Answer to Question #307227 in Accounting for Rival

Question

Rick Hall owns a card shop, Hall's Cards. The following cash information is available for the

month of August 2016.

As of August 31, the bank statement shows a balance of $16,140. The August 31 unadjusted

balance in the Cash account of Hall's Cards is $14,100. A review of the bank statement revealed

the following information:

A deposit of $4,150 on August 31, 2016, does not appear on the August bank statement.

2. It was discovered that a check to pay for baseball cards was correctly written and paid by the

bank for $4.500 but was recorded on the books as $5.400.

3.

When checks written during the month were compared with those paid by the bank, three

checks amounting to $5,370 were found to be outstanding.

4.

A debit memo for $80 was included in the bank statement for the purchase of a new supply

of checks.

Required

a. Prepare a bank reconciliation at the end of August showing the true cash balance.

Answer 1

Hall's Cards

Bank Reconcilliation Statement

August 31 2016

Unadjusted bank balance, August 31 2016  $            16,140.00

ADD:Deposits in transit  $              4,150.00

LESS:Outstanding checks  $            (5,370.00)    

True bank balance, August 31 2016  $            14,920.00    

Unadjusted book balance, August 31 2016  $            14,100.00

ADD: Error in recording (5400-4500)  $                  900.00

LESS:Supply of checks  $                (80.00)    

True cash balance, August 31 2016  $            14,920.00

Journal Entry  

  Debit    Credit 

Cash  $     900.00  

Accounts Payable     $     900.00

(Check recorded as 5400 instead 0f 4500)          

Bank charges  $        80.00  

Cash     $       80.00

(Bank charges recorded)