Preparing a bank reconciliation and journal entries

This problem continues the Canyon Canoe Company situation from Chapter 6.

Canyon Canoe Company has decided to open a new checking account at River

Nations Bank during March 2019. Canyon Canoe Company’s March Cash T-account

for the new cash account from its general ledger is as follows:

Cash—River Nations Bank Checking Account

Balance

Deposit

Deposit

Deposit

Deposit

200

4,300

750

1,675

1,500

14,165

Mar. 1

2

13

20

27

Deposit

10,000

2,325

2,750

4,500

31 3,490

Mar. 2

4

9

14

21

Ck#101

Ck#102

Ck#103

Ck#104

Ck#105

175

300

28

30

Ck#106

Ck#107

Balance

Canyon Canoe Company’s bank statement dated March 31, 2019, follows:

Beginning Balance, March 1, 2019

Deposits and other credits:

Mar. 2

14

21

28

29 EFT Sport Shirts(1)

(1) Sport Shirts is a customer making a payment on account.

(2) Bank Checks is a company that prints business checks (considered

a bank expense) for Canyon Canoe Company

\(10,000

2,325

2,750

4,500

500

Checks and other debits:

Mar. 2 EFT to Bank Checks(2)

Ending balance, March 31, 2019

\) 0

31 Interest Revenue 45

3 Ck#101

6 Ck#102

15 Ck#104

16 Ck#103

55

200

4,300

1,675

750

28 EFT to Rivers Energy(3) 270

29 Ck#106 175

31 Bank service charge 70

20,120

(7,495)

$ 12,625

(3) Rivers Energy is a utility provider.

Requirements

1. Prepare the bank reconciliation at March 31, 2019.

2. Journalize any transactions required from the bank reconciliation.

3. Compute the adjusted account balance for the Cash T-account, and denote thebalance as End. Bal. Does the adjusted balance of the Cash T-account match theadjusted book balance on the bank reconciliation?

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

Canyon Canoe Company
Bank Reconciliation Statement
March 31, 2019
Bank Side		Book Side
Particulars	Amount	Particulars	Amount
Balance as per bank	$12,625	Balance as per cash book	$14,165
Add:		Add:
Outstanding Deposits	$3,490
		Interest Revenue	$45
		EFT Collection	$500
Deductions:		Deductions:
Outstanding Checks	$1,800	Utility Expense	$270
		Bank Expense	$55
		Service Charge	$70
Adjusted Balance on October 31	$14,315	Adjusted Balance on October 31	$14,315

In the bank reconciliation statement, the opening balance as per bank and cashbook is $12,625 and $14,165. 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 $14,315.

03

Journal Entries

Date	Particulars	Debit	Credit
March 31	Cash	$45
	Interest Revenue		$45
	(To record the interest revenue)
March 31	Bank Expense	$55
	Cash		$55
	(To record NSF Check)
March 31	Cash	$500
	Accounts Receivable		$500
	(To record the receipt of account receivable)
March 31	Bank Charges	$70
	Cash		$70
	(To record the payment of bank charges)
March 31	Utilities Expense	$270
	Cash		$270

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

The third entry is passed on record as the bank expense

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

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

04

Cash T-account

Cash
Opening Balance	$14,165	Utilities Expense	$270
Interest Revenue	$45	Bank expense	$55
Account Receivable	$500	Service Charges	$70
Adjusted Balance of Cash	$14,315

Yes, the adjusted balance of the cash T-account and Book side of the statement is the same.

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