Answer:
1. Pala Medical Co. Bank Reconciliation Statement as on June 30, 20Y1
PARTICULARS $ $
Balance as per cash book 166,436
Add: Cheques issued but not yet presented 19,427
25,000 note collected by Bank <u>26,500 </u>
<u> 45,927 </u>
212,363
Deduct: Checks deposited but not yet collected
by the bank 12,300
Overstatement of figure by the bank 720
Returned check wrongly recorded by Pala
Medical Co. 3,600
Bank service charge <u> 55
</u>
<u> 16,675 </u>
Balance as per bank statement as on June 30, 20Y1 <u> </u><u>195,688 </u>
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2. DETAIL DR CR
$ $
Cash Account 25,000
Investment 25,000
Matured Investment ($25,000 Notes)
Cash Account 1,500
Interst Income 1,500
Being interest on $25,000 Notes received
Cash Account 400
Creditors - Skyline Supply Co. 400
Being correction of Payment to Skyline Supply Co. wronfly recorded
Creditors - Skyline Supply Co. 4,000
Cash Account 4,000
Being Payment to Skyline Supply Co.
Bank Charges 55
Cash Account 55
Bank Charges recorded captured in the bank statement
3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1 the amount to be reported as cask is $166,436
Explanation:
1. The balance shown by the bank statement seldom agree with the balance shown by the cash book, bank reconciliation statement is usually drawn up to agree the balance shown by the bank statement with the balance shown by the cash book.
In this question:
a. Check outstanding of $19,427 are checks issued to creditors which where not presented for payment. generally known as unpresented checks.
b. The receipts of $12,300 recorded in Pala Medical Co. cash book was not credited by the bank, this will obviously cause a disagreement between the bank statement and the cash book at month end.
c. The amount of $26,500 recorded in the bank statement must be reported correctly the the cash book and the relevant ledger by debiting the cash book by the total receipt of $26,500 and crediting investment and with $25,000 and crediting the interest elements to interest income account.
d. The wrong recording of $400 instead of $4000 must be corrected by reversing the initial entry. this is done by debiting Cash book with $400 and crediting Creditor account - Skyline Supply Co. with $400 and recording the correct entry by debiting Creditor account - Skyline Supply Co. with $4000 and crediting cash book by $4000.
e. The check of $195 is recorded correctly already in the cash book, it is the bank to pass the necessary entry but it will only enter the company cash book.
f. Bank service charge should be recorded by debiting bank charges with $55 and crediting cash book with $55
