On May 31, 2011, James Logan Company had a cash balance per books of $6,781.50. The bank statement from Farmers State Bank on that date showed a balance of $6,404.60. A comparison of the statement with the cash account revealed the following facts.
The statement included a debit memo of $40 for the printing of additional company checks.
Cash sales of $836.15 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit slip were incorrectly made for $886.15. The bank credited Logan Company for the correct amount.
Outstanding checks at May 31 totaled $576.25. Deposits in transit were $1,916.15.
On May 18, the company issued check No. 1181 for $685 to Barry Trest, on account. The check, which cleared the bank in May, was incorrectly journalized and posted by Logan Company for $658.
A $2,500 note receivable was collected by the bank for Logan Company on May 31 plus $80 interest. The bank charged a collection fee of $20. No interest has been accrued on the note.
Included with the cancelled checks was a check issued by Bridgetown Company to Tom Lujak for $800 that was incorrectly charged to Logan Company by the bank.
On May 31, the bank statement showed an NSF charge of $680 for a check issued by Sandy Grifton, a customer, to Logan Company on account.
a. Prepare the bank reconciliation at May 31, 2011
b. Prepare the necessary adjusting entries for Logan Company at May 31, 2011
On May 31, 2010, James Logan Company had a cash balance per books of $6,781.50. The bank statement from Farmers State Bank on that date showed a balance of $6,404.60. A comparison of the statement with the cash account revealed the following facts.
cash balance per books 6781.50
Prepare the bank reconciliation at May 31, 2011
P8 -3A
please send me answer
a. To prepare the bank reconciliation at May 31, 2011, we need to compare the company's cash balance per books with the balance shown on the bank statement. Here are the steps to complete the bank reconciliation:
1. Start with the cash balance per books ($6,781.50) and the balance shown on the bank statement ($6,404.60).
2. Add any deposits in transit to the cash balance per books. In this case, the deposits in transit amount is $1,916.15. So, add $1,916.15 to the cash balance per books.
Cash balance per books: $6,781.50
+ Deposits in transit: $1,916.15
Adjusted cash balance per books: $8,697.65
3. Subtract any outstanding checks from the adjusted cash balance per books. In this case, the outstanding checks amount is $576.25. So, subtract $576.25 from the adjusted cash balance per books.
Adjusted cash balance per books: $8,697.65
- Outstanding checks: $576.25
Adjusted cash balance per books after outstanding checks: $8,121.40
4. Compare this adjusted cash balance per books with the balance shown on the bank statement ($6,404.60). If they match, the reconciliation is complete. If they don't match, there are additional items to consider.
5. Review the bank statement for any additional items. In this case, we have the following:
- Debit memo of $40 for the printing of additional company checks. This reduces the cash balance per books, so subtract $40 from the adjusted cash balance per books.
Adjusted cash balance per books after outstanding checks: $8,121.40
- Debit memo for printing of checks: $40
Adjusted cash balance per books after additional items: $8,081.40
6. Compare the adjusted cash balance per books after additional items with the balance shown on the bank statement ($6,404.60). If they still don't match, there might be errors or discrepancies that need to be investigated.
b. To prepare the necessary adjusting entries for Logan Company at May 31, 2011, we need to account for the discrepancies between the company's cash records and the bank statement. Here are the adjusting entries:
1. Adjust for the incorrect deposit made on May 12. The correct amount deposited was $836.15, but it was incorrectly recorded as $886.15. To correct this, we need to reduce the company's cash balance and adjust the accounts receivable.
Debit:
Cash (decrease) - $50 (886.15 - 836.15)
Accounts Receivable (increase) - $50
2. Adjust for the incorrectly journalized and posted check to Barry Trest on May 18. The correct amount should have been $685, but it was recorded as $658. To correct this, we need to adjust the accounts payable and reduce the company's cash balance.
Debit:
Accounts Payable (increase) - $27 (685 - 658)
Cash (decrease) - $27
3. Adjust for the collection of a note receivable and the associated interest and fees. The bank collected a $2,500 note plus $80 interest and charged a $20 collection fee. To adjust for this, we need to increase the company's cash balance and recognize interest revenue and the collection fee.
Debit:
Cash (increase) - $2,560 (2,500 + 80 - 20)
Interest Revenue (increase) - $80
Collection Fee Expense (increase) - $20
4. Adjust for the incorrectly charged check from Bridgetown Company. Reduce the company's cash balance and adjust the accounts payable.
Debit:
Cash (decrease) - $800
Accounts Payable (increase) - $800
5. Adjust for the NSF charge on a customer's check. Remove the amount of the NSF charge from the accounts receivable.
Debit:
Accounts Receivable (decrease) - $680
These adjusting entries will help reconcile the differences between the company's cash records and the bank statement and ensure the correct financial position.