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College Accounting (Book Only): A Career Approach

13th Edition

ISBN:9781337280570

Author:Scott, Cathy J.

Publisher:Scott, Cathy J.

Chapter6: Bank Accounts, Cash Funds, And Internal Controls

Section: Chapter Questions

Problem 5E

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Question

Balance of the Cash account of Isofac Company on 31 August 2022 was $42,650, while balance of its bank statement on the same day was $40,400. Isofac adjusts its book monthly. Below is some additional information for August: There were no outstanding checks and deposit in transit at the end of 31 July 2022 (1) The Company has correctly issued and recorded a check no.113 in the amount of $8,600 to purchase inventories from a supplier. But the bank statement showed the bank has cleared this check incorrectly as $6,800. (2) The total deposit shown in the bank statement was $158,000 while the accounting records of Isofac showed the total deposit made in August was $183,000. (3) Papal, a customer of Isofac, directly deposited $500 to Isofac’s bank account to settle its outstanding account. (4) Three checks no. 54, $100; no.56, $200; no.60, $800, issued by Isofac were not found on the bank statement. (5) A$1,500checkissuedbyacustomerShineLtd.infavourofIsofacwasreturnedbythebankbecause of insufficient fund. (6) On 1 March, 2022 Isofact signed a 9% 6-month note receivable of $20,000. The note and full amount of the interest was credited directly to Isofac’s bank account on 31 August. (7) The bank debited Isofac’s account $50 for bank charges. Required: (a) Preparethebankreconciliationstatementasat31August2022. (b) Preparethenecessaryadjustingjournalentriestoupdatetheaccountingrecord.

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