Tavarez Company assembled the following information in completing its July bank reconciliation: balance per bank $15,280; outstanding checks $3,100; deposits in transit $5,000; NSF check $320; bank service charge $100; cash balance per books $17,600. As a result of this reconciliation, Tavarez will
reduce its cash account by $100.
reduce its cash account by $420.
reduce its cash account by $1,900.
increase its cash account by $220.
reduce its Cash account by $420.00
To determine the correct answer, we need to analyze each item mentioned in the bank reconciliation and its impact on Tavarez's cash account.
1. Balance per bank: This is the ending balance reported by the bank, which is $15,280. It represents the cash account balance according to the bank's records.
2. Outstanding checks: These are checks issued by Tavarez but have not yet been cleared by the bank. The amount is $3,100, and it reduces Tavarez's cash account because the funds have already been deducted from the account when the checks were issued.
3. Deposits in transit: These are deposits made by Tavarez but have not yet been recorded by the bank. The amount is $5,000, and it increases Tavarez's cash account because the funds have already been received by the bank.
4. NSF check: This is a check received by Tavarez but returned by the bank due to insufficient funds in the payer's account. The amount is $320, and it reduces Tavarez's cash account since the funds were not received.
5. Bank service charge: It is a fee charged by the bank for its services. The amount is $100, and it reduces Tavarez's cash account.
6. Cash balance per books: This represents the cash account balance according to Tavarez's records, which is $17,600.
To reconcile the cash balance per books with the balance per bank, we add the deposits in transit and subtract the outstanding checks, NSF check, and bank service charge.
$15,280 (balance per bank)
+ $5,000 (deposits in transit)
- $3,100 (outstanding checks)
- $320 (NSF check)
- $100 (bank service charge)
_________
= $17,760 (reconciled cash balance)
Comparing the reconciled cash balance ($17,760) with the cash balance per books ($17,600), we can see that Tavarez will increase its cash account by $160 ($17,760 - $17,600).
Therefore, the correct answer is: Tavarez will increase its cash account by $160.