The cash account for Stone Systems at July 31, 20Y5, indicated a balance of $12,350. The bank statement indicated a balance of $15,930 on July 31, 20Y5. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:
Checks outstanding totaled $17,865.

A deposit of $9,150, representing receipts of July 31, had been made too late to appear on the bank statement.

The bank had collected $6,095 on a note left for collection. The face of the note was $5,750.

A check for $390 returned with the statement had been incorrectly recorded by Stone Systems as $930. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account.

A check drawn for $1,810 had been incorrectly charged by the bank as $1,180.

Bank service charges for July amounted to $80.

Required:

1. Prepare a bank reconciliation.

2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash.

3. If a balance sheet were prepared for Stone Systems on July 31, 20Y5, what amount should be reported as cash?

1.

Balance at bank as per cash book                            $12,810

Add Unpresented Checks                                          $17,865

Less Lodgements not yet credited                           ( $9,150)

Balance as per Bank Statement                                 $21,525

The bank has to make corrections of the error it has made - a note should be sent

2.

J1

Cash  $540 (debit)

Holland Co $540 (credit)

J2

Bank Charges $80 (debit)

Cash $80 (credit)

3. Cash Balance = $12,810

Explanation:

Step 1 First Bring the Cash Balance in the Cash Book Up to Date by doing the following :

Debit :

Balance as per Cash Book as at July 31, 20Y5       $12,350

Over stated Check - Holland Co 930-390                   $540

Totals                                                                         $ 12,890

Credit:

Bank service charges                                                     $80

Updated Cash Book - Cash Balance                        $12,810

Totals                                                                         $ 12,890

Step 2 Prepare the Bank Reconciliation Statement as follows

Balance at bank as per cash book                            $12,810

Add Unpresented Checks                                          $17,865

Less Lodgements not yet credited                           ( $9,150)

Balance as per Bank Statement                                 $21,525

The bank has to make corrections of the error it has made - a note should be sent

J1

Cash  $540 (debit)

Holland Co $540 (credit)

J2

Bank Charges $80 (debit)

Cash $80 (credit)

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