The cash account for Stone Systems at July 31, 20Y5, indicated a balance of $8,210. The bank statement indicated a balance of $10,580 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 $3,810.
- A deposit of $3,970, representing receipts of July 31, had been made too late to appear on the bank statement.
- The bank had collected $2,060 on a note left for collection. The face of the note was $1,960.
- A check for $400 returned with the statement had been incorrectly recorded by Stone Systems as $440. The check was for the payment of an obligation to Holland Co. for the purchase of office supplies on account.
- A check drawn for $500 had been incorrectly charged by the bank as $50.
- Bank service charges for July amounted to $20.
Required:
Question Content Area
1. Prepare a bank reconciliation.
| Line Item Description | Amount | Amount |
|---|---|---|
| Cash balance according to bank statement | blank | $Cash balance according to bank statement |
| Add: Bank service chargesAdd: Deposit in transit on July 31Add: Error in recording check by Stone SystemsAdd: Note collected by bank, including $100 interestAdd: Outstanding checks | – Select – | |
| Deduct: Bank service chargesDeduct: Deposit in transit on July 31Deduct: Error in recording check by Stone SystemsDeduct: Note collected by bank, including $100 interestDeduct: Outstanding checks | $- Select – | |
| Deduct: Bank error in charging check as $50 instead of $500Deduct: Bank service chargesDeduct: Deposit in transit on July 31Deduct: Error in recording check by Stone SystemsDeduct: Note collected by bank, including $100 interest | – Select – | blank |
| Total deductions | blank | Total deductions |
| Adjusted balance | blank | $Adjusted balance |
| Cash balance according to company’s records | blank | $Cash balance according to company’s records |
| Adjustments: | blank | blank |
| Add: Bank error in charging check as $50 instead of $500Add: Bank service chargesAdd: Deposit in transit on July 31Add: Note collected by bank, including $100 interestAdd: Outstanding checks | $- Select – | |
| Add: Bank error in charging check as $50 instead of $500Add: Bank service chargesAdd: Deposit in transit on July 31Add: Error in recording check by Stone SystemsAdd: Outstanding checks | – Select – | blank |
| Total additions | blank | Total additions |
| Deduct: Bank service chargesDeduct: Deposit in transit on July 31Deduct: Error in charging check as $50 instead of $500Deduct: Note collected by bank, including $100 interestDeduct: Outstanding checks | blank | – Select – |
| Adjusted balance | blank | $Adjusted balance |
Question Content Area
2. Journalize the necessary entries (a.) that increase cash and (b.) that decrease cash. The accounts have not been closed. If an amount box does not require an entry, leave it blank.
| Date | Account | Debit | Credit |
|---|---|---|---|
| 20Y5 July 31 | CashInterest ReceivableInterest RevenueNotes ReceivablePetty Cash | – Select – | – Select – |
| CashInterest PayableInterest ReceivableNotes PayableNotes Receivable | – Select – | – Select – | |
| CashInterest PayableInterest ReceivableInterest RevenueUnearned Interest | – Select – | – Select – | |
| Accounts Payable-Holland Co.Accounts Receivable-Holland Co.CashCash Short or OverNotes Payable | – Select – | – Select – | |
| July 31 | Accounts Receivable-Holland Co.CashMiscellaneous ExpenseNotes PayablePetty Cash | – Select – | – Select – |
| Accounts PayableAccounts ReceivableCashMiscellaneous Administrative ExpensePetty Cash | – Select – | – Select – |
Question Content Area
3. If a balance sheet were prepared for Stone Systems on July 31, 20Y5, what amount should be reported as cash?
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