Question

The cash account for American Medical Co. at April 30 indicated a balance of $334,985. The bank statement indicated a balance of $388,600 on April 30. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

A.	Checks outstanding totaled $61,280.
B.	A deposit of $42,500, representing receipts of April 30, had been made too late to appear on the bank statement.
C.	The bank collected $42,000 on a $40,000 note, including interest of $2,000.
D.	A check for $7,600 returned with the statement had been incorrectly recorded by American Medical Co. as $760. The check was for the payment of an obligation to Targhee Supply Co. for a purchase on account.
E.	A check drawn for $240 had been erroneously charged by the bank as $420.
F.	Bank service charges for April amounted to $145.

	Instructions
1.	Prepare a bank reconciliation. Refer to the Amount Descriptions list provided for the exact wording of the answer choices for text entries. “Deduct:” or “Add:” will automatically appear if it is required.
2.	Journalize the necessary entries. The accounts have not been closed. Refer to the Chart of Accounts for exact wording of account titles.
3.	If a balance sheet is prepared for American Medical Co. on April 30, what amount should be reported as cash?

Answer 1

American Medical Co.
Bank Reconciliation
April 30
Bank statement balance		388,600	Book balance		334,985
Add:			Add:
Deposit in transit	42,500		Note receivable	40,000
Correction of bank error	180		Interest	2,000
		42,680			42,000
		$431,280			$376,985
Deduct:			Deduct:
Outstanding check	-61,280		Bank service charge	-145
			Correction of book error	-6,840
		-61,280			-6,985
Adjusted bank balance		$370,000	Adjusted book balance		$370,000

2.

Date	Account Titles and Explanation	Debit	Credit
Aprilr 30	Cash	$42,000
	Note receivable		$40,000
	Interest revenue		$2,000
	( To record note receivable)
April 30	Accounts payable - Targhee supply co.	$6,840
	Cash		$6,840
	( To record accounts payable)
April 30	Bank service charge	$145
	Cash		$145
	( To record safety deposit rent)

3. Amount should be reported as cash = $370,000

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