The cash account for Fit Bike Co. at August 1, 2014, indicated a balance of $12,190. During August, the total cash deposited was $28,100 and checks written totaled $33,010. The bank statement indicated a balance of $12,550 on August 31. Comparing the bank statement, the canceled checks, and the accompanying memos with the records revealed the following reconciling items:
a) Checks outstanding totaled $7,440
b) A deposit of $2,880 representing receipts of August 31, had been made too late to appear on the bank statement.
(c) The bank had collected for Fit Bike Co. $2080 on a note left for collection. The face of the note was $2,000.
(d) A check for $580 returned with the statement had been incorrectly charged by the bank as $850.
(e) A check for $640 returned with the statement had been recorded by Fit Bike Co. as $460. The check was for the payment of an obligation to Brown Co. on account.
(f) Bank service charges for August amounted to $20.
(g) A check for $900 from Murdock Co. was returned by the bank due to insufficient funds.
(1) Prepare a bank reconciliation as of August 31
(2) Journalize the necessary entries. The accounts have not been closed.
(3) If a balance sheet were prepared for Fit. Bike Co. on August 31, 2014, what amount should be reported as cash?
This solution illustrates how to compute cash per books at the end of the month and how to perform a two-sided bank reconciliation.