Identify the amount of deposits in transit as at September 30.

Question

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Answer 1

Question

Chapter 5, Problem 3PB

1.

To determine

Identify the amount of deposits in transit as at September 30.

1.

Expert Solution

Explanation of Solution

Deposits-in-transit: The checks that are deposited and recorded by the company, but not yet recorded by the bank are referred to as deposits-in-transit.

Deposits that should be included in bank reconciliation: As per the information, the deposits in transit as at September 30, is $21,000, which is deposited on September 30, but the bank has not recorded.

Conclusion

Hence, the deposits in transit as at September 30, is $21,000.

2.

To determine

List the outstanding checks at September 30.

2.

Expert Solution

Explanation of Solution

Outstanding checks: Outstanding checks are the checks that are issued by the company, but not yet paid by the bank.

Determine the amount of outstanding checks as at September 30.

Particulars	Amount ($)
Outstanding check	$500
Outstanding check	6,000
Amount of outstanding checks as at September 30	$6,500

Table (1)

Description: The other checks that were issued by company were paid by the bank.

Conclusion

Hence, the amount of outstanding checks at September 30 was $6,500.

3.

To determine

Prepare a bank reconciliation of Company T, as at September 30.

3.

Expert Solution

Explanation of Solution

Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare bank reconciliation of Company T, as at September 30.

Company T
Bank Reconciliation
September 30
Updates to Bank Statement		Updates to Company’s Books
Ending cash balance per bank statement	$108,430	Ending cash balance per books	$123,410
Additions:		Additions:
Deposits in transit	21,000	Interest earned	60
	129,430		123,470

Deductions:		Deductions:
Outstanding checks (refer table 1)	6,500	NSF check	500
Up-to-date ending cash balance	$122,930	Bank service charge	40
		Up-to-date ending cash balance	$122,930

Table (2)

Description:

The deposits which are not recorded by the bank are referred to as deposits in transit. Since the deposits in transit are not reflected on the bank statement, the company should add deposits in transit to cash balance per bank, while preparation of bank reconciliation statement.
Outstanding checks are the checks that are issued by the company, but not yet paid by the bank. When the check is issued for payment, the company deducts the cash balance immediately. But the bank deducts only when the cash is paid for the issued check. So, company deducts the cash balance per bank to remove the differences.
Interest earned on checking account is credited by bank to the bank account of which the company is not aware of. So, while preparing bank reconciliation statement, company should add the amount to the cash balance per books.
While bank reconciliation, the NSF check should be deducted from the cash balance per book. This is because the bank could not collect funds from the customer’s bank due to lack of funds. But being recorded as accounts receivable previously, the balance should be deducted from books, to increase the accounts receivable account.
Banks deduct the service charge for the services rendered like lock box rental, or printed checks. But the company is not aware of such deductions. So, company deducts the cash balance per books while bank reconciliation preparation.

4.

To determine

Prepare the adjusting journal entries that arise due to bank reconciliation.

4.

Expert Solution

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entry to record interest earned.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Cash			60
			Interest Revenue			60
		(To record interest earned)

Table (3)

Description:

Cash is an asset account. The amount is increased because interest is earned on checking account; hence, an increase in asset is debited.
Interest revenue is a revenue account. Revenues increase equity account and an increase in equity is credited.

Prepare journal entry to record NSF check.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Accounts Receivable			500
			Cash			500
		(To record the cash receipt for the NSF check )

Table (4)

Description:

Accounts Receivable is an asset account. The bank has not collected the amount from the customer due to insufficient funds, which was earlier recorded as a receipt. As the collection could not be made, amount to be received increased. Therefore, increase in asset would be debited.
Cash is an asset account. The amount is decreased because bank could not collect amount due to insufficient funds in customer’s account, and a decrease in asset is credited.

Prepare journal entry to record bank service charge.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Office Expense			40
			Cash			40
		(To record the deduction of bank service charge)

Table (5)

Description:

Office expense is an expense account and the amount is increased because bank has charged service charges. Expenses decrease equity account and decrease in equity is debited.
Cash is an asset account. The amount is decreased because bank service charge is paid, and a decrease in asset is credited.

5.

To determine

Indicate the balance in cash account, after posting the reconciliation entries

5.

Expert Solution

Answer to Problem 3PB

The balance in cash account, after posting the reconciliation entries is $122,930.

Explanation of Solution

After the three adjustments (Refer to the bank reconciliation statement in Part 3), the balance in cash account is $122,930($123,410+$60–$500–$40).

Conclusion

Hence, the balance in cash account, after posting the reconciliation entries is $122,930.

