Question

Owen Company's unadjusted book balance at June 30 is $9,120. The company's bank statement reveals bank service charges of $50. Two credit memos are included in the bank statement: one for $940, which represents a collection that the bank made for Owen, and one for $60, which represents the amount of interest that Owen had earned on its interest-bearing account in June.
Required:
a. What is the true cash balance?

Answer 1

Answer:

$10,070

Explanation:

The true cash balance is the balance having considered the effect of the transactions that have happened but are yet to be captured in the books.

Reviewing the transactions,

• bank service charges of $50 - This will be deducted from the book balance
• Two credit memos are included in the bank statement: one for $940, which represents a collection that the bank made for Owen, and one for $60, which represents the amount of interest that Owen had earned on its interest-bearing account in June - Both will be added to the book balance

Hence the true cash balance

= $9,120 - $50 + $940 + $60

= $10,070