CHAPTER 13 BANK RECONCILIATION Basic problems Problem 13-1 (AICPA Adapted) In preparing the bank reconciliation for the month of August, Apex Company provided the following information: Balance per bank statement 1,805,000 Deposit in transit 325,000 Return of customer check for insufficient fund 60,000 Outstanding checks, 275,000 Bank service charge for August 10,000 What amount should be reported as adjusted cash in bank? 1,855,000 1,795,000 1,785,000 1,755,000 aes Solution 13-1 Answer a Balance per bank 1,805,000 Deposit in transit 325,000: Total 2,130,000 Outstanding checks (275,000) Adjusted bank balance 1,855,000 The customer check which is returned for insufficient find and the bank service charge are ignored because thése are book reconciling items. 168problem 13-2(AICPA Adapted) ‘Inpreparing the bank reconciliation for the month of December, Case Company provided te following data Balance per bank statement 3,800,000 Deposit in transit “520,000 Amount erroneously credited by bank to Case’s account 40,000 Bank service charge for December 5,000 NSF check 50,000 Outstanding checks 675,000 1, What amount should be reported as adjusted cash in bank? a. 3,685,000 b. 3,645,000 c. 3,600,000 d. 3,605,000 2. What is the unadjusted cash in bank balance per book? a. 3,550,000 b. 3,660,000 _¢ 3,610,000 d. 3,655,000 Solution 13-2 Question 1 Answer d Question 2 Answer b Balance per bank statement 3,800,000 Deposit in transit 520,000 Outstanding checks ( 675,000) Bank error — erroneous bank credit (__40,000) Adjusted bank balance 3,605,000 Unadjusted book balance (SQUEEZE) 3,660,000 Bank service charge (5,000) NSF check (_ 50,000) Adjusted cash in bank balance 3,605,000 169Problem 13-3 (IAA) Core Company provided the following data for the purpose of reconciling the cash balance per book with the balance per bank statement on December 31: 7 Balance per book 850,000 Balance per bank statement 2,000,000 Outstanding checks, including certified check of P100,000 500,000 Deposit in transit 200,000 December NSF checks, of which P50,000 had been redeposited and cleared on December 27 150,000 Erroneous credit to Core’s account, representing proceeds of loan granted to another company 300,000 Proceeds of note collected by bank for Core, 750,000 net of service charge of P20,000 What amount should be reported as cash in bank at year-end? a. 1,500,000 b. 1,400,000 c. 1,800,000 d. 1,450,000 Solution 13-3 Answer a Balance per bank 2,000,000 Deposit in transit 200,000 Outstanding checks (500,000 — 100,000) ( 400,000) Erroneous bank credit (_ 300,000) Adjusted bank balance 1,500,000 The certified check of P100,000 is no longer outstanding for reconciliation purposes. Thus, the amount is deducted from the total outstanding checks. Balance per book 850,000 NSF checks (150,000 - 50,000) (100,000) Proceeds of note collected 750,000 Adjusted book balance 1,500,000 Note that NSF checks of P50,000 are already redeposited and cleared on December 27. 170problem 13-4 (AICPA Adapted) Able Company received the bank statement for the month of March. However, the closing balance of the account was unreadable. Attempts to contact the bank after hours did not secure the desired information. : February 28 book balance 1,460,000 Note collected by bank 100,000 Interest eartied on note 10,000 NSF check of customer 130,000 Bank service charge on NSF check 2,000 Other bank service charges 3,000 Outstanding checks 200,000 Deposit of February 28 placed in night depository 85,000 Check issued by Axle Company charged to Able’s account 20,000 What is the cash balance per bank statement? a. 1,435,000 b. °1,530,000 c. 1,340,000 d. 1,550,000 Solution 13-4 Answer b February 28 book balance 1,460,000 Note collected by bank *100,000 Interest earned on note : 10,000 NSF check (130,000) Bank service charges (2,000 + 3,000) ( 5,000) Adjusted book balance 1,435,000 Balance per bank statement (SQUEEZE) 1,530,000 Deposit in transit 85,000 Bank error — erroneous charge 20,000 Outstanding checks (__ 200,000) Adjusted bank balance 1,435,000 The bank statement balance is “squeezed” by working back from the adjusted balance. 