Prepare bank reconciliation and journal entries

Reference no: EM1357420

Prepare responses to the following assignments from the e-text, Fundamentals of Financial Accounting 1st ed., by Phillips, Libby, and Libby

Identifying Outstanding Checks and Deposits in Transit and Preparing a Bank Reconciliation and Journal Entries: L02

The August 2006 bank statement for Martha Company and the cash T-account for August 2006 follow:

Bank Statement

Date Checks Deposits Other Balance

Aug. 1 $17,470

2 $300 17,170

3 $12,000 29,170

4 400 28,770

5 250 28,520

9 890 27,630

10 310 27,320

15 4,000 31,320

21 400 30,920

24 21,000 9,920

25 7,000 16,920

30 800 16,120

30 Interest earned $20 16,140

31 Service charge 10 16,130

Outstanding checks at the end of July were for $250, $400, and $300. No deposits were in transit at the end of July.

Required:

1. Identify and list the deposits in transit at the end of August.

2. Identify and list the outstanding checks at the end of August.

3. Prepare a bank reconciliation for August.

4. Give any journal entries that the company should make as a result of the bank reconciliation. Why are they necessary?

5. After the reconciliation journal entries are posted, what balance will be reflected in the Cash account in the ledger?

6. If the company also has $100 on hand, which is recorded in a different account called Cash on Hand, what total amount of cash should be reported on the August 31, 2006, balance sheet?

Reference no: EM1357420

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