6.

To determine

Indicate the balance that is to be reported in the balance sheet as at September 30, after including the balance of $200 in petty cash on hand.

6.

Expert Solution

Answer to Problem 3PB

The balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,310.

Explanation of Solution

After adding the balance in petty cash on hand account of $200 to the updated balance in cash account of $122,930, the balance to be reported in the balance sheet as at September 30 is $123,130($122,930+$200).

Conclusion

Hence, the balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,130.

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Answer 2

Question

Chapter 5, Problem 3PB

1.

To determine

Identify the amount of deposits in transit as at September 30.

1.

Expert Solution

Explanation of Solution

Deposits-in-transit: The checks that are deposited and recorded by the company, but not yet recorded by the bank are referred to as deposits-in-transit.

Deposits that should be included in bank reconciliation: As per the information, the deposits in transit as at September 30, is $21,000, which is deposited on September 30, but the bank has not recorded.

Conclusion

Hence, the deposits in transit as at September 30, is $21,000.

2.

To determine

List the outstanding checks at September 30.

2.

Expert Solution

Explanation of Solution

Outstanding checks: Outstanding checks are the checks that are issued by the company, but not yet paid by the bank.

Determine the amount of outstanding checks as at September 30.

Particulars	Amount ($)
Outstanding check	$500
Outstanding check	6,000
Amount of outstanding checks as at September 30	$6,500

Table (1)

Description: The other checks that were issued by company were paid by the bank.

Conclusion

Hence, the amount of outstanding checks at September 30 was $6,500.

3.

To determine

Prepare a bank reconciliation of Company T, as at September 30.

3.

Expert Solution

Explanation of Solution

Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare bank reconciliation of Company T, as at September 30.

Company T
Bank Reconciliation
September 30
Updates to Bank Statement		Updates to Company’s Books
Ending cash balance per bank statement	$108,430	Ending cash balance per books	$123,410
Additions:		Additions:
Deposits in transit	21,000	Interest earned	60
	129,430		123,470

Deductions:		Deductions:
Outstanding checks (refer table 1)	6,500	NSF check	500
Up-to-date ending cash balance	$122,930	Bank service charge	40
		Up-to-date ending cash balance	$122,930

Table (2)

Description:

The deposits which are not recorded by the bank are referred to as deposits in transit. Since the deposits in transit are not reflected on the bank statement, the company should add deposits in transit to cash balance per bank, while preparation of bank reconciliation statement.
Outstanding checks are the checks that are issued by the company, but not yet paid by the bank. When the check is issued for payment, the company deducts the cash balance immediately. But the bank deducts only when the cash is paid for the issued check. So, company deducts the cash balance per bank to remove the differences.
Interest earned on checking account is credited by bank to the bank account of which the company is not aware of. So, while preparing bank reconciliation statement, company should add the amount to the cash balance per books.
While bank reconciliation, the NSF check should be deducted from the cash balance per book. This is because the bank could not collect funds from the customer’s bank due to lack of funds. But being recorded as accounts receivable previously, the balance should be deducted from books, to increase the accounts receivable account.
Banks deduct the service charge for the services rendered like lock box rental, or printed checks. But the company is not aware of such deductions. So, company deducts the cash balance per books while bank reconciliation preparation.

4.

To determine

Prepare the adjusting journal entries that arise due to bank reconciliation.

4.

Expert Solution

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entry to record interest earned.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Cash			60
			Interest Revenue			60
		(To record interest earned)

Table (3)

Description:

Cash is an asset account. The amount is increased because interest is earned on checking account; hence, an increase in asset is debited.
Interest revenue is a revenue account. Revenues increase equity account and an increase in equity is credited.

Prepare journal entry to record NSF check.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Accounts Receivable			500
			Cash			500
		(To record the cash receipt for the NSF check )

Table (4)

Description:

Accounts Receivable is an asset account. The bank has not collected the amount from the customer due to insufficient funds, which was earlier recorded as a receipt. As the collection could not be made, amount to be received increased. Therefore, increase in asset would be debited.
Cash is an asset account. The amount is decreased because bank could not collect amount due to insufficient funds in customer’s account, and a decrease in asset is credited.

Prepare journal entry to record bank service charge.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Office Expense			40
			Cash			40
		(To record the deduction of bank service charge)

Table (5)

Description:

Office expense is an expense account and the amount is increased because bank has charged service charges. Expenses decrease equity account and decrease in equity is debited.
Cash is an asset account. The amount is decreased because bank service charge is paid, and a decrease in asset is credited.

5.

To determine

Indicate the balance in cash account, after posting the reconciliation entries

5.

