Question

Oscar’s Red Carpet Store maintains a checking account with Academy Bank. Oscar’s sells carpet each day but makes bank deposits only once per week. The following provides information from the company’s cash ledger for the month ending February 28, 2018. Date Amount No. Date Amount Deposits: 2/4 $ 2,600 Checks: 321 2/2 $ 4,600 2/11 2,200 322 2/8 650 2/18 3,100 323 2/12 2,400 2/25 4,000 324 2/19 2,100 Cash receipts: 2/26-2/28 1,500 325 2/27 450 326 2/28 950 $ 13,400 327 2/28 1,800 Balance on February 1 $ 6,700 $12,950 Receipts 13,400 Disbursements (12,950) Balance on February 28 $ 7,150 Information from February's bank statement and company records reveals the following additional information:
a. The ending cash balance recorded in the bank statement is $11,770.
b. Cash receipts of $1,500 from 2/26-2/28 are outstanding.
c. Checks 325 and 327 are outstanding.
d. The deposit on 2/11 includes a customer's check for $450 that did not clear the bank (NSF check).
e. Check 323 was written for $2,800 for advertising in February. The bank properly recorded the check for this amount.
f. An automatic withdrawal for Oscar's February rent was made on February 4 for $1,300.
g. Oscar's checking account earns interest based on the average daily balance. The amount of interest earned for February is $190.
h. In January, one of Oscar's suppliers, Titanic Fabrics, borrowed $5,800 from Oscar. On February 24, Titanic paid $5,950 ($5,800 borrowed amount plus $150 interest) directly to Academy Bank in payment for January's borrowing.
i. Academy Bank charged service fees of $120 to Oscar’s for the month. Prepare a bank reconciliation for Oscar's checking account on February 28, 2018.

Answer 1

Answer:

Explanation:

Oscars Red Carpet Store

Bank reconciliation Statement

Balance as Per Bank Statement  $11,770

Add back Un-credited checks/deposits

Cash receipts for 26 - 28 Feb $1,500

NSF check $450

Total $1,950

deduct uncleared check

#325  $450

#327   $1,800

Total $2,250

Add withdrawals in Bank not in cash ledger

#323 - understated value in cash ledger ($2,800 - $2,400) $400

Automatic withdrawal - rent $1,300

Service Fee (Academy Bank) $120

Total $1,820

Deduct items in Bank not in Cash ledger

Interest earned $190

Titanic Fabrics repayment $5,950

Total $6,140

Adjusted Bank Balance (in line with Cash balance) $7,150