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The cash account for South Bay Sports Co
The cash account for South Bay Sports Co. on April 1, 2012, indicated a balance of $35,025. During April, the total cash deposited was $83,150, and checks written totaled $90,000. The bank statement indicated a balance of $34,345 on April 30, 2012. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $7,700.
b. A deposit of $3,800, representing receipts of April 30, had been made too late to appear on the bank statement.
c. A check for $960 had been incorrectly charged by the bank as $690.
d. A check for $150 returned with the statement had been recorded by South Bay Sports Co. as $1,500. The check was for the payment of an obligation to Jones Co. on account.
e. The bank had collected for South Bay Sports Co. $2,600 on a note left for collections. The face of the note was $2,500.
f. Bank service charges for June amounted to $50.
g. A check for $1,900 from Valley Schools Academy was returned by the bank because of insufficient funds.
Instructions
1. Prepare a bank reconciliation as of April 30.
2. Journalize the necessary entries. The accounts have not beet closed.
3. If a balance sheet were prepared for South Bay Sports Co. on April 30, 2012, what amount should be reported as cash?
Expert Solution
1.
SOUTH BAY SPORTS CO.
Bank Reconciliation
April 30, 2012
Balance per bank statement..................................................... $34,345
Add deposit of April 30, not recorded by bank 3,800
$38,145
Deduct: Outstanding checks............................................... $ 7,700
Bank error in charging check as $690
instead of $960................................................. 270 7,970
Adjusted balance..................................................................... $30,175
Balance per company’s records............................................... $28,175*
Add: Proceeds of note collected by bank,
including $100 interest........................................... $ 2,600
Error in recording check.............................................. 1,350 3,950
$32,125
Deduct: Check returned because of insufficient
funds................................................................. $ 1,900
Bank service charges............................................. 50 1,950
Adjusted balance..................................................................... $30,175
*Cash balance, April 1......................................................... $ 35,025
Plus cash deposited in April............................................... 83,150
Less checks written in April............................................... (90,000)
Balance per company’s records, April 30........................... $ 28,175
2. Cash............................................................................................ 3,950
Notes Receivable.................................................................. 2,500
Interest Revenue.................................................................. 100
Accounts Payable x Jones Co.............................................. 1,350
Accounts Receivable x Valley Schools Academy..................... 1,900
Miscellaneous Administrative Expense...................................... 50
Cash...................................................................................... 1,950
3. $30,175; the adjusted balance from the bank reconciliation should be reported as cash on the April 30, 2012, balance sheet for South Bay Sports Co.
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