Answered: Bank Reconciliation On May 31, the Cash…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

Bank Reconciliation On May 31, the Cash in Bank account of Wallace Company, a sole proprietorship, had a balance of $6,000.50. On that date, the bank statement indicated a balance of $7,868.50.
A comparison of returned checks and bank advices revealed the following:

Deposits in transit May 31 totaled $2,603.05
Outstanding checks May 31 totaled $3,077.25
The bank added to the account $19.80 of interest income earned by Wallace during May.
The bank collected a $2,400 note receivable for Wallace and charged a $30 collection fee. Both items appear on the bank statement.
Bank service charges in addition to the collection fee, not yet recorded were $40.00.
Included with the returned checks is a memo indicating that L. Ryder's check for $686.00 had been returned NSF.
Ryder, a customer, had sent the check to pay an account of $700.00 less a discount of 2%
Wallace Company incorrectly recorded the payment of an account payable as $360.00 the check was for $630.00.

Required
a. Prepare a bank reconciliation for Wallace Company at May 31.
b. Prepare the journal entry (or entries) necessary to bring the Cash in Bank account into agreement with the reconciled cash balance on the bank reconciliation.

Note: Do not round answers - enter using two decimal places, when needed.

Bank reconciliation
Journal entries

WALLACE COMPANY Bank Reconciliation May 31
Answer	Answer		Balance from general ledger		Answer
Add:	Answer	Answer		Add:	Answer	Answer
				Less:	Collection Fee	Answer	Answer
				Add: Interest Income			Answer
	Subtotal	Answer			Subtotal			Answer
Less:	Answer	Answer		Less:	Answer		Answer
				Less:	NSF Check		Answer
				Less:	Answer
					Answer	Answer
								Answer
Answer	Answer		Answer		Answer

GENERAL JOURNAL
Date	Description	Debit	Credit
May	31	Answer	Answer	Answer
		Miscellaneous Expense	Answer	Answer
		Answer	Answer	Answer
		To record collection of note by bank, less collection fee.
	31	Answer	Answer	Answer
		Answer	Answer	Answer
		To record interest earned on bank account in May.
	31	Answer	Answer	Answer
		Answer	Answer	Answer
		To record service charges.
	31	Answer	Answer	Answer
		Answer	Answer	Answer
		Cash in Bank	Answer	Answer
		To reclassify NSF check as an account receivable.
	31	Answer	Answer	Answer
		Answer	Answer	Answer
		To correct error in recording check.

Please answer all parts of the question.

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