You are given the following information for River Adventures Company:
The adjusted cash balance per bank agreed with the cash balance per books at April 30, 2008. The May bank statement
showed the following:
Additional information from the bank statement:
1. The deposit of $1,650 on May 13 is an electronic transfer from a customer in payment of its account. The amount
includes $35 of interest, which River Adventures Company had not previously accrued.
2. The NSF for $440 is for a $425 cheque from a customer, Ralph King, in payment of his account, plus a $15 processing
fee.
3. SC represents bank service charges for the month.
4. The bank made an error when processing cheque #564. The company also made two errors in the month. All cheques
were written to pay accounts payable; all cash receipts were collections of accounts receivable.
The company's cash payments and cash receipts for the month were as follows:
Instructions
(a) Calculate the unadjusted cash balance in River Adventures' general ledger at May 31.
(b) Prepare a bank reconciliation and the necessary adjusting journal entries at May 31.
Solution:
(a)
Book balance, May 1 (per Apr. 30 bank reconciliation) ...........................$ 7,776
Add: Cash receipts ................................................................................................
6,825
Less: Cash payments ..............................................................................................
13,526
Unadjusted cash balance, May 31 ..........................................................................
$ 1,075
(b)
RIVER ADVENTURES COMPANY
Bank Reconciliation
May 31, 2008
Cash balance per bank statement ....................................................................................
Add:
Deposits in transit................................................................
$1,286
Error in cheque 564 ($603 - $306) ......................................
297
$4,308
1,583
5,891
Less: Outstanding cheques
No. 533 .........................................................................
$279
No. 555 .........................................................................
79
No. 558 .........................................................................
943
No. 560 .........................................................................
890
No. 566 .........................................................................
950
3,141
Adjusted cash balance per bank......................................................................................
$2,750
Cash balance per books ..................................................................................................
$1,075
Add:
EFT proceeds ($1,615 + $35) ..............................................
Error in May 26th deposit
($980 - $890) ................................................................
Error in cheque #563
($2,887 - $2,487) ..........................................................
$1,650
90
400
2,140
3,215
Less:
NSF cheque .........................................................................
$ 440
Bank service charges ...........................................................
25
Adjusted cash balance per books ....................................................................................
465
$2,750
May
31
31
Cash ....................................................................
1,650
Accounts Receivable .....................................
1,615
Interest Revenue ............................................
35
Cash ....................................................................
90
Accounts Receivable .....................................
31
Cash .....................................................................
90
400
Accounts Payable ..........................................
31
Accounts Receivable—R. King ...........................
400
440
Cash...............................................................
31
Bank Charges Expense ........................................
Cash...............................................................
Check: $1,075 + $1,650 + $90 + $400- $440 - $25
= $2,750 adjusted cash balance
440
25
25