Question

Oscar's Red Carpet Store maintains a checking account with Academy Bank. Oscar's sells carpet each day but makes bank deposits only once per week. The following provides information from the company's cash ledger for the month ending February 28, 2021. Deposits: Date 2/4 2/11 2/18 2/25 2/26-2/28 Amount $ 2,600 Checks: 2,200 3,100 4,000 1,500 $ 13,400 No. 321 322 323 324 325 326 327 Date 2/2 2/8 2/12 2/19 2/27 2/28 2/28 Amount $ 4,600 650 2,400 2,100 450 950 1,800 $12,950 Cash receipts: Balance on February 1 Receipts Disbursements Balance on February 28 $ 6,700 13,400 (12,950) $ 7,150 Information from February's bank statement and company records reveals the following additional information: a. The ending cash balance recorded in the bank statement is $11,770. b. Cash receipts of $1,500 from 2/26-2/28 are outstanding. C. Checks 325 and 327 are outstanding. d. The deposit on 2/11 includes a customer's check for $450 that did not clear the bank (NSF check). e. Check 323 was written for $2,800 for advertising in February. The bank properly recorded the check for this amount. f. An automatic withdrawal for Oscar's February rent was made on February 4 for $1,300. g. Oscar's checking account earns interest based on the average daily balance. The amount of interest earned for February is $190. h. In January, one of Oscar's suppliers, Titanic Fabrics, borrowed $5,800 from Oscar. On February 24, Titanic paid $5,950 ($5,800 borrowed amount plus $150 interest) directly to Academy Bank in payment for January's borrowing. i. Academy Bank charged service fees of $120 to Oscar's for the month.
hi

Answer 1

Solution 1:

Oscar's Red Carpet
Bank Reconciliation - February 28
Bank's Cash balance		Company's cash balance
Particulars	Amount	Particulars	Amount
Ending balance as per Bank Statements	$11,770.00	Ending Balance as per cash books	$7,150.00
Additions:		Additions:
Outstanding Deposits	$1,500.00	Note Collection (including interest)	$5,950.00
		Interest earned	$190.00
Deductions:		Deductions:
Outstanding Checks ($450 + $1,800)	$2,250.00	NSF Cheque	$450.00
		Incorrect recording of check 323	$400.00
		Rent withdrawl	$1,300.00
		Service charge	$120.00
Up to date cash balance as per bank	$11,020.00	Up to date cash balance as per books	$11,020.00

Solution 2:

Journal Entries - Oscar's Red Carpet
Date	Particulars	Debit	Credit
28-Feb	Cash Dr	$6,140.00
	To Note receivables		$5,800.00
	To Interest Revenue		$340.00
	(To record reconciliation items that increases in cash)
28-Feb	Accounts Receivables Dr	$450.00
	Advertising expense Dr	$400.00
	Rent expense Dr	$1,300.00
	Miscellaneous expense Dr	$120.00
	To Cash		$2,270.00
	(To record reconciliation items that decreases cash)