Preparing a bank reconciliation and journal entries

The October 31 bank statement of Wyndham’s Healthcare has just arrived from State

Bank. To prepare the bank reconciliation, you gather the following data:

a. The October 31 bank balance is \(6,290.

b. The bank statement includes two charges for NSF checks from customers. One is

for \)370 (#1), and the other is for \(180 (#2).

c. The following Wyndham’s checks are outstanding at October 31:

Check No. Amount

237 \) 120

288 140

291 570

294 570

295 30

296 110

d. Wyndham’s collects from a few customers by EFT. The October bank statement

lists a \(2,200 EFT deposit for a collection on account.

e. The bank statement includes two special deposits that Wyndham’s hasn’t recorded

yet: \)900 for dividend revenue and \(100 for the interest revenue Wyndham’s

earned on its bank balance during October.

f. The bank statement lists a \)80 subtraction for the bank service charge.

g. On October 31, the Wyndham’s treasurer deposited \(270, but this deposit does

does not appear on the bank statement.

h. The bank statement includes a \)750 deduction for a check drawn by Multi-State

Freight Company. Wyndham’s notified the bank of this bank error.

i. Wyndham’s Cash account shows a balance of $3,200 on October 31.

Requirements

1. Prepare the bank reconciliation for Wyndham’s Healthcare at October 31, 2018.

2. Journalize any required entries from the bank reconciliation. Include an explanation for each entry.

Step by step solution

01

Definition of bank reconciliation statement

The bank reconciliation statement is the statement prepared to remove the errors of bank balance and cash book balance.

02

Bank reconciliation statement

Wyndham’s Healthcare
Bank Reconciliation Statement
October 31
Bank Side		Book Side
Particulars	Amount	Particulars	Amount
Balance as per bank	$6,290	Balance as per cash book	$3,200
Add:		Add:
Outstanding Deposits	$270	Dividend Revenue	$900
Bank Error	$750	Interest Revenue	$100
		EFT Collection	$2,200
Deductions:		Deductions:
Outstanding Checks	$1,540	NSF Cheque	$560
		Service Charge	$80
Adjusted Balance on October 31	$5,770	Adjusted Balance on October 31	$5,770

In the bank reconciliation statement, the opening balance as per bank and cashbook is $6,290 and $3,200. You add the outstanding deposit and deduct the outstanding checks to find the adjusted balance on the bank side. You add rent receipts and note collection to the book balance on the book side. After this, you deduct the NSF check, incorrect recording of the check, EFT payment, and service charge. After making these adjustments on both sides, you got the adjusted balance of $5,770.

03

Journal Entries

Date	Particulars	Debit	Credit
October 31	Cash	$900
	Dividend Revenue		$900
	(To record the dividend revenue)
October 31	Cash	$100
	Interest Revenue		$100
	(To record the interest revenue)
October 31	Accounts Receivable	$550
	Cash		$550
	(To record NSF Check)
October 31	Cash	$2,200
	Accounts Receivable		$2,200
	(To record the receipt of account receivable)
October 31	Bank Charges	$80
	Cash		$80
	(To record the payment of bank charges)

The first and the second entry is passed to the dividend and interest revenue.

The third entry is passed on recording the NSF checks.

The fourth entry is passed on recording the collection accounts receivable.

The fifth entry is passed on recording the payment of bank charges.

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