Expert Solution

Answer to Problem 3PB

The balance in cash account, after posting the reconciliation entries is $122,930.

Explanation of Solution

After the three adjustments (Refer to the bank reconciliation statement in Part 3), the balance in cash account is $122,930($123,410+$60–$500–$40).

Conclusion

Hence, the balance in cash account, after posting the reconciliation entries is $122,930.

6.

To determine

Indicate the balance that is to be reported in the balance sheet as at September 30, after including the balance of $200 in petty cash on hand.

6.

Expert Solution

Answer to Problem 3PB

The balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,310.

Explanation of Solution

After adding the balance in petty cash on hand account of $200 to the updated balance in cash account of $122,930, the balance to be reported in the balance sheet as at September 30 is $123,130($122,930+$200).

Conclusion

Hence, the balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,130.

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Answer 3

Question

Chapter 5, Problem 3PB

1.

To determine

Identify the amount of deposits in transit as at September 30.

1.

Expert Solution

Explanation of Solution

Deposits-in-transit: The checks that are deposited and recorded by the company, but not yet recorded by the bank are referred to as deposits-in-transit.

Deposits that should be included in bank reconciliation: As per the information, the deposits in transit as at September 30, is $21,000, which is deposited on September 30, but the bank has not recorded.

Conclusion

Hence, the deposits in transit as at September 30, is $21,000.

2.

To determine

List the outstanding checks at September 30.

2.

Expert Solution

Explanation of Solution

Outstanding checks: Outstanding checks are the checks that are issued by the company, but not yet paid by the bank.

Determine the amount of outstanding checks as at September 30.

Particulars	Amount ($)
Outstanding check	$500
Outstanding check	6,000
Amount of outstanding checks as at September 30	$6,500

Table (1)

Description: The other checks that were issued by company were paid by the bank.

Conclusion

Hence, the amount of outstanding checks at September 30 was $6,500.

3.

To determine

Prepare a bank reconciliation of Company T, as at September 30.

3.

Expert Solution

Explanation of Solution

Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare bank reconciliation of Company T, as at September 30.

Company T
Bank Reconciliation
September 30
Updates to Bank Statement		Updates to Company’s Books
Ending cash balance per bank statement	$108,430	Ending cash balance per books	$123,410
Additions:		Additions:
Deposits in transit	21,000	Interest earned	60
	129,430		123,470

Deductions:		Deductions:
Outstanding checks (refer table 1)	6,500	NSF check	500
Up-to-date ending cash balance	$122,930	Bank service charge	40
		Up-to-date ending cash balance	$122,930

Table (2)

Description:

The deposits which are not recorded by the bank are referred to as deposits in transit. Since the deposits in transit are not reflected on the bank statement, the company should add deposits in transit to cash balance per bank, while preparation of bank reconciliation statement.
Outstanding checks are the checks that are issued by the company, but not yet paid by the bank. When the check is issued for payment, the company deducts the cash balance immediately. But the bank deducts only when the cash is paid for the issued check. So, company deducts the cash balance per bank to remove the differences.
Interest earned on checking account is credited by bank to the bank account of which the company is not aware of. So, while preparing bank reconciliation statement, company should add the amount to the cash balance per books.
While bank reconciliation, the NSF check should be deducted from the cash balance per book. This is because the bank could not collect funds from the customer’s bank due to lack of funds. But being recorded as accounts receivable previously, the balance should be deducted from books, to increase the accounts receivable account.
Banks deduct the service charge for the services rendered like lock box rental, or printed checks. But the company is not aware of such deductions. So, company deducts the cash balance per books while bank reconciliation preparation.

4.

To determine

Prepare the adjusting journal entries that arise due to bank reconciliation.

4.

Expert Solution

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entry to record interest earned.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Cash			60
			Interest Revenue			60
		(To record interest earned)

Table (3)

Description:

Cash is an asset account. The amount is increased because interest is earned on checking account; hence, an increase in asset is debited.
Interest revenue is a revenue account. Revenues increase equity account and an increase in equity is credited.

Prepare journal entry to record NSF check.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Accounts Receivable			500
			Cash			500
		(To record the cash receipt for the NSF check )

Table (4)

Description:

Accounts Receivable is an asset account. The bank has not collected the amount from the customer due to insufficient funds, which was earlier recorded as a receipt. As the collection could not be made, amount to be received increased. Therefore, increase in asset would be debited.
Cash is an asset account. The amount is decreased because bank could not collect amount due to insufficient funds in customer’s account, and a decrease in asset is credited.

