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The cash account for Bravo Bike Co
The cash account for Bravo Bike Co. at May 1, 2012, indicated a balance of $15,085. During May, the total cash deposited was $75,100 and checks written totaled $69,750. The bank statement indicated a balance of $25,460 on May 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a. Checks outstanding totaled $11,360.
b. A deposit of $9,200, representing receipts of May 31, had been made too late to appear on the bank statement.
c. The bank had collected for Bravo Bike Co. $4,725 on a note left for collection. The face of the note was $4,500.
d. A check for $490 returned with the statement had been incorrectly charged by the bank as $940.
e. A check for $410 returned with the statement had been recorded by Bravo Bike Co. as $140. The check was for the payment of an obligation to Portage Co. on account.
f. Bank service charges for July amounted to $40.
g. A check for $1,100 from Elkhart Co. was returned by the bank because of insufficient funds.
1. Prepare a bank reconciliation as of May 31.
2. Journalize the necessary entries. The accounts have not been closed.
3. If a balance sheet were prepared for Bravo Bike Co. on May 31, 2012, what amount should be reported as cash?
Expert Solution
1.BRAVO BIKE CO.
Bank Reconciliation
May 31, 2012
Balance per bank statement.............................................................. $25,460
Add: Deposit of May 31, not recorded by bank............................. $ 9,200
Bank error in charging check as $940 instead
of $490................................................................................ 450 9,650
$35,110
Deduct outstanding checks.............................................................. 11,360
Adjusted balance.............................................................................. $23,750
Balance per company's records........................................................ $20,435*
Add proceeds of note collected by bank,
including $225 interest................................................................ 4,725
$25,160
Deduct: Check returned because of insufficient funds................. $ 1,100
Bank service charges........................................................ 40
Error in recording check.................................................. 270 1,410
Adjusted balance.............................................................................. $23,750
*Cash balance, May 1................................................................... $ 15,085
Plus cash deposited in May......................................................... 75,100
Less checks written in May......................................................... (69,750)
Balance per company's books, May 31....................................... $ 20,435
2. Cash............................................................................................ 4,725
Notes Receivable................................................................... 4,500
Interest Revenue.................................................................... 225
Accounts Payable-Portage Co. ............................................... 270
Accounts Receivable-Elkhart Co. .......................................... 1,100
Miscellaneous Administrative Expense...................................... 40
Cash....................................................................................... 1,410
3. $23,750; the adjusted balance from the bank reconciliation should be reported as cash on the May 31, 2012, balance sheet for Bravo Bike Co.
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