171Problem 13-5 (IAA) i bank statement for the month of Stellar Company provided the ek December which included the following ie 800,000 Ending balance, December 31 i j on Bank service charge for December 100 Interest paid by bank to Stellar Company for December ,000 In comparing the bank statement to its own cash records, the entity found the following: bank 350,000 Deposits made but not yet recorded by the Checks written and mailed but not yet recorded by the bank 650,000 that it had drawn and erroneously a nea ea a graf P56 0m hould have been recorded for recorded a check for P46,000 that s! P64,000. What is the cash balance per ledger on December 3 1? a. 2,500,000 b. 2,520,000 c. 2,540,000 d. 2,800,000 Solution 13-5 Answer b Balance per bank 2,800,000 Deposits in transit 350,000 Outstanding checks ( 650,000) Adjusted bank balance Balance per ledger (SQUEEZE) Interest income Service charge Book error (64,000 — 46,000) Adjusted book balance The cash balance per ledger is “squeezed” by working back from the adjusted balance. 172Problem 13-6 (IAA) Letty Company Provided the bank statement for the month of April which included the following information: Bank service charge for April Check deposited by Letty during April was notcollectible and has been marked “NSF” by the bank and returned 40,000 15,000 In comparing the bank statement to its own records, the entity found the following: Deposits made but not yet recorded by bank 130,000 Checks written and mailed but not yet recorded by bank 100,000 All deposits in transit and outstanding checks have been properly recorded in the entity’s books. Acustomer check for P35,000 payable to Letty Comipany had not yet been deposited and had not been recorded by the entity. The cash in bank account balance per ledger is P920,000. What amount should be reported as adjusted cash in bank on April 30? a. 900,000 b. 865,000 c. 930,000 d. 965,000 Solution 13-6 Answer a Balance per ledger 920,000 Unrecorded customer check le: 35,000 Bank service charge (15,000) NSF check (40,000) Adjusted book balance 900,000 The deposits in transit and checks outstanding are ignored because these are bank reconciling items. 173Problem 13-7 (IAA) Gallant Company showed a cash account balance of P4,500,000 at the month-end. The bank statement did not include a deposit of P230,000 made on the last day of the month. The bank statement showed a collection of a note receivable by the bank of P94,000 for the depositor and a customer check for P32,000 returned because it was NSF. A customer check for P45,000 was recorded by the depositor as 54,000 and a check written for P79,000 was recorded as P97,000. What amount should be reported as cash in bank? 4,765,000 4,571,000 4,819,000 4,801,000 BOP Solution 13-7 Answer b Balance per book 4,500,000 Collection by bank of note receivable 94,000 NSF customer check (32,000) Book error — customer check overstated (9,000) Book error — check written overstated 18,000 Adjusted book balance 4,571,000 Customer check 45,000 Recorded by depositor 54,000 Book error — overstatement of a collection 9,000 Company check 79,000 Recorded by depositor 97,000 Book error - overstatement of payment 18,000 ” The deposit in transit of P230,000 is a bank reconciling item. 174Problem 13-8 (IAA) Grass Company Provided the following information: Balance per bank Statement Jul Balance per ledger, July 31 ry "750,000 Deposit of July 30 not recorded by bank 280,000 Debit memo — service char, t ges 10,000 Credit memo ~ collection of Suede of note by bank for Grass Seana Ananalysis of the canceled ch i ed the fllowinn checks returned with the