Bank Reconciliations Flashcards
A bank reconciliation with the headings “Balance per Books” and “Balance per Bank” lists three adjustments under the former and four adjustments under the latter. The company makes separate adjusting entries for each item in the reconciliation that requires an adjustment. How many adjusting entries are recorded?
A) 3
B) 4
C) 7
D) 0
Only amounts adjusting the balance per books require an adjusting entry because only those amounts explain why the firm’s recorded cash balance is not the same as the true cash balance. Common adjustments of this type include bank service charges, notes collected, and interest. The firm cannot alter the bank balance.
Answer = A
In preparing its August 31, 1990 bank reconciliation, Apex Corp. has the following information available:
Balance per bank statement, 08/31/90 $18,050
Deposit in transit, 08/31/90 3,250
Return of customer’s check for 600
insufficient funds, 08/31/90
Outstanding checks, 08/31/90 2,750
Bank Service charges for August 100
On August 31, 1990, Apex’s correct cash balance is:
A) $18,550
B) $17,950
C) $17,850
D) $17,550
Balance per bank statement $18,050
Plus deposit in transit 3,250
Less outstanding checks (2,750)
Equals ending cash balance $18,550
The effects of the bank service charges and the insufficient funds check are already reflected in the balance per bank statement. The bank was the source of that information.
Answer = A
Poe, Inc. had the following bank reconciliation at March 31, 2005:
Balance per bank statement, 3/31/05 $46,500
Add deposit in transit 10,300
56,800
Less outstanding checks 12,600
Balance per books, 3/31/05 $44,200
Data per bank for the month of April 2005 follow:
Deposits $58,400
Disbursements 49,700
All reconciling items at March 31, 2005 cleared the bank in April. Outstanding checks at April 30, 2005 totaled $7,000. There were no deposits in transit at April 30, 2005. What is the cash balance per books at April 30, 2005?
A) $48,200
B) $52,900
C) $55,200
D) $45,900
Balance per books, 3/31 $44,200
Deposits per bank, April $58,400
Less deposit in transit, 3/31 (10,300)
Equals deposits made by firm in April 48,100
Checks clearing bank in April $49,700
Less outstanding checks, 3/31 (12,600)
Plus outstanding checks, 4/30 7,000
Equals checks written by firm in April (44,100)
Balance per books, 4/30 $48,200
Answer = A
Hilltop Co.’s monthly bank statement shows a balance of $54,200. Reconciliation of the statement with company books reveals the following information:
Bank service charge $10 Insufficient funds check 650 Checks outstanding 1,500 Deposits in transit 350 Check deposited by Hilltop and cleared by the bank for $125, but improperly recorded by Hilltop as $152
What is the net cash balance after the reconciliation?
A) $52,363
B) $53,023
C) $53,050
D) $53,077
The reconciling items that need to be adjusted to the bank balance are: checks outstanding (−1,500) and deposit in transit (+350). The net cash after the reconciliation is: Bank balance $54,200 − 1,500 + 350 = $53,050. The bank service charge and insufficient funds are already reflected in the bank balance. The error is on Hilltop’s books, not on the bank statement and therefore does not need to be included in the reconciliation.
Answer = C
The following information pertains to Park Co. on December 31, 2005:
Bank statement balance $10,000
Checkbook balance 14,000
Deposit in transit 5,000
Outstanding checks 1,000
In Park’s December 31, 2005, balance sheet, cash should be reported as:
A) $9,000
B) $10,000
C) $14,000
D) $15,000
There is no information about errors in the book’s records, represented by the checkbook balance. The deposit in transit and outstanding checks have been recorded by the firm. The checkbook balance reflects these amounts. It is the bank balance that does not. The checkbook balance is the correct ending cash balance.
As a check, take the ending balance per the bank + deposits in transit − outstanding checks; $10,000 + $5,000 − $1,000 = $14,000.
Answer = C
