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Prepare a Bank Reconciliation and Journal Entries

Prepare responses to the following assignments from the e-text, Fundamentals of Financial Accounting 1st ed., by Phillips, Libby, and Libby
b. Chapter 6: Coach Problems CP 6-2
CP 6-2 Identifying Outstanding Checks and Deposits in Transit and Preparing a Bank Reconciliation and Journal Entries: L02
The August 2006 bank statement for Martha Company and the cash T-account for August 2006 follow:
Bank Statement
Date Checks Deposits Other Balance
Aug. 1 $17,470
2 $300 17,170
3 $12,000 29,170
4 400 28,770
5 250 28,520
9 890 27,630
10 310 27,320
15 4,000 31,320
21 400 30,920
24 21,000 9,920
25 7,000 16,920
30 800 16,120
30 Interest earned $20 16,140
31 Service charge 10 16,130
Outstanding checks at the end of July were for $250, $400, and $300. No deposits were in transit at the end of July.
Required:
1. Identify and list the deposits in transit at the end of August.
2. Identify and list the outstanding checks at the end of August.
3. Prepare a bank reconciliation for August.
4. Give any journal entries that the company should make as a result of the bank reconciliation. Why are they necessary?
5. After the reconciliation journal entries are posted, what balance will be reflected in the Cash account in the ledger?
6. If the company also has $100 on hand, which is recorded in a different account called Cash on Hand, what total amount of cash should be reported on the August 31, 2006, balance sheet?

Solution Preview

See Excel attached.

1. There is a deposit in transit of $5,000 at the end of August. It is recorded in the books, but not in the bank.
2. There are two ...

Solution Summary

The solution presents a bank reconciliation in the dual format view. It is easier to understand, and the explanations help too.

$2.19