Wright Company deposits all cash receipts on the day when they are received and it makes all cash payments by check. At the close of business on May 31, 2015, its Cash account shows a $29,700 debit balance. The company’s May 31 bank statement shows $28,000 on deposit in the bank. a. The May 31 bank statement included a $210 debit memorandum for bank services; the company has not yet recorded the cost of these services. b. Outstanding checks as of May 31 total $6,700. c. May 31 cash receipts of $7,300 were placed in the bank’s night depository after banking hours and were not recorded on the May 31 bank statement. d. In reviewing the bank statement, a $510 check written by Smith Company was mistakenly drawn against Wright’s account. e. A debit memorandum for $380 refers to a $380 NSF check from a customer; the company has not yet recorded this NSF check. Prepare a bank reconciliation for the company using the above information.

Wright Company

Bank Reconciliation Statement

                                                                                    $                          $

Balance per bank                                                                                 28,000

Add:

Debit memorandum for bank services                                                    210

Cash receipts placed in the bank’s night depository                          7,300

Check written by Smith Company mistakenly drawn                             510

A debit memorandum that refers to NSF check                                     380

Subtract;

Outstanding checks                                                                             (6,700)  

Balance per cash book                                                                         29,700  

Explanation:

Debit memorandum for bank services is a charge that has been recognized as a deduction from the bank balance but is yet to be recognized in the cash book hence it is added back.

Outstanding checks are checks that have been deducted from the cashbook but are yet to be deducted from the bank balance hence the deduction.

Cash receipts of $7,300 were placed in the bank’s night depository after banking hours and were not recorded on the May 31 bank statement, hence the addition to he bank balance.

Check written by Smith Company was mistakenly drawn against Wright’s account. This will be added back to the bank balance as the deduction would not have been captured in the cash book.

A debit memorandum for $380 refers to a $380 NSF check from a customer; the company has not yet recorded this NSF check. This will be added back to the bank balance.

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