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The following data has been gathered for Ludlow Inc
The following data has been gathered for Ludlow Inc. for the month ended November 30, 2018:
? The bank statement reveals a balance of $3,500
? The November 30, 2018, book balance was $1,300
? There was an EFT deposit of $1,000 on the bank statement for a rental property.
? The bookkeeper had erroneously recorded cheque #101 as $435 cheque instead of $453. The cheque was to settle accounts payable.
? The bank statement revealed $120 in service charges.
? Cheques #103, #105, #115 and #133 for $50, $885, $681 and $32 were not returned with the bank statement.
? A deposit made on November 17, 2018, for $350 did not appear on the bank statement.
? A deposit of $1,500 made on November 10 was erroneously credited to Taylor Enterprises account by the bank for $1,050.
? A bank debit memo indicated an NSF cheque from a customer for $100.
? There was an EFT receipt of $590 for interest income earned on investment.
Required
- Prepare a bank reconciliation for Taylor Enterprises for November 30th
- Record the journal entries that Taylor Enterprises should record on November 30th to update their Cash Account. Include any explanation for each entry.
Expert Solution
a.
Bank reconciliation
| Bank balance | 3,500 | Book balance | 1,300 |
| Deposit in transit | 350 | EFT deposit | 1,000 |
| Bank error | 450 | Interest revenue | 590 |
| Check oustandings : | |||
| Cheque no. 103 50 | Book error | -18 | |
| Cheque no 105 885 | Bank service charge | -120 | |
| Cheque no 115 681 | NSF cheque | -100 | |
| Cheque no 133 32 | -1,648 | ||
| Adjusted bank balance | 2,652 | Adjusted book balance | 2,652 |
b.
Journal
|
Date |
Account Title and Explanation |
Debit |
Credit |
| Cash | 1,000 | ||
| Rent revenue | 1,000 | ||
| (To record rent revenue) | |||
| Accounts payable | 18 | ||
| Cash | 18 | ||
| (To record error in recording of accounts payable) | |||
| Bank service charge | 120 | ||
| Cash | 120 | ||
| (To record bank service charge) | |||
| Accounts receivable | 100 | ||
| Cash | 100 | ||
| (To record NSF cheque) | |||
| Cash | 590 | ||
| Interest revenue | 590 | ||
| (To record interest revenue) |
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