Question

PLEASE HELP WITH ACCTG HW

The bank statement for the checking account of Management Systems Inc. (MSI) showed a December 31, 2021, balance of $15,333.87. Information that might be useful in preparing a bank reconciliation is as follows: a. Outstanding checks were $1,391.30. b. The December 31, 2021, cash receipts of $610 were not deposited in the bank until January 2, 2022. c. One check written in payment of rent for $253 was correctly recorded by the bank but was recorded by MSI as a $267 disbursement. d. In accordance with prior authorization, the bank withdrew $520 directly from the checking account as payment on a note payable. The interest portion of that payment was $385. MSI has made no entry to record the automatic payment. e. Bank service charges of $21 were listed on the bank statement. f. A deposit of $910 was recorded by the bank on December 13, but it did not belong to MSI. The deposit should have been made to the checking account of MIS, Inc. g. The bank statement included a charge of $60 for an NSF check. The check was returned with the bank statement and the company will seek payment from the customer. h. MSI maintains a $270 petty cash fund that was appropriately reimbursed at the end of December. i. According to instructions from MSI on December 30, the bank withdrew $13,500 from the account and purchased U.S. Treasury bills for MSI. MSI recorded the transaction in its books on December 31 when it received notice from the bank. Half of the Treasury bills mature in two months and the other half in six months. Required: 1. Prepare a bank reconciliation for the MSI checking account at December 31, 2021. You will have to compute the balance per books. 2. Prepare any necessary adjusting journal entries indicated. 3. What amount would MSI report as cash and cash equivalents in the current asset section of the December 31, 2021, balance sheet?

Answer 1

SOLUTION

1. Balance as per books-

Balance as per bank	15,333.87
Add: Deposit outstanding	610
Automatic mortgage payment	520
Bank service charges	21
NSF check charges	60
Less: Checks outstanding	(1,391.30)
Error in recording rent check (267-253)	(14)
Deposit credit to company's account in error	(910)
Balance as per books	14,229.57

Bank reconciliation statement-

Particulars	Amount ($)	Particulars	Amount ($)
Balance as per bank statement	15,333.87	Balance as per books	14,229.57
Add: Deposits outstanding	610	Add: Error in recording rent check	14
	15,943.87		14,243.57
Less: Outstanding checks	(1,391.30)	Less: Bank service charges	(21)
Deposit credit to company's account in error	(910)	NSF check charges	(60)
		Automatic mortgage payment	(520)
Adjusted bank balance	13,642.57	Adjusted book balance	13,642.57

2. Journal entries

S.No.	Accounts titles and Explanation	Debit ($)	Credit ($)
1.	Cash	14
	Rent expense		14
	(To record the adjustment of cash disbursement for rent)
2.	Interest expense	385
	Mortgage note payable (520-385)	135
	Miscellaneous expense (Bank service charge)	21
	Accounts receivable (NSF checks)	60
	Cash		601
	(To record the credits to cash revealed by the bank reconciliation)

3.

	Amount ($)	Amount ($)
Assets
Current assets
Cash and cash equivalents
Checking account balance	13,642.57
Petty cash	270
U.S. Treasury bills (13,500/2)	6,750
Total Cash and cash equivalents		20,662.57