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The cash account for Online Medical Co, at June 30, 2012, indicated a balance of $9,375
The cash account for Online Medical Co, at June 30, 2012, indicated a balance of $9,375. The bank statement indicated a balance of $10,760 on June 30, 2012. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $3,900.
b. A deposit of $4,000, representing receipts of June 30, had been made too late to appear on the bank statement.
c. The bank had collected $2,100 on a note left for collection. The face of the note was $2,000.
d. A check for $550 returned with the statement had been incorrectly recorded by Online Medical Co. as $500. The check was for the payment of an obligation to Hirsch Co. for the purchase on account.
e. A check drawn for $60 had been erroneously charged by the bank as $600.
f. Bank service charges for June amounted to $25.
Instructions
1. Prepare a bank reconciliation
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Online Medical Co. on June 30, 2012, what amount should be reported as cash?
Expert Solution
1. ONLINE MEDICAL CO.
Bank Reconciliation
June 30, 2012
Cash balance according to bank statement.................................. $10,760
Add: Deposit of June 30, not recorded by bank $4,000
Bank error in charging check as $600 instead
of $60......................................................................... 540 4,540
$15,300
Deduct outstanding checks......................................................... 3,900
Adjusted balance......................................................................... $11,400
Cash balance according to company’s records............................ $ 9,375
Add proceeds of note collected by bank, including
$100 interest.......................................................................... 2,100
$11,475
Deduct: Error in recording check............................................ $ 50
Bank service charges.................................................. 25 75
Adjusted balance......................................................................... $11,400
2. Cash............................................................................................. 2,100
Notes Receivable................................................................... 2,000
Interest Revenue.................................................................... 100
Accounts Payable x Hirsch Co. .................................................. 50
Miscellaneous Administrative Expense....................................... 25
Cash ...................................................................................... 75
3. $11,400; the adjusted balance from the bank reconciliation should be reported as cash on the June 30, 2012, balance sheet for Online Medical Co.
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