bank statement * Check for purchase of suppli Aeon ipplies was drawn for P60,000 but was * The manager wrote acheck for traveling expenses of P100,000 while out of town, The check was not recorded. What amount of cash in bank should be reported on July 31? a. 970,000 b. 270,000 c. 550,000 d. 610,000 Solution 13-8 Answer a Balance per ledger 750,000 Debit memo — service charges, (10,000) Credit memo - collection of note 300,000 Book error in recording check (90,000 — 60,000) 30,000 Unrecorded check for traveling expenses (100,000) Adjusted book balance 970,000 Balance per bank 1,240,000 Deposit in transit 280,000 Outstanding checks ( 550,000) Adjusted bank balance 970,000 175Problem 13-9 (IAA) v Aries Company kept all cash ina checking account. An examination of the accounting records and bank statement for the month of June revealed the following information: * The cash balance per book on June 30 was 8,500,000. ; * A deposit of P1,000,000 that was placed in the bank’s night depository on June 30 did not appear on the bank statement. * The bank statement showed that on June 30 the bank collected note for the entity and credited the proceeds of P950,000 to the entity’s account, net of collection charge P50,000. Checks outstanding on June 30 amounted to P300,000 including certified check of P100,000. * The entity discovered that a check written in June for P200,000 in payment ofan account payable had been recorded in the entity’s records as P20,000. * Thcluded with the June bank statement was NSF check for P250,000 received from a customer on June 26. * The bank statement showed a P20,000 service charge for June. 1. What amount should be reported as cash in bank on June 30? a. 9,000,000 b. 8,300,000 c. 9,360,000 d. 9,180,000 2. Whatis the balance per bank statement on June 30? a. 8,300,000 b. 9,700,000 c. 8,660,000 d. 8,200,000 3: Whatis the net adjustment to cash in bank on June 30? be. Net debit P950,000 b. Netcredit P450,000 c. Netdebit P500,000 d. Net debit P860,000 176Solution 13-9 Question 1 Answer a Balance per book 10 Note collected by bank oeo0 Total 9,450,000 Book error (200,000 — 20,000) ( 180,000) NSF check (_ 250,000) Service charge ( 20,000) Adjusted book balance 9,000,000 Question 2 Answer d Balance per bank (SQUEEZE) 8,200,000 Deposit in transit 1,000,000 Outstanding checks (300,000 - 100,000 certified check (200,000) Adjusted bank balance 9,000,000 The certified check is no longer considered outstanding check for bank reconciliation purposes. Question 3 Answer c . Cash in bank Service charge Note receivable Accounts payable Accounts receivable Service charge Cash in bank 950,000 50,000 1,000,000 180,000 250,000 20,000 450,000 The two entries can be compounded and the net effect is a debit to cash in bank of P500,000. 177Problem 13-10 (PHILCPA Adapted) ; : Boracay Company ke all cash in a checking account. An examination of the bank Sane fot the month of December revealed a bank statement balance of P8,470,000. i i *s night depository o, A deposit of P950,000 placed in the bank’s night n December 29 does not appear on the bank statement. Checks outstanding on December 31 amount to P270,000. The bank statement showed that on. Decembet 25 the bank collected a note for Boracay Company and credited the proceeds of P935,000 to the entity’s account net of. 