ACCT 201 Principles of Financial Accounting Practice Exam - Chapter 6 Reporting & Analyzing Cash and Internal Controls Dr. Fred Barbee Solution to Problem #1

1. a customer's check for $100 marked NSF was returned to Brown Company by the bank. The bank charged the company's account a $25 processing fee.
2. The September 30 cash receipts, $1,250 were placed in the bank's night depository after banking hours on that date and this amount did not appear on the September 30 bank statement.
3. A $15 debit memorandum for checks printed by the bank was included with the canceled checks.
4. Outstanding checks amounted to $1,145.
5. A customer's note for $900 was collected by the bank. a collection fee of $25 was deducted by the bank.
6. Included with the canceled checks was a check for $275, drawn on another company, Browne, Inc.

Required:

1. Prepare a bank reconciliation as of September 30.
2. Prepare any necessary adjusting journal entries necessary as a result of the bank reconciliation.

Solution - Part 1:

BROWN COMPANY Bank Reconciliation September 30
Bank Statement Balance	$1,350	Book Cash Balance	$995
Add:		Add:
Deposit of 9/30	1,250	Proceeds of note less collection fee	875
Bank error	275
	$2,875		$1,870
Deduct:		Deduct:
Outstanding checks	1,145	NSF check processing fee	125
		Bank service charge	15
Adjusted Bank Balance	$1,730	Adjusted Book Balance	$1,730

Solution - Part 2:

Cash	875
Service Charge Expense	25
Notes Receivable		900

Accounts Receivable	100
Service Charge Expense	25
Cash		125

Service Charge Expense	15
Cash		15