Question

tosh corp. prepares monthly bank reconciliations as part of its cash controls. toshs bank provided the following details about toshs transactions at the bank during the month of april:
balance, april 30 $87,000
service charge for april 20
note ($4,600) and interest ($180) collected for tosh from a customer 4,780
interest earned during april 110
nsf check from orange corp. (deposited by tosh) for goods purchased on account 390
tosh then analyzed its cash balance on its own set of books, revealing the following details:
checking account balance per toshs books $82,670
deposit in transit at april 30 1,600
outstanding checks as of april 30 1,400
error in recording a check issued by tosh. (correct amount of the check is $560, but was recorded as a cash disbursement of $610. the check was issued to pay for merchandise originally purchased on account.) 50
required:

1. prepare a bank reconciliation at april 30 in proper form.

tosh corp.
bank reconciliation
april 30
cash balance from bank statement

$$\\square$ add: $square$ $square$ less: $square$ $square$ adjusted cash balance $$

\square$
cash balance from company records

$$\\square$ add: $square$ $square$ less: $square$ $square$ adjusted cash balance $$

\square$

1. record any necessary adjusting journal entries. if an amount box does not require an entry, leave it blank.

$square$
$square$
(record bank service charge)
$square$
$square$
(record interest)

Explanation:

Step1: Bank - side reconciliation

Start with bank statement balance. Add deposits in transit and subtract outstanding checks.
Cash balance from bank statement = $87,000
Add: Deposit in transit = $1,600
Less: Outstanding checks = $1,400
Adjusted cash balance (bank - side) = $87,000 + $1,600 - $1,400=$87,200

Step2: Company - side reconciliation

Start with company's book balance. Add note and interest collected and interest earned. Subtract service charge, NSF check and correct the error in check recording.
Cash balance from company records = $82,670
Add: Note and interest collected = $4,780
Interest earned = $110
Less: Service charge = $20
NSF check = $390
Error correction ($610 - $560) = $50
Adjusted cash balance (company - side) = $82,670+4,780 + 110-20 - 390-50=$87,200

Step3: Adjusting journal entries

Record bank service charge

Debit: Bank Service Charge Expense $20
Credit: Cash $20

Record interest

Debit: Cash $110
Credit: Interest Revenue $110

Answer:

Bank Reconciliation - April 30

	Amount
Add: Deposit in transit	$1,600
Less: Outstanding checks	$1,400
Adjusted cash balance	$87,200
Cash balance from company records	$82,670
Add: Note and interest collected	$4,780
Interest earned	$110
Less: Service charge	$20
NSF check	$390
Error correction	$50
Adjusted cash balance	$87,200

Adjusting Journal Entries

Account Titles and Explanation	Debit	Credit
Cash		$20
Cash	$110
Interest Revenue		$110