Bank Reconciliation and Entries

Rancho Foods deposits all cash receipts each Wednesday and Friday in a night depository, after banking hours. The data required to reconcile the bank statement as of May 31 have been taken from various documents and records and are reproduced as follows. The sources of the data are printed in capital letters. All checks were written for payments on account.

CASH ACCOUNT:
Balance as of May 1 $9,578.00
CASH RECEIPTS FOR MONTH OF MAY $5,255.89
DUPLICATE DEPOSIT TICKETS:
Date and amount of each deposit in May:
Date Amount Date Amount Date Amount
May 2 $569.50 May 12 $580.70 May 23 $ 731.45
5 701.80 16 600.10 26 601.50
9 189.24 19 701.26 31 580.34
CHECKS WRITTEN:
Number and amount of each check issued in May:
Check No. Amount Check No. Amount Check No. Amount
614 $243.50 621 $309.50 628 $ 837.70
615 350.10 622 Void 629 329.90
616 279.90 623 Void 630 882.80
617 395.50 624 707.01 631 1,081.56
618 435.40 625 185.63 632 62.40
619 320.10 626 550.03 633 310.08
620 238.87 627 318.73 634 503.30
Total amount of checks issued in May $8,342.01

BANK RECONCILIATION FOR PRECEDING MONTH (DATED APRIL 30):
Cash balance according to bank statement $ 9,422.80
Add deposit of April 30, not recorded by bank 780.80
$10,203.60
Deduct outstanding checks:
No. 580 $310.10
No. 602 85.50
No. 612 92.50
No. 613 137.50 625.60
Adjusted balance $ 9,578.00
Cash balance according to company’s records $ 9,605.70
Deduct service charges 27.70
Adjusted balance $ 9,578.00
Instructions:

1. Prepare a bank reconciliation as of May 31. If errors in recording deposits or checks are discovered, assume that the errors were made by the company. Assume that all deposits are from cash sales except for the note receivable of $4,000 and interest of $160 collected on May 14. All checks are written to satisfy accounts payable. If required, round your answers to the nearest cent.

Rancho Foods
Bank Reconciliation
May 31, 20Y8
Cash balance according to bank statement $
Add deposit of May 31, not recorded by bank
$
Deduct outstanding checks:
No. 613 $
No. 628
No. 634
Adjusted balance $
Cash balance according to Rancho Foods $
Add: Proceeds of note collected by bank:
Principal $
Interest
Add: Error in recording May 9 deposit as $189.24 by the company instead of $819.24
Add: Error in recording Check No. 625 as $185.63 by the company instead of $158.63
$
Deduct: Check returned because of insufficient funds $
Deduct: Service charges
Adjusted balance $
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2. Illustrate the effects on the accounts and financial statements of the bank reconciliation. If no account or activity is affected, select "No effect" from the dropdown and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

Increase in Cash:

Statement of Cash Flows Balance Sheet Income Statement
Assets = Liabilities + Stockholders' Equity
Cash + Notes Receivable = Accounts Payable + Retained Earnings
May 31 May 31
Statement of Cash Flows Income Statement
Operating Sales
Interest revenue
No effect

Decrease in Cash:

Statement of Cash Flows Balance Sheet Income Statement
Assets = Liabilities + Stockholders' Equity
Cash + Accounts Receivable = No effect + Retained Earnings
May 31 May 31
Statement of Cash Flows Income Statement
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3. What is the amount of Cash that should appear on the balance sheet as of May 31? Round your answer to the nearest cent.
$

4. Assume that a canceled check for $50 had been incorrectly recorded by the bank as $500. Which of the following is the correct way to include the error in a bank reconciliation?
The error of $450 in the canceled check should be added to the "balance according to bank statement" on the bank reconciliation.