The cash account for Stone Systems at July 31, 20Y5, indicated a balance of $17,750. The bank statement indicated a balance of $33,650 on July 31, 20Y5. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items: Checks outstanding totaled $17,865. A deposit of $9,150, representing receipts of July 31, had been made too late to appear on the bank statement. The bank had collected $6,095 on a note left for collection. The face of the note was $5,750. A check for $390 returned with the statement had been incorrectly recorded by Stone Systems as $930. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account. A check drawn for $1,810 had been incorrectly charged by the bank as $1,180. Bank service charges for July amounted to $80.
Required:
1. Prepare a bank reconciliation.
Stone Systems
Bank Reconciliation
July 31, 20Y5
Cash balance according to bank statement $
Adjustments:
Deposit of July 31, not recorded by bank $
Bank error in charging check as $1,180 instead of $1,810
Outstanding checks
Total adjustments
Adjusted balance $
Cash balance according to company's records $
Adjustments:
Proceeds of note collected by bank, including $345 interest $
Error in recording check by Stone Systems
Bank service charges
Total adjustments
Adjusted balance $
Feedback
1 & 3. Set up two sections: one for the company cash account section and the other for the bank balance section. Determine the effect of the data on each section. Recall that when you are finished, the adjusted balances in the bank and company sections of the reconciliation must be equal. If not, an item has been overlooked or treated in error.
Recall that the company's cash account balance is updated for any items in the company section of the bank reconciliation.
Learning Objective 5.
2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. For a compound entry, if an amount box does not require an entry, leave it blank.
20Y5 July 31 Cash
Notes Receivable
Interest Revenue
Accounts Payable-Holland Co.
July 31 Miscellaneous Expense
Cash
Feedback
2. Keep in mind that the company needs to journalize any adjusting items in the company section of the bank reconciliation, because these have not been previously recorded by the company. Debit memo items like bank service charges decrease Cash. Items that come from credit memos like collections of notes or interest by the bank increase Cash. If the company made an error that overstates or understates cash in the company section, the journal adjustment would decrease Cash or increase Cash, respectively.
Learning Objective 5.
3. If a balance sheet were prepared for Stone Systems on July 31, 20Y5, what amount should be reported as cash?
$