Final answer:
A bank reconciliation for Novak Company needs to adjust both the balance per the bank and the company's records to reconcile the differences, factoring in deposits in transit, outstanding checks, note collection, and interest earned. The adjusted bank balance on September 30 is $20,461, while the adjusted book balance is $18,749. Adjusting entries for an NSF check and unaccrued interest on a note must also be prepared.
Step-by-step explanation:
Bank Reconciliation for Novak Company
To create the bank reconciliation for Novak Company as of September 30, we need to adjust the balance per the company's records and the balance per the bank statement to find any discrepancies between the two. Here's how the reconciliation would look:
Balance per Bank Statement on September 30: $16,682
- Add: Deposits in transit: $4,580
- Less: Outstanding checks: ($2,513)
- Add: Note collection and interest: $1,660
- Add: Interest earned on checking account: $52
Adjusted Bank Balance: $20,461
Balance per Company's Books on September 30: $17,664
- Less: NSF check: Richard Nance: ($555)
- Less: Safety deposit box rent: ($72)
- Add: Note collection and interest: $1,660
- Add: Interest earned on checking account: $52
Adjusted Book Balance: $18,749
The difference between the adjusted bank balance and the book balance is the unadjusted items that will need to be recorded in the company's books to reconcile the two balances. These might include bank fees, errors in recording transactions, or items in transit that have not yet been recorded by the bank.
Adjusting Entries
As for the adjusting entries on September 30, we'll need to account for the NSF check and the interest on the note. The NSF check was from a customer on account, so we will debit Accounts Receivable and credit Cash to reverse the initial entry of receiving cash. Since no interest had been accrued on the note, we would record the interest income received upon the note's collection as interest revenue.