Ch. 7 The cash account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $166,436.

Ch. 7

 

The  cash  account for Pala Medical Co. at June 30, 20Y1, indicated a balance of $166,436. The  bank statement  indicated a balance of $195,688 on June 30, 20Y1. Comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

a.	Checks outstanding totaled $19,427.
b.	A deposit of $12,300, representing receipts of June 30, had been made too late to appear on the bank statement.
c.	The bank collected $26,500 on a $25,000 note, including interest of $1,500.
d.	A check for $4,000 returned with the statement had been incorrectly recorded by Pala Medical Co. as $400. The check was for the payment of an obligation to Skyline Supply Co. for a purchase on account.
e.	A check drawn for $195 had been erroneously charged by the bank as $915.
f.	Bank service charges for June amounted to $55.

Required:

1.	Prepare a bank reconciliation.
2.	Journalize the necessary entries.
3.	If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?
CHART OF ACCOUNTS
Pala Medical Co.
General Ledger
ASSETS 110 Cash 111 Petty Cash 120 Accounts Receivable 131 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Office Equipment 192 Accumulated Depreciation-Office Equipment 193 Store Equipment 194 Accumulated Depreciation-Store Equipment     LIABILITIES 211 Accounts Payable-Skyline Supply Co. 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable   EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends	REVENUE 410 Sales 610 Interest Revenue   EXPENSES 510 Cost of Goods Sold 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Insurance Expense 534 Office Supplies Expense 535 Rent Expense 536 Repairs Expense 537 Selling Expenses 538 Store Supplies Expense 561 Depreciation Expense-Office Equipment 562 Depreciation Expense-Store Equipment 590 Miscellaneous Expense 710 Interest Expense

Labels and Amount Descriptions

Labels
For the Month Ended June 30, 20Y1
June 30, 20Y1
Amount Descriptions
Adjusted balance
Bank error in charging check as $915 instead of $195
Bank service charges
Deposit in transit on June 30
Error in recording check
Note collected by bank, including $1,500 interest
Outstanding checks
Total additions
Total deductions

Bank Reconciliation

1. Prepare a bank reconciliation.

Bank Reconciliation Instructions

Pala Medical Co.

Bank Reconciliation

 

1	Cash balance according to bank statement
2
3
4
5
6
7
8	Cash balance according to company’s records
9
10
11
12
13

 

General Journal

2. Journalize the necessary entries.

General Journal Instructions

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6

Final Question

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1, what amount should be reported as cash?

 

Part 2

The  cash  account for Coastal Bike Co. at October 1, 20Y9, indicated a balance of $5,140. During October, the total cash deposited was $39,175, and checks written totaled $40,520. The  bank statement  indicated a balance of $8,980 on October 31, 20Y9. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:

a.	Checks outstanding totaled $3,260.
b.	A deposit of $2,450 representing receipts of October 31 had been made too late to appear on the bank statement.
c.	The bank had collected for Coastal Bike Co. $5,300 on a note left for collection. The face of the note was $5,000.
d.	A check for $460 returned with the statement had been incorrectly charged by the bank as $640.
e.	A check for $430 returned with the statement had been recorded by Coastal Bike Co. as $340. The check was for the payment of an obligation to Rack Pro Co. on account.
f.	Bank service charges for October amounted to $50.
g.	A check for $605 from Bay View Condos was returned by the bank due to insufficient funds.
	Required:
1.	Prepare a bank reconciliation as of October 31, 20Y9.
2.	Journalize the necessary entries.
3.	If a balance sheet were prepared for Coastal Bike Co. on October 31, 20Y9, what amount should be reported as cash?

Chart of Accounts

CHART OF ACCOUNTS
Coastal Bike Co.
General Ledger
ASSETS 110 Cash 111 Petty Cash 112 Accounts Receivable-Bay View Condos 131 Notes Receivable 141 Merchandise Inventory 145 Office Supplies 146 Store Supplies 151 Prepaid Insurance 181 Land 191 Office Equipment 192 Accumulated Depreciation-Office Equipment 193 Store Equipment 194 Accumulated Depreciation-Store Equipment     LIABILITIES 211 Accounts Payable-Rack Pro Co. 221 Notes Payable 222 Interest Payable 231 Salaries Payable 241 Sales Tax Payable   EQUITY 310 Common Stock 311 Retained Earnings 312 Dividends	REVENUE 410 Sales 610 Interest Revenue   EXPENSES 510 Cost of Goods Sold 515 Credit Card Expense 516 Cash Short and Over 520 Salaries Expense 531 Advertising Expense 532 Delivery Expense 533 Insurance Expense 534 Office Supplies Expense 535 Rent Expense 536 Repairs Expense 537 Selling Expenses 538 Store Supplies Expense 561 Depreciation Expense-Office Equipment 562 Depreciation Expense-Store Equipment 590 Miscellaneous Expense 710 Interest Expense

Labels and Amount Descriptions

Labels
For the Month Ended October 31, 20Y9
October 31, 20Y9
Amount Descriptions
Adjusted balance
Bank error in charging check as $640 instead of $460
Bank service charges
Check returned because of insufficient funds
Deposit in transit on October 31
Error in recording check
Note collected by bank, including $300 interest
Outstanding checks
Total additions
Total deductions

Bank Reconciliation

1. Prepare a bank reconciliation as of October 31, 20Y9.

Bank Reconciliation Instructions

Coastal Bike Co.

Bank Reconciliation

 

1	Cash balance according to bank statement
2
3
4
5
6
7
8	Cash balance according to company’s records
9
10
11
12
13
14

 

General Journal

2. Journalize the necessary entries.

General Journal Instructions

PAGE 1

JOURNAL

ACCOUNTING EQUATION

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT	ASSETS	LIABILITIES	EQUITY
1
2
3
4
5
6
7

Final Question

3. If a balance sheet were prepared for Coastal Bike Co. on October 31, 20Y9, what amount should be reported as cash?