Wright Company's cash account shows a $28,700 debit balance and its bank statement shows $27,000 on deposit at the close of business on May 31.

Question

The May 31 bank statement lists $160 in bank service charges; the company has not yet recorded the cost of these services.
Outstanding checks as of May 31 total $6,200.
May 31 cash receipts of $6,800 were placed in the bank’s night depository after banking hours and were not recorded on the May 31 bank statement.
In reviewing the bank statement, a $460 check written by Smith Company was mistakenly drawn against Wright’s account.
The bank statement shows a $480 NSF check from a customer; the company has not yet recorded this NSF check.

Answer 1

To reconcile the cash account, we need to adjust for the items that are not yet recorded in the company's records and the bank statement.

1. Add the outstanding checks to the bank statement balance:
Bank statement balance: $27,000
Add: Outstanding checks: $6,200
Adjusted bank statement balance: $33,200

2. Deduct the unrecorded deposit:
Adjusted bank statement balance: $33,200
Deduct: Unrecorded deposit: $6,800
Adjusted bank statement balance: $26,400

3. Deduct the bank service charges:
Adjusted bank statement balance: $26,400
Deduct: Bank service charges: $160
Adjusted bank statement balance: $26,240

4. Deduct the check drawn by Smith Company:
Adjusted bank statement balance: $26,240
Deduct: Check drawn by Smith Company: $460
Adjusted bank statement balance: $25,780

5. Deduct the NSF check:
Adjusted bank statement balance: $25,780
Deduct: NSF check: $480
Adjusted bank statement balance: $25,300

After reconciling, the adjusted bank statement balance is $25,300. To match this balance with the company's cash account, we need to adjust the company's records accordingly.

1. Deduct the unrecorded deposit:
Cash account balance: $28,700
Deduct: Unrecorded deposit: $6,800
Adjusted cash account balance: $21,900

2. Add the outstanding checks:
Adjusted cash account balance: $21,900
Add: Outstanding checks: $6,200
Adjusted cash account balance: $28,100

3. Deduct the bank service charges:
Adjusted cash account balance: $28,100
Deduct: Bank service charges: $160
Adjusted cash account balance: $27,940

4. Deduct the check drawn by Smith Company:
Adjusted cash account balance: $27,940
Deduct: Check drawn by Smith Company: $460
Adjusted cash account balance: $27,480

5. Deduct the NSF check:
Adjusted cash account balance: $27,480
Deduct: NSF check: $480
Adjusted cash account balance: $27,000

After adjusting for all the items, the reconciled cash account balance matches the $27,000 balance on the bank statement.