16BE Horton Corporation is preparing ... [FREE SOLUTION]

Chapter 7: 16BE (page 364)

Horton Corporation is preparing a bank reconciliation and has identified the following potential reconciling items. For each item, indicate if it is (1) added to balance per bank statement, (2) deducted from balance per bank statement, (3) added to balance per books, or (4) deducted from balance per books.
(a) Deposit in transit $5,500.
(d) Outstanding checks $7,422.
(b) Bank service charges $25.
(e) NSF check returned $377.
(c) Interest credited to Horton鈥檚 account $31.

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Item	Classification
(a) Deposit in transit $5,500.	Added to balance as per bank statement.
(b) Bank service charges $25.	Deducted from the balance as per books.
(c) Interest credited to Horton鈥檚 account $31.	Added to balance as per books.
(d) Outstanding checks $7,422.	Deducted from the balance as per bank statement.
(e) NSF check returned $377.	Deducted from the balance as per the book.

A bank passbook can be defined as thediary reflecting all the deposits, withdrawals, and any other transaction occurring from the bank account.

(a) Deposit in transit will increase the bank account balance. Therefore, it is added to the balance of the bank statement.

(b) Bank service charges reduce the bank balance; therefore, it is also deducted from the balance as per books.

(c) Interest credited to the account will increase the bank balance; therefore, it is also added to the balance as per books.

(d) Outstanding checks reduced the balance of the book balance. Therefore, it is also deducted from the balance of the bank statement.

(e) NSF checks returned by the bank will not be credited to the bank account. Therefore, it is deducted from the book balance.

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(a) Deposit in transit \(5,500.	(d) Outstanding checks \)7,422.
(b) Bank service charges \(25.	(e) NSF check returned \)377.
(c) Interest credited to Horton鈥檚 account $31.

Postage expenses	\)33.00
Mailing Labels and Other Supplies	65.00
I.O.U from employees	30.00
Shipping charges	57.45
Newspaper advertising	22.80
Miscellaneous expenses	15.35

THIRD NATIONAL BANK
BANK STATEMENT
	Disbursements	Receipts	Balance
Balance 1 May, 2017			\(8,769
Deposits		\)28,000
Note payment direct from customer (\(30)		930
Check clearing during May	\)31,150
Bank service charges	27
Balance 31 May, 2017			6,522