Prepare journal entry to record bank service charge.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Office Expense			40
			Cash			40
		(To record the deduction of bank service charge)

Table (5)

Description:

Office expense is an expense account and the amount is increased because bank has charged service charges. Expenses decrease equity account and decrease in equity is debited.
Cash is an asset account. The amount is decreased because bank service charge is paid, and a decrease in asset is credited.

5.

To determine

Indicate the balance in cash account, after posting the reconciliation entries

5.

Expert Solution

Answer to Problem 3PB

The balance in cash account, after posting the reconciliation entries is $122,930.

Explanation of Solution

After the three adjustments (Refer to the bank reconciliation statement in Part 3), the balance in cash account is $122,930($123,410+$60–$500–$40).

Conclusion

Hence, the balance in cash account, after posting the reconciliation entries is $122,930.

6.

To determine

Indicate the balance that is to be reported in the balance sheet as at September 30, after including the balance of $200 in petty cash on hand.

6.

Expert Solution

Answer to Problem 3PB

The balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,310.

Explanation of Solution

After adding the balance in petty cash on hand account of $200 to the updated balance in cash account of $122,930, the balance to be reported in the balance sheet as at September 30 is $123,130($122,930+$200).

Conclusion

Hence, the balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,130.

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Answer 4

Question

Chapter 5, Problem 3PB

1.

To determine

Identify the amount of deposits in transit as at September 30.

1.

Expert Solution

Explanation of Solution

Deposits-in-transit: The checks that are deposited and recorded by the company, but not yet recorded by the bank are referred to as deposits-in-transit.

Deposits that should be included in bank reconciliation: As per the information, the deposits in transit as at September 30, is $21,000, which is deposited on September 30, but the bank has not recorded.

Conclusion

Hence, the deposits in transit as at September 30, is $21,000.

2.

To determine

List the outstanding checks at September 30.

2.

Expert Solution

Explanation of Solution

Outstanding checks: Outstanding checks are the checks that are issued by the company, but not yet paid by the bank.

Determine the amount of outstanding checks as at September 30.

Particulars	Amount ($)
Outstanding check	$500
Outstanding check	6,000
Amount of outstanding checks as at September 30	$6,500

Table (1)

Description: The other checks that were issued by company were paid by the bank.

Conclusion

Hence, the amount of outstanding checks at September 30 was $6,500.

3.

To determine

Prepare a bank reconciliation of Company T, as at September 30.

3.

Expert Solution

Explanation of Solution

Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare bank reconciliation of Company T, as at September 30.

Company T
Bank Reconciliation
September 30
Updates to Bank Statement		Updates to Company’s Books
Ending cash balance per bank statement	$108,430	Ending cash balance per books	$123,410
Additions:		Additions:
Deposits in transit	21,000	Interest earned	60
	129,430		123,470

Deductions:		Deductions:
Outstanding checks (refer table 1)	6,500	NSF check	500
Up-to-date ending cash balance	$122,930	Bank service charge	40
		Up-to-date ending cash balance	$122,930

Table (2)

Description:

The deposits which are not recorded by the bank are referred to as deposits in transit. Since the deposits in transit are not reflected on the bank statement, the company should add deposits in transit to cash balance per bank, while preparation of bank reconciliation statement.
Outstanding checks are the checks that are issued by the company, but not yet paid by the bank. When the check is issued for payment, the company deducts the cash balance immediately. But the bank deducts only when the cash is paid for the issued check. So, company deducts the cash balance per bank to remove the differences.
Interest earned on checking account is credited by bank to the bank account of which the company is not aware of. So, while preparing bank reconciliation statement, company should add the amount to the cash balance per books.
While bank reconciliation, the NSF check should be deducted from the cash balance per book. This is because the bank could not collect funds from the customer’s bank due to lack of funds. But being recorded as accounts receivable previously, the balance should be deducted from books, to increase the accounts receivable account.
Banks deduct the service charge for the services rendered like lock box rental, or printed checks. But the company is not aware of such deductions. So, company deducts the cash balance per books while bank reconciliation preparation.

4.

To determine

Prepare the adjusting journal entries that arise due to bank reconciliation.

4.

Expert Solution

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entry to record interest earned.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Cash			60
			Interest Revenue			60
		(To record interest earned)

Table (3)

Description:

Cash is an asset account. The amount is increased because interest is earned on checking account; hence, an increase in asset is debited.
Interest revenue is a revenue account. Revenues increase equity account and an increase in equity is credited.

