On May 31 2017 Terrell Ltd cash balance per book of 6,781.50. The bank statement from home town bank on that date showed balance of 6,824.60. A comparison of statement with the cash account revealed the following facts.

Question

1. The statement included a debit memo of 60 for the printing of additional campany checks.
2. Cash sales of 836.15 on May 12 were deposited in the bank. The receipt journal entry and deposit slip were incorrectly made for 886.15. The bank credited Terrell campany for the correct amount.
3. Outstanding checks at May 31 totaled 276.25. Deposit in transit were 1,916.15.
4. On May 18 the campany issued check No. 1181 for 685 to Barry dietz on account. The check which cleared the in May, was incorrectly journalized and posted by Terrell for 658.
5. A 3000 note receivable was collected by the bank for Terrell on May 31 plus 80 interest. A bank charged a collection fee of 20. No interest has been accrued on the note.
6. Included with canceled checks was a check issued by Bridges plc to Jon Newton for 600 that was incorrectly charged to Terrell by the bank.
7. On May 31 the bank statement showed an NSF charge of 640 for a check issued by sandy Grifton, a customer, to Terrell on account.
INSTRUCTIONS
a) prepare the bank reconciliation on May 31,2017
b) prepare the necessary adjusting entries for Terrell on May 31,2017

Answer 1

a) Bank Reconciliation on May 31, 2017:

Balance per bank statement: $6,824.60
Add: Deposit in transit: $1,916.15
Less: Outstanding checks: $276.25
Adjusted balance per bank: $8,464.50

Balance per book: $6,781.50
Add: Debit memo for printing of company checks: $60.00
Less: Incorrect deposit: $50.00 ($886.15 - $836.15)
Add: Interest on note receivable: $80.00
Less: Collection fee: $20.00
Less: Incorrectly charged check: $600.00
Less: NSF charge: $640.00
Adjusted balance per book: $5,611.50

b) Adjusting entries for Terrell on May 31, 2017:

1. Debit: Printing Expense - $60.00
Credit: Cash - $60.00

2. Debit: Cash - $50.00
Credit: Accounts Receivable - $50.00

3. Debit: Cash - $80.00
Credit: Interest Income - $80.00

4. Debit: Interest Expense - $20.00
Credit: Cash - $20.00

5. Debit: Accounts Receivable - $600.00
Credit: Cash - $600.00

6. Debit: Accounts Receivable - $640.00
Credit: Cash - $640.00

Note: Adjusting entries may vary depending on the account titles used in the company's chart of accounts.