'P15,000 service charge. Boracay Company discovered that a check written iti December for P183,000 in payment of an account had been recorded as P138,000, Included with the December 31 bank statement was an NSF check for P250,000 that Boracay Company had received from a customer on December 20. The bank statement showed a P15,000 service charge for December, 1. Whatis the adjusted cash in bank on December 31? a. 9,150,000 b. 9,240,000 c. 9,195,000 d. 9,215,000 2. What is the unadjusted balance per book on December 31? a. 8,480,000 b. 8,525,000 c. 8,435,000 d. 8,510,000 3. What is the net adjustment to cash in bank on December 31? a. Netdebit 935,000 b. Netcredit 310,000 c, Netdebit 625,000 d. Netcredit 625,000 178Solution 13-10 Question 1 Answer a Balance per bank Deposit in transit Checks outstanding Adjusted bank balance Question 2 Answer b Balance per book (SQUEEZE) Note collected by bank for the depositor Book error in recording check NSF check . Service charge Adjusted book balance Check written in December Recorded by entity : Book error in recording check Question 3 Answer c Cash in bank Service charge Note receivable Accounts payable Accounts receivable Service charge Cash in bank 935,000 15,000 45,000 250,000 15,000 8,470,000 950,000 (_ 270,000) 9,150,000 8,525,000 935,000 (45,000) (250,000) (15,000) 9,150,000 183,000 (138,000) 45,000 950,000 310,000 The two entries can be compounded and the net effect is a debit to cash in bank of P625,000. 179Problem 13-11 (AICPA Adapted) Pearl Company maintains a checking ac bank provides bank statement along with day of each month. The July bank statement count at the City Bank. The canceled checks on the lag included the following information: Balance, July 1 eee Deposits : 7 690,000 Checks processed : 90.000 Service charge ; 0,000 NSF check pine Monthly loan payment deducted by bank from account aled P400,000 and all checks written by the Deposits outstanding tot ey wet aa the bank except for check of P500,000, entity were processed by A P200,000 July deposit from a credit customer was recorded ag P20,000 debit to cash and credit to accounts receivable. A check correctly recorded by Pearl Compeny as P30,000 disbursement was incorrectly processed by the bank as P300,000 disbursement. 1. What is the balance per bank on July 31? 3,600,000 4,100,000 4,300,000 3,800,000 ~ 2. What amount should be reported as adjusted cash in bank on July 31? a. 3,500,000 b. 3,770,000 ce. 3,230,000 d. 3,800,000 3. Whatis the cash in bank balance per ledger on July 31? a. 4,320,000 b. 4,470,000 c. 4,290,000 d. 4,020,000 Be op 180Solution 13-11 Question 1 Answer a Balance per bank ~ July | Deposits Checks processed Service charge NSF check Monthly loan payment Balance per bank — July 31 Question 2 Answer b Balance per bank — July 31 Deposit in transit Outstanding check Bank error — overstatement of disbursement Adjusted bank baiance Correct amount of disbursement Recorded by bank Bank error — overstatement of disbursement Question 3 Answer c Balance per ledger — July 31 (SQUEEZE) Service charge NSF check Monthly loan payment Book error — understatement of collection Adjusted book balance Correct amount of accounts receivable collected Recorded by depositor Book error — understatement of collection (50,000) (150,000) (500,000) 180,000 3,770,000 200,000 20,000 180,000CHAPTER 14 BANK RECONCILIATION Comprehensive problems Problem 14-1 (PHILCPA Adapted) ” Divine Company prepared the following bank reconciliation on December 31: " Balance per bank statement 2,800,000 Add: Deposit in transit 195,000 Checkbook printing charge. 5,000 Error made by Divine in recording chéck issued in December 35,000 NSF check 110,000 345,000 Total 3,145,000 Less: Outstanding check 100,000 Note collected by bank including P15,000 interest 215,000 315,000 Balance per book 2,830,000 The entity had cash on hand P500,000 and petty cash fund P50,000 on December 31. ~ 1. What amount should be reported as cash in bank at year-end? a. 2,930,000 b. 3,095,000 ce. 2,895,000 d. 3,130,000 2. What total amount of cash should be reported at year-end? a, 3,395,000 b. 3,350,000 c. 3,445,000 d. 3,380,000 182Solution 14-1 . Question 1 Answer ¢ Balance per bank Deposit in transit Outstanding check Adjusted cash in bank Balance per book Note collected by bank NSF check Book error Checkbook printing charge Adjusted cash in bank Question 2 Answer c Adjusted cash in bank Cash on hand