Prepare journal entry to record NSF check.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Accounts Receivable			500
			Cash			500
		(To record the cash receipt for the NSF check )

Table (4)

Description:

Accounts Receivable is an asset account. The bank has not collected the amount from the customer due to insufficient funds, which was earlier recorded as a receipt. As the collection could not be made, amount to be received increased. Therefore, increase in asset would be debited.
Cash is an asset account. The amount is decreased because bank could not collect amount due to insufficient funds in customer’s account, and a decrease in asset is credited.

Prepare journal entry to record bank service charge.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Office Expense			40
			Cash			40
		(To record the deduction of bank service charge)

Table (5)

Description:

Office expense is an expense account and the amount is increased because bank has charged service charges. Expenses decrease equity account and decrease in equity is debited.
Cash is an asset account. The amount is decreased because bank service charge is paid, and a decrease in asset is credited.

5.

To determine

Indicate the balance in cash account, after posting the reconciliation entries

5.

Expert Solution

Answer to Problem 3PB

The balance in cash account, after posting the reconciliation entries is $122,930.

Explanation of Solution

After the three adjustments (Refer to the bank reconciliation statement in Part 3), the balance in cash account is $122,930($123,410+$60–$500–$40).

Conclusion

Hence, the balance in cash account, after posting the reconciliation entries is $122,930.

6.

To determine

Indicate the balance that is to be reported in the balance sheet as at September 30, after including the balance of $200 in petty cash on hand.

6.

Expert Solution

Answer to Problem 3PB

The balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,310.

Explanation of Solution

After adding the balance in petty cash on hand account of $200 to the updated balance in cash account of $122,930, the balance to be reported in the balance sheet as at September 30 is $123,130($122,930+$200).

Conclusion

Hence, the balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,130.

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Answer 5

Chapter 5, Problem 3PB

1.

To determine

Identify the amount of deposits in transit as at September 30.

1.

Expert Solution

Explanation of Solution

Deposits-in-transit: The checks that are deposited and recorded by the company, but not yet recorded by the bank are referred to as deposits-in-transit.

Deposits that should be included in bank reconciliation: As per the information, the deposits in transit as at September 30, is $21,000, which is deposited on September 30, but the bank has not recorded.

Conclusion

Hence, the deposits in transit as at September 30, is $21,000.

2.

To determine

List the outstanding checks at September 30.

2.

Expert Solution

Explanation of Solution

Outstanding checks: Outstanding checks are the checks that are issued by the company, but not yet paid by the bank.

Determine the amount of outstanding checks as at September 30.

Particulars	Amount ($)
Outstanding check	$500
Outstanding check	6,000
Amount of outstanding checks as at September 30	$6,500

Table (1)

Description: The other checks that were issued by company were paid by the bank.

Conclusion

Hence, the amount of outstanding checks at September 30 was $6,500.

3.

To determine

Prepare a bank reconciliation of Company T, as at September 30.

3.

Expert Solution

Explanation of Solution

Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare bank reconciliation of Company T, as at September 30.

Company T
Bank Reconciliation
September 30
Updates to Bank Statement		Updates to Company’s Books
Ending cash balance per bank statement	$108,430	Ending cash balance per books	$123,410
Additions:		Additions:
Deposits in transit	21,000	Interest earned	60
	129,430		123,470

Deductions:		Deductions:
Outstanding checks (refer table 1)	6,500	NSF check	500
Up-to-date ending cash balance	$122,930	Bank service charge	40
		Up-to-date ending cash balance	$122,930

Table (2)

Description:

The deposits which are not recorded by the bank are referred to as deposits in transit. Since the deposits in transit are not reflected on the bank statement, the company should add deposits in transit to cash balance per bank, while preparation of bank reconciliation statement.
Outstanding checks are the checks that are issued by the company, but not yet paid by the bank. When the check is issued for payment, the company deducts the cash balance immediately. But the bank deducts only when the cash is paid for the issued check. So, company deducts the cash balance per bank to remove the differences.
Interest earned on checking account is credited by bank to the bank account of which the company is not aware of. So, while preparing bank reconciliation statement, company should add the amount to the cash balance per books.
While bank reconciliation, the NSF check should be deducted from the cash balance per book. This is because the bank could not collect funds from the customer’s bank due to lack of funds. But being recorded as accounts receivable previously, the balance should be deducted from books, to increase the accounts receivable account.
Banks deduct the service charge for the services rendered like lock box rental, or printed checks. But the company is not aware of such deductions. So, company deducts the cash balance per books while bank reconciliation preparation.

4.

To determine

Prepare the adjusting journal entries that arise due to bank reconciliation.

4.

