliation for Nolan Company, we will adjust the balance per bank and the balance per books to reflect the true amount of cash. Here are the steps:

• Start with the bank statement balance: $21,332.
• Add deposits in transit (June 30 cash receipts): $4,724.
• Subtract outstanding checks: $3,713.
• The adjusted bank statement balance is: $22,343.

Now, we reconcile the balance per books:

• Start with the book balance: $22,352.
• Subtract bank service charges: $41.
• Add interest earned: $23.
• Correct the error in recording check: Add back the $9 overstatement ($99 recorded - $90 actual).
• The adjusted book balance is: $22,343.

The adjusted bank statement balance and the adjusted book balance now both equal $22,343, indicating the reconciliation is complete.