Petty cash fund Total cash 183 2,800,000 195,000 (100,000) 2,895,000 2,830,000 215,000 (110,000) (35,000) (5,000) 2,895,000 2,895,000 500,000: 50,000 3,445,000Problem 14-2 (IAA) Ron Company provided the following data for the month of January: Balance per book, January 31 3,130,000 Balance per bank statement, January 31 3,500,000 Collections on January 31 but undeposited 550,000 NSF check received from a customer returned by the bank on February 5 with the January bank statement 50,000 Checks outstanding on January 31 650,000 Bank debit memo for safety deposit box rental not recorded by depositor 5,000 A creditor check for P30,000 was incorrectly recorded in the depositor’s book as 300,000 A customer check for P200,000 was recorded by the depositor as 20,000 The depositor neglected to make an entry.for a check 125,000 drawn in payment of an account payable What amount should be reported as adjusted cash in bank on January 312 a. 3,130,000 b. 3,500,000 ce. 3,400,000 d. 2,950,000 * Solution 14-2 Answer ¢ Balance per book 3,130,000 Overstatement of creditor check 270,000 Understatement of customer check 180,000 NSF check ( 50,000) Bank debit memo for safety deposit box (5,000) Unrecorded check 125,000) Adjusted book balance 3,400,000 Balance per bank 3,500,000 Undeposited collections 550,000 Checks outstanding (650,000) Adjusted bank balance 3,400,000 184Problem 14-3 (IAA) Jnreconciling the cash balance on December 31 with that shown in the bank statement, Sam Company provided the following information: Balance per bank statement 4,000,000 Balance per book 2,700,000 Outstanding checks 600,000 Deposit in transit : ‘ 475,000 Service charge 10,000 Proceeds of bank loan, December 1, discounted for 6 months at 12%, not recorded on Sam Company’s books 940,000 Customer check charged back by bank for absence of counter signature 50,000 Deposit of P100,000 incorrectly recorded by bank as 10,000 Check of Sim Company charged by bank against Sam account 150,000 Customer note collected by bank in favor of Sam Company. Face . 400,000 Interest - 40,000 Total 440,000 Collection fee 5,000 435,000 Erroneous debit memo of December 28, to charge Sam account with settlement of bank loan 200,000 Deposit of Sim Company credited to Sam account 300,000 What amount should be reported as adjusted cash in bank on December 31? ar 4,315,000 b. 3,925,000 c, 3,075,000 d. 4,015,000 185Solution 14-3 Answer d Balance per book Add: Proceeds of bank loan Customer note collected by bank Total Less: Service charge Customer check charged back Adjusted book balance Balance per bank Add: Deposit in transit Incorrect deposit Erroneous bank charge Erroneous debit memo Total Less: Outstanding checks Erroneous bank credit Adjusted bank balance 186 940,000 435,000 10,000 50,000 eee 475,000 90,000 150,000 200,000 600,000 300,000 2,700,000 1,375,000 4,075,000 60,000 4,015,000 4,000,000 915,000 4,915,000 900,000 4,015,000Problem 14-4 (1AA) Susan Company showed the following information on August 31: Balance of cash in bank account 1,300,000 Balance of bank statement 1,200,000 Outstanding checks, August 31: Number 555 ‘10,000 761 55,000 162 40,000 163 25,000 164 65,000 165 70,000 Receipts of August 31, deposited September 1 275,000 Service charge for August 5,000 NSF check received from a customer 85,000 The cashier-bookkeeper had misappropriated P30,000 and an additional P10,000 by charging sales discounts and crediting accounts receivable, The stub for check number 765 and the invoice relating thereto showed that it was for P50,000. It was recorded incorrectly in the cash disbursements journal as P70,000. This check was drawn in payment of an account. payable. Payment has been stopped on check number 555 which was drawn in payment of an account payable. The payee cannot be located. What amount should be reported as adjusted cash in bank on August 31? a. 1,240,000 