Expert Solution

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entry to record interest earned.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Cash			60
			Interest Revenue			60
		(To record interest earned)

Table (3)

Description:

Cash is an asset account. The amount is increased because interest is earned on checking account; hence, an increase in asset is debited.
Interest revenue is a revenue account. Revenues increase equity account and an increase in equity is credited.

Prepare journal entry to record NSF check.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Accounts Receivable			500
			Cash			500
		(To record the cash receipt for the NSF check )

Table (4)

Description:

Accounts Receivable is an asset account. The bank has not collected the amount from the customer due to insufficient funds, which was earlier recorded as a receipt. As the collection could not be made, amount to be received increased. Therefore, increase in asset would be debited.
Cash is an asset account. The amount is decreased because bank could not collect amount due to insufficient funds in customer’s account, and a decrease in asset is credited.

Prepare journal entry to record bank service charge.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Office Expense			40
			Cash			40
		(To record the deduction of bank service charge)

Table (5)

Description:

Office expense is an expense account and the amount is increased because bank has charged service charges. Expenses decrease equity account and decrease in equity is debited.
Cash is an asset account. The amount is decreased because bank service charge is paid, and a decrease in asset is credited.

5.

To determine

Indicate the balance in cash account, after posting the reconciliation entries

5.

Expert Solution

Answer to Problem 3PB

The balance in cash account, after posting the reconciliation entries is $122,930.

Explanation of Solution

After the three adjustments (Refer to the bank reconciliation statement in Part 3), the balance in cash account is $122,930($123,410+$60–$500–$40).

Conclusion

Hence, the balance in cash account, after posting the reconciliation entries is $122,930.

6.

To determine

Indicate the balance that is to be reported in the balance sheet as at September 30, after including the balance of $200 in petty cash on hand.

6.

Expert Solution

Answer to Problem 3PB

The balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,310.

Explanation of Solution

After adding the balance in petty cash on hand account of $200 to the updated balance in cash account of $122,930, the balance to be reported in the balance sheet as at September 30 is $123,130($122,930+$200).

Conclusion

Hence, the balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,130.

Answer 6

Chapter 5, Problem 3PB

1.

To determine

Identify the amount of deposits in transit as at September 30.

1.

Expert Solution

Explanation of Solution

Deposits-in-transit: The checks that are deposited and recorded by the company, but not yet recorded by the bank are referred to as deposits-in-transit.

Deposits that should be included in bank reconciliation: As per the information, the deposits in transit as at September 30, is $21,000, which is deposited on September 30, but the bank has not recorded.

Conclusion

Hence, the deposits in transit as at September 30, is $21,000.

Answer 7

Chapter 5, Problem 3PB

1.

To determine

Identify the amount of deposits in transit as at September 30.

Answer 8

1.

Expert Solution

Explanation of Solution

Deposits-in-transit: The checks that are deposited and recorded by the company, but not yet recorded by the bank are referred to as deposits-in-transit.

Deposits that should be included in bank reconciliation: As per the information, the deposits in transit as at September 30, is $21,000, which is deposited on September 30, but the bank has not recorded.

Answer 9

1.

Expert Solution

Answer 10

1.

Expert Solution

Answer 11

Expert Solution

Answer 12

Conclusion

Hence, the deposits in transit as at September 30, is $21,000.

Answer 13

2.

To determine

List the outstanding checks at September 30.

2.

Expert Solution

Explanation of Solution

Outstanding checks: Outstanding checks are the checks that are issued by the company, but not yet paid by the bank.

Determine the amount of outstanding checks as at September 30.

Particulars	Amount ($)
Outstanding check	$500
Outstanding check	6,000
Amount of outstanding checks as at September 30	$6,500

Table (1)

Description: The other checks that were issued by company were paid by the bank.

Conclusion

Hence, the amount of outstanding checks at September 30 was $6,500.

Answer 14

2.

To determine

List the outstanding checks at September 30.

Answer 15

2.

Expert Solution

Explanation of Solution

Outstanding checks: Outstanding checks are the checks that are issued by the company, but not yet paid by the bank.

Determine the amount of outstanding checks as at September 30.

Particulars	Amount ($)
Outstanding check	$500
Outstanding check	6,000
Amount of outstanding checks as at September 30	$6,500

Table (1)

Description: The other checks that were issued by company were paid by the bank.

Answer 16

2.

Expert Solution

Answer 17

2.

Expert Solution

Answer 18

Expert Solution

Answer 19

Conclusion

Hence, the amount of outstanding checks at September 30 was $6,500.

Answer 20

3.

To determine

Prepare a bank reconciliation of Company T, as at September 30.

3.

Expert Solution

Explanation of Solution

Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare bank reconciliation of Company T, as at September 30.

Company T
Bank Reconciliation
September 30
Updates to Bank Statement		Updates to Company’s Books
Ending cash balance per bank statement	$108,430	Ending cash balance per books	$123,410
Additions:		Additions:
Deposits in transit	21,000	Interest earned	60
	129,430		123,470

Deductions:		Deductions:
Outstanding checks (refer table 1)	6,500	NSF check	500
Up-to-date ending cash balance	$122,930	Bank service charge	40
		Up-to-date ending cash balance	$122,930

Table (2)

Description:

The deposits which are not recorded by the bank are referred to as deposits in transit. Since the deposits in transit are not reflected on the bank statement, the company should add deposits in transit to cash balance per bank, while preparation of bank reconciliation statement.
Outstanding checks are the checks that are issued by the company, but not yet paid by the bank. When the check is issued for payment, the company deducts the cash balance immediately. But the bank deducts only when the cash is paid for the issued check. So, company deducts the cash balance per bank to remove the differences.
Interest earned on checking account is credited by bank to the bank account of which the company is not aware of. So, while preparing bank reconciliation statement, company should add the amount to the cash balance per books.
While bank reconciliation, the NSF check should be deducted from the cash balance per book. This is because the bank could not collect funds from the customer’s bank due to lack of funds. But being recorded as accounts receivable previously, the balance should be deducted from books, to increase the accounts receivable account.
Banks deduct the service charge for the services rendered like lock box rental, or printed checks. But the company is not aware of such deductions. So, company deducts the cash balance per books while bank reconciliation preparation.

Answer 21

3.

To determine

Prepare a bank reconciliation of Company T, as at September 30.

Answer 22

3.

Expert Solution

Explanation of Solution

Bank reconciliation: Bank statement is prepared by bank. The company maintains its own records from its perspective. This is why the cash balance per bank and cash balance per books seldom agree. Bank reconciliation is the statement prepared by company to remove the differences and disagreement between cash balance per bank and cash balance per books.

Prepare bank reconciliation of Company T, as at September 30.

Company T
Bank Reconciliation
September 30
Updates to Bank Statement		Updates to Company’s Books
Ending cash balance per bank statement	$108,430	Ending cash balance per books	$123,410
Additions:		Additions:
Deposits in transit	21,000	Interest earned	60
	129,430		123,470

Deductions:		Deductions:
Outstanding checks (refer table 1)	6,500	NSF check	500
Up-to-date ending cash balance	$122,930	Bank service charge	40
		Up-to-date ending cash balance	$122,930

Table (2)

Description:

The deposits which are not recorded by the bank are referred to as deposits in transit. Since the deposits in transit are not reflected on the bank statement, the company should add deposits in transit to cash balance per bank, while preparation of bank reconciliation statement.
Outstanding checks are the checks that are issued by the company, but not yet paid by the bank. When the check is issued for payment, the company deducts the cash balance immediately. But the bank deducts only when the cash is paid for the issued check. So, company deducts the cash balance per bank to remove the differences.
Interest earned on checking account is credited by bank to the bank account of which the company is not aware of. So, while preparing bank reconciliation statement, company should add the amount to the cash balance per books.
While bank reconciliation, the NSF check should be deducted from the cash balance per book. This is because the bank could not collect funds from the customer’s bank due to lack of funds. But being recorded as accounts receivable previously, the balance should be deducted from books, to increase the accounts receivable account.
Banks deduct the service charge for the services rendered like lock box rental, or printed checks. But the company is not aware of such deductions. So, company deducts the cash balance per books while bank reconciliation preparation.

Answer 23

3.

Expert Solution

Answer 24

3.

Expert Solution

Answer 25

Expert Solution

Answer 26

4.

To determine

Prepare the adjusting journal entries that arise due to bank reconciliation.

4.

Expert Solution

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entry to record interest earned.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Cash			60
			Interest Revenue			60
		(To record interest earned)

Table (3)

Description:

Cash is an asset account. The amount is increased because interest is earned on checking account; hence, an increase in asset is debited.
Interest revenue is a revenue account. Revenues increase equity account and an increase in equity is credited.

Prepare journal entry to record NSF check.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Accounts Receivable			500
			Cash			500
		(To record the cash receipt for the NSF check )

Table (4)

Description:

Accounts Receivable is an asset account. The bank has not collected the amount from the customer due to insufficient funds, which was earlier recorded as a receipt. As the collection could not be made, amount to be received increased. Therefore, increase in asset would be debited.
Cash is an asset account. The amount is decreased because bank could not collect amount due to insufficient funds in customer’s account, and a decrease in asset is credited.

