The December cash records of Duffy Insurance follow:
Duffy’s Cash account shows a balance of $17,050 at December 31. On December 31, Duffy Insurance received the following bank statement:
Additional data for the bank reconciliation follow:
a. The EFT credit was a receipt of rent. The EFT debit was an insurance payment.
b. The NSF check was received from a customer.
c. The $1,600 bank collection was for a note receivable.
d. The correct amount of check 1419, for rent expense, is $1,910. Duffys controller mistakenly recorded the check for $1,190.
Requirements
1. Prepare the bank reconciliation of Duffy Insurance at December 31, 2016.
2. Journalize any required entries from the bank reconciliation.
SOLUTION
Requirement 1
BANK | BOOK | ||||
---|---|---|---|---|---|
Balance, December 31, 2016 | $ 18,480 | Balance, December 31, 2016 | $ 17,050 | ||
ADD: | ADD: | ||||
Deposit in transit | 1,830 | EFT collection of rent | $ 400 | ||
20,310 | Bank collection of note | 1,600 | 2,000 | ||
19,050 | |||||
LESS: | LESS: | ||||
Outstanding checks | Correction of book error | 720 | |||
No. 1420 | $ 1,470 | NSF check | 600 | ||
No. 1421 | 1,200 | EFT – insurance payment | 700 | ||
No. 1422 | