Question

Required: 1. Prepare a bank reconciliation for Oscar's checking account on February 28, 2021. (Amounts to be deducted should be indicated with a minus sign. Total entries to the same account together when entering in the bank reconciliation.) Answer is not complete. OSCAR'S RED CARPET STORE Bank Reconciliation February 28, 2021 Bank's Cash Balance Company's Cash Balance Per bank statement $ 11,770 Per general ledger Deposits outstanding 1,500 Company error Checks outstanding 2,000 % $ 7,150 (650) Bank balance per reconciliation Company balance per reconciliation 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, 2021. Deposits: Date 2/4 2/11 2/18 2/25 2/26-2/28 Amount $ 2,600 Checks: 2,200 3, 100 4,000 1,500 $ 13, 400 No. 321 322 323 324 325 326 327 Date 2/2 2/8 2/12 2/19 2/27 2/28 2/28 Amount $ 4,600 650 2,400 2,100 450 950 1,800 $ 12,950 Cash receipts: Balance on February 1 Receipts Disbursements Balance on February 28 $ 6,700 13,400 (12,950) $ 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.

Answer 1

Answer:

A. Cash balance as per bank $11,020.00

Cash balance as per books $11,020.00

B. 28-Feb

Dr Cash $6,140.00

Cr      To Note receivables  $5,800.00

Cr      To Interest Revenue  $340.00

28-Feb

Dr Accounts Receivables $450.00

Dr Advertising expense $400.00

Dr Rent expense $1,300.00

Dr Miscellaneous expense $120.00

Cr       To Cash  $2,270.00

Explanation:

Preparation of  a bank reconciliation for Oscar's checking account on February 28, 2021.

OSCAR'S RED CARPET Bank Reconciliation - February 28

BANK'S CASH BALANCE

Ending balance as per Bank Statements $11,770.00

Add Outstanding Deposits $1,500.00

Less Outstanding Checks ($2,250.00)

($450 + $1,800)  

Cash balance as per bank $11,020.00

COMPANY'S CASH BALANCE

Ending Balance as per cash books $7,150.00

Note Collection (including interest) $5,950.00

Interest earned $190.00

Less: NSF Cheque ($450.00)

Incorrect recording of check 323 ($400.00)

Rent withdrawl ($1,300.00)

Service charge ($120.00)

Cash balance as per books $11,020.00

Therefore the  bank reconciliation for Oscar's checking account on February 28, 2021 will be:

Cash balance as per bank $11,020.00

Cash balance as per books $11,020.00

2. Preparation to Record the necessary cash adjustments.

Journal Entries - Oscar's Red Carpet

28-Feb

Dr Cash $6,140.00

Cr      To Note receivables  $5,800.00

Cr      To Interest Revenue  $340.00

(To record reconciliation items that increases in cash)  

28-Feb

Dr Accounts Receivables $450.00

Dr Advertising expense $400.00

Dr Rent expense $1,300.00

Dr Miscellaneous expense $120.00

Cr       To Cash  $2,270.00

(To record reconciliation items that decreases cash)