Prepare journal entry to record bank service charge.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Office Expense			40
			Cash			40
		(To record the deduction of bank service charge)

Table (5)

Description:

Office expense is an expense account and the amount is increased because bank has charged service charges. Expenses decrease equity account and decrease in equity is debited.
Cash is an asset account. The amount is decreased because bank service charge is paid, and a decrease in asset is credited.

Answer 27

4.

To determine

Prepare the adjusting journal entries that arise due to bank reconciliation.

Answer 28

4.

Expert Solution

Explanation of Solution

Journal entry: Journal entry is a set of economic events which can be measured in monetary terms. These are recorded chronologically and systematically.

Debit and credit rules:

Debit an increase in asset account, increase in expense account, decrease in liability account, and decrease in stockholders’ equity accounts.
Credit decrease in asset account, increase in revenue account, increase in liability account, and increase in stockholders’ equity accounts.

Prepare journal entry to record interest earned.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Cash			60
			Interest Revenue			60
		(To record interest earned)

Table (3)

Description:

Cash is an asset account. The amount is increased because interest is earned on checking account; hence, an increase in asset is debited.
Interest revenue is a revenue account. Revenues increase equity account and an increase in equity is credited.

Prepare journal entry to record NSF check.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Accounts Receivable			500
			Cash			500
		(To record the cash receipt for the NSF check )

Table (4)

Description:

Accounts Receivable is an asset account. The bank has not collected the amount from the customer due to insufficient funds, which was earlier recorded as a receipt. As the collection could not be made, amount to be received increased. Therefore, increase in asset would be debited.
Cash is an asset account. The amount is decreased because bank could not collect amount due to insufficient funds in customer’s account, and a decrease in asset is credited.

Prepare journal entry to record bank service charge.

Date		Account Titles and Explanation		Ref.	Debit ($)	Credit ($)
September	31	Office Expense			40
			Cash			40
		(To record the deduction of bank service charge)

Table (5)

Description:

Office expense is an expense account and the amount is increased because bank has charged service charges. Expenses decrease equity account and decrease in equity is debited.
Cash is an asset account. The amount is decreased because bank service charge is paid, and a decrease in asset is credited.

Answer 29

4.

Expert Solution

Answer 30

4.

Expert Solution

Answer 31

Expert Solution

Answer 32

5.

To determine

Indicate the balance in cash account, after posting the reconciliation entries

5.

Expert Solution

Answer to Problem 3PB

The balance in cash account, after posting the reconciliation entries is $122,930.

Explanation of Solution

After the three adjustments (Refer to the bank reconciliation statement in Part 3), the balance in cash account is $122,930($123,410+$60–$500–$40).

Conclusion

Hence, the balance in cash account, after posting the reconciliation entries is $122,930.

Answer 33

5.

To determine

Indicate the balance in cash account, after posting the reconciliation entries

Answer 34

5.

Expert Solution

Answer to Problem 3PB

The balance in cash account, after posting the reconciliation entries is $122,930.

Answer 35

5.

Expert Solution

Answer 36

5.

Expert Solution

Answer 37

Expert Solution

Answer 38

Explanation of Solution

After the three adjustments (Refer to the bank reconciliation statement in Part 3), the balance in cash account is $122,930($123,410+$60–$500–$40).

Answer 39

Conclusion

Hence, the balance in cash account, after posting the reconciliation entries is $122,930.

Answer 40

6.

To determine

Indicate the balance that is to be reported in the balance sheet as at September 30, after including the balance of $200 in petty cash on hand.

6.

Expert Solution

Answer to Problem 3PB

The balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,310.

Explanation of Solution

After adding the balance in petty cash on hand account of $200 to the updated balance in cash account of $122,930, the balance to be reported in the balance sheet as at September 30 is $123,130($122,930+$200).

Conclusion

Hence, the balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,130.

Answer 41

6.

To determine

Indicate the balance that is to be reported in the balance sheet as at September 30, after including the balance of $200 in petty cash on hand.

Answer 42

6.

Expert Solution

Answer to Problem 3PB

The balance to be reported in the balance sheet as at September 30, after including the balance in petty cash on hand is $123,310.

Answer 43

6.

Expert Solution

Answer 44

6.

Expert Solution

Answer 45

Expert Solution

Answer 46

Explanation of Solution

After adding the balance in petty cash on hand account of $200 to the updated balance in cash account of $122,930, the balance to be reported in the balance sheet as at September 30 is $123,130($122,930+$200).