24) What is the purpose of a bank reconciliation?
25) The accountant for Midway Company is reconciling the company’s cash account with the bank statement. Below is a list of items that will be included in the reconciliation. Write the LETTER for each item as either an addition to or a subtraction from either the bank balance or the book balance.
a.Midway Company deposited $200 worth of checks that are not on the bank statement.
b.A customer’s check for $118 was returned by the bank for insufficient funds.
c.There are $2,980 worth of outstanding checks.
d.The bank collected a note receivable for Midway Company worth $500.
e.The bank charged Midway Company $10 to collect the note receivable.
f.$20 of other bank service charges appears on the bank statement.
Bank Balance
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Book Balance
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Add:
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Add:
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Subtract:
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Subtract:
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Answer: Bank Balance
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Book Balance
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Add:
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Add:
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a.
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d.
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Subtract:
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Subtract:
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c.
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b.
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e.
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f.
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Diff: 2
Skill: Analytic skills
26) The accountant for Jem’s Jewelry is reconciling the company’s cash account with the bank statement. Below is a list of items that will be included in the reconciliation. Write the LETTER for each item as either an addition to or a subtraction from either the bank balance or the book balance.
a. Bank service charges for the month were $35.
b. Jem’s Jewelry recorded a deposit of $134. The bank correctly recorded the deposit as $143.
c. A deposit of $400 was mailed to the bank, but has not been recorded by the bank.
d. Jem’s Jewelry correctly recorded a deposit of $89. The bank recorded the deposit as $98.
e. $1,555 worth of checks were outstanding.
Bank Balance
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Book Balance
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Add:
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Add:
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Subtract:
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Subtract:
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27) Alpha Company’s bookkeeper decided to save time by accepting the cash balance shown on the bank statement as the company’s correct ending cash balance each month. Explain to the bookkeeper why a monthly bank reconciliation should be prepared.
28) Put an X in the appropriate box to show how each of these items would appear on a company’s bank reconciliation. Put an asterisk (*) next to the items for which the company must record an adjusting entry:
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Balance per bank
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Balance per books
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add to
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deduct from
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add to
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deduct from
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1.
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The bank statement shows that a check written by the company for $651 was paid by the bank for $615 in error.
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2.
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The bank recorded a deposit of $100 as $1,000.
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3.
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The bookkeeper correctly wrote a check to a supplier for $604, but recorded the payment as $406 in the company’s records.
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4.
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The company’s bookkeeper mistakenly recorded a deposit of $420 as $240.
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