Peterson Company's general ledger shows a cash balance of $7,420 on May 31. May cash receipts of $1,290, included in the general ledger balance, are placed in the night depository at the bank on May 31 and processed by the bank on June 1. The bank statement dated May 31 shows an NSF check for $170 and a service fee of $60. The bank processes all checks written by the company by May 31 and lists them on the bank statement, except for one check totaling $1,900. The bank statement shows a balance of $7,800 on May 31. Prepare a bank reconciliation to calculate the correct ending balance of cash on May 31.

The correct ending balance of cash on May 31 is $7,190

Explanation:

The bank reconciliation can be prepared as follows:

Peterson Company

Bank Reconciliation

At May 31

Particulars                                                                                            $      

Bank statement balance at May 31 yet  to be reconciled             7,800

Add:

Cash deposited on May 31 yet to be credited                               1,290

Less:

Outstanding check                                                                         (1,900)  

Adjusted bank statement balance at May 31                              7,190  

Peterson Company

Bank Reconciliation

At May 31

Particulars                                                                                            $      

Cash book balance yet to be reconciled                                     7,420

Less:

NSF check                                                                                        (170)

Service fee                                                                                        (60)  

Adjusted cash balance at May 31                                                7,190  

Since in each of the Adjusted bank statement balance at May 31 and the Adjusted cash balance at May 31 is equal to $7,190, it implies that the correct ending balance of cash on May 31 is $7,190.

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