Question

INSTRUCTIONS: QUESTION 5 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 S40,000 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 S420. 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 nor 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? ACCOUNT CHARTS CHART OF ACCOUNTSAmerican Medical Co.General Ledge ASSETS 1110|Cash 111 Petty Cash 120 Accounts Receivable 131 Notes Receivable (141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 1151 Prepaid Insurance 181 Land 191 Joffice Equipment 192|Accumulated Depreciation Office Equipment 193 Store Equipment 1194 Accumulated Depreciation Store Equipment

Answer 1

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American Medical			Answer b
Answer a			Journal entries						Accounting Equation
Bank reconciliation statement	Amount $		Date	Description	Post. Ref.	Debit $	Credit $		Assets	Liabilities	Equity
Cash balance according to bank statement	388,600.00		April 30th	Cash		42,000.00			2,000.00		2,000.00
Add:				Notes Receivable			40,000.00
B. Deposit in Transit	42,500.00			Interest Revenue			2,000.00
E. Incorrect charge by bank (420-240)	180.00			(As per Event C)
Less:
A. Outstanding cheque	61,280.00		April 30th	Accounts Payble- Targhee Supply Company		6,840.00			(6,840.00)	(6,840.00)	(145.00)
				Cash			6,840.00
Adjusted Balance	370,000.00			(As per Event D)
	Amount $			Service Charges		145.00			(145.00)		(145.00)
Cash balance according to company's records	334,985.00			Cash			145.00
Add:				(As per Event F)
C. Collection of note by bank	42,000.00
Less:
D. Cheque returned recorded incorrectly (7,600-760)	6,840.00		Answer c	If balance sheet is prepared for Medical Co. on April 30 then $ 370,000 should be reported as cash.
F. Service Charges	145.00
Adjusted Balance	370,000.00