Hello! Could anyone help me understand this question?
For purposes of preparing its December bank reconciliation, the following information is available:
The bank statement shows a cash balance of $98,000 as of Dec 31.
Interest earned on the bank balance in December totals $250.
The cash deposit for the sale of land that occurred on Dec 27 has not yet cleared the bank. Received $27,000 in cash from the sale of a parcel of its land. The parcel had an original cost of $22,000.
Bank service charges for December amount to $70.
Checks written on December 31 have not yet cleared the bank (check numbers 509 through 521) - (509-520): Salaries Expense and Cash are both 15,000. (521) Cash is $4,000 and Notes Payable is $3840
Sure, I can help you understand the information and also explain how to prepare the December bank reconciliation.
To start with, let's understand the components of a bank reconciliation. It is a process of comparing your bank statement with your own records to ensure that the balances match. The goal is to identify any discrepancies and make necessary adjustments.
Now, let's go through the given information:
1. The bank statement shows a cash balance of $98,000 as of December 31.
This is the ending cash balance according to the bank's records.
2. Interest earned on the bank balance in December totals $250.
This represents the interest income earned by the company on its cash balance. It needs to be added to the bank statement balance to reconcile it with the company's records.
3. The cash deposit for the sale of land that occurred on December 27 has not yet cleared the bank. The company received $27,000 in cash from the sale of a parcel of its land. The parcel had an original cost of $22,000.
This means that the cash deposit for the sale of land was made on December 27, but it has not yet been processed by the bank. As a result, this amount needs to be added to the bank statement balance.
4. Bank service charges for December amount to $70.
This represents the charges imposed by the bank for their services during December. These charges need to be deducted from the bank statement balance.
5. Checks written on December 31 have not yet cleared the bank (check numbers 509 through 521).
- Check 509-520: Salaries Expense and Cash are both $15,000.
This indicates that checks were written for salaries expense and cash for a total amount of $15,000. The company's records would have accounted for this amount already, so it needs to be deducted from the bank statement balance.
- Check 521: Cash is $4,000, and Notes Payable is $3,840.
This check indicates a payment made for $4,000 in cash, and it also reduces the company's obligation under notes payable by $3,840. Hence, the $4,000 cash amount needs to be deducted from the bank statement balance.
Now, to prepare the December bank reconciliation, you will need to follow these steps:
1. Start with the bank statement balance of $98,000.
2. Add the interest earned on the bank balance ($250).
3. Add the cash deposit for the sale of land that has not yet cleared the bank ($27,000).
4. Subtract the bank service charges for December ($70).
5. Subtract the amount of the checks written on December 31 that have not yet cleared the bank ($15,000 + $4,000).
6. The resulting figure should match the cash balance according to your own records. If it does not, there may be additional discrepancies that need to be investigated.
I hope this explanation helps you understand the given information and how to prepare the bank reconciliation. Let me know if you have any further questions!