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Chapter 7: Q9SE (page 413)

Preparing a bank reconciliation

The Cash account of Guard Dog Security Systems reported a balance of \(2,540 at December 31, 2018. There were outstanding checks totaling \)400 and a December 31 deposit in transit of \(100. The bank statement, which came from Park Cities Bank, listed the December 31 balance of \)3,340. Included in the bank balance was a collection of \(510 on account from Brendan Ballou, a Guard Dog customer who pays the bank directly. The bank statement also shows a \)30 service charge and $20 of interest revenue that Guard Dog earned on its bank balance. Prepare Guard Dog鈥檚 bank reconciliation for December 31.

Short Answer

Expert verified

The ending balance of the bank reconciliation statement is $3,040.

Step by step solution

01

Step-by-Step SolutionStep 1: Definition of the bank reconciliation statement

A bank reconciliation statement is a statement that is prepared to remove the difference in the balance of cash balance and bank balance.

02

Bank reconciliation statement

In the bank reconciliation statement, there are two sides one is the bank, and the second is the book side. On the bankside, the opening balance of the bank account is entered. After this, the amount of deposit transit is added to the bank balance, and the number of outstanding checks is deducted.

The second side of the bank reconciliation statement is started with the opening balance of the company鈥檚 book. After this, the amount of bank collection and interest revenue is added to the balance, and the amount of service charge is deducted from the book side balance.

Guard Dog Security Systems
Bank Reconciliation Statement
December 31, 2018
Bank
Book

Balance, December 31, 2018

$3,340

Balance, December 31, 2018

$2,540

Add:

Add:

  1. Deposit in transit

$100

  1. Bank Collection

$510

$3,440

  1. Interest Revenue

$20

$3,070

Less:

Less:

  1. Outstanding Checks

$400

  1. Service Charge

$30

Adjusted bank balance, December 31, 2018

$3,040

Adjusted cash balance December 31, 2018

$3,040

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Most popular questions from this chapter

Preparing a bank reconciliation and journal entries

The October 31 bank statement of Wyndham鈥檚 Healthcare has just arrived from State

Bank. To prepare the bank reconciliation, you gather the following data:

a. The October 31 bank balance is \(6,290.

b. The bank statement includes two charges for NSF checks from customers. One is

for \)370 (#1), and the other is for \(180 (#2).

c. The following Wyndham鈥檚 checks are outstanding at October 31:

Check No. Amount

237 \) 120

288 140

291 570

294 570

295 30

296 110

d. Wyndham鈥檚 collects from a few customers by EFT. The October bank statement

lists a \(2,200 EFT deposit for a collection on account.

e. The bank statement includes two special deposits that Wyndham鈥檚 hasn鈥檛 recorded

yet: \)900 for dividend revenue and \(100 for the interest revenue Wyndham鈥檚

earned on its bank balance during October.

f. The bank statement lists a \)80 subtraction for the bank service charge.

g. On October 31, the Wyndham鈥檚 treasurer deposited \(270, but this deposit does

does not appear on the bank statement.

h. The bank statement includes a \)750 deduction for a check drawn by Multi-State

Freight Company. Wyndham鈥檚 notified the bank of this bank error.

i. Wyndham鈥檚 Cash account shows a balance of $3,200 on October 31.

Requirements

1. Prepare the bank reconciliation for Wyndham鈥檚 Healthcare at October 31, 2018.

2. Journalize any required entries from the bank reconciliation. Include an explanation for each entry.

List internal control procedures related to e-commerce.

What is a bank reconciliation?

Accounting for petty cash transactions

Suppose that on September 1, Cool Gyrations, a disc jockey service, create a petty

cash fund with an imprest balance of \(350. During September, Ruth Mangan, fund

custodian, signs the following petty cash tickets:

Petty Cash

Ticket Number Item Amount

1 Postage for package received \) 25

2 Office party 10

3 Two boxes of stationery 20

4 Printer cartridges 15

5 Business dinner 65

On September 30, prior to replenishment, the fund contains these tickets plus cash of

\(210. The accounts affected by petty cash payments are Office Supplies, Entertainment

Expense, and Postage Expense.

Requirements

1. On September 30, how much cash should this petty cash fund hold before it is

replenished?

2. Journalize all required entries to (a) create the fund and (b) replenish it. Include

explanations.

3. Make the entry on October 1 to increase the fund balance to \)425. Include an

Explanation

The Scott Sun & Shade Company had the following financial data at December 31, 2018:

Cash and cash equivalents $ 60,000

Total current liabilities 75,000

What is the cash ratio as of December 31, 2018, for Scott Sun & Shade?
See all solutions

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