b. 1,230,000 c. 1,210,000 d. 1,200,000 “187Solution 14-4 Answer a Balance per book ‘Add: Overstatement of check number 165 Check number 555 stopped for payment Total Less: Service charge NSF check Adjusted book balance Company check number 765 Recorded by depositor Overstatement of payment Balance per bank Add: Undeposited collections Total Less: Outstanding checks: Number 761 762 763 164 765 + Adjusted bank balance 188 55,000 40,000 25,000 65,000 50,000 1,300,000 30,000 1,330,000 1,240,000 | 50,000 70,000 1,200,000 —215,00 1,475,000Problem 14-5 (PHILCPA Adapted) Mcbride Company provided the following data pertaining to the cash fons and bank account for the month of | May: Cash balance per accounting record 1,719,000 Cash balance per bank statement 3,195,000 Bank service charge . 10,000 Debit memo for the cost of printed checks delivered’ by the bank; the charge has not been recorded in the accounting record 12,000 Outstanding checks 685,000 . Deposit of May 30 not recorded by bank until June 1 500,000 Proceeds of a bank loan on May 30, not recorded in the accounting record, net of interest of P30,000 570,000 Proceeds from a customer Promissory note, principal amount P800,000 collected by the bank not taken up in the accounting record with interest 810,000 Check No. 1086 issued to a supplier entered in the accounting record as P210,000 but deducted in the bank statement at an erroneous amount of 120,000 Stolen check lacking an authorized signature deducted from Mebride’s account by the bank in error 80,000 ° Customer check returned by the bank marked NSF, indicating that the customer balance was not adequate to cover the check; no entry has been made in the accounting record to record the returned check 77,000 What amount should be reported as adjusted cash in bank? a. 3,000,000 b. .2,910,000 ¢. 3,080,000 d. 2,990,000 129Solution 14-5 Answer a Balance per book Service charge Debit memo for printed checks Proceeds of bank loan Proceeds-of customer note NSF customer check Adjusted book balance Balance per bank Outstanding checks Deposit in transit Bank error in recording check Stolen check deducted by bank in error Adjusted bank balance 190 1,719,009 ( 10,000) (12,009) 570,000 810,000 (__77,000) —— 3,000,000 —_—_— 3,195,000: ( 685,000) 500,000 ( 90,000) — 80,000 3,000,000Problem 14-6 (AICPA Adapted) Carefree Compan: . pe March 31: Y Prepared the following bank reconciliation on Book balance ‘Add: Deposit in transit 1,405,000 Collection of note Beano Interest on note 7 150,000 3,400,000 Total 4,805,000 Less: Careless Company deposit credited to our account 1,100,000 Bank service charge ‘ 45,000 1,145,000 Adjusted book balance 3,660,000 Bank balance 5,630,000 Add: Error by depositor on recording check 45,000 Total ; 5,675,000 Less: Preauthorized payments for water bills 205,000 NSF customer check 220,000 Outstanding checks 1,650,000 2,075,000 Adjusted bank balance 3,600,000 The check erroneously recorded by the depositor was made for the proper amount of P249,000 in payment of account. However it was entered in the cash payments journal as P294,000. The entity authorized the bank to automatically pay its water bills as. submitted directly to the bank. What amount should be reported as cash in bank on March 31? a. 3,660,000 b. 3,600,000 c. 3,630,000 d, 2,880,000 191Solution 14-6 Answer c Book balance Collection of note Interest on note Book error on recording check Bank service charge Water bills paid directly by bank NSF customer check Adjusted book balance Company check Recorded by depositor Book error — overstatement of a payment. Bank balance Deposit in transit Outstanding checks Bank error - Careless Company deposit erroneously credited Adjusted bank balance 192 1,405,000 2,500,000 150,000 45,000 (45,000) (205,000) (220,000) 3,630,000 249,000 294,000 45,000 5,630,000 750,000 (1,650,000) (1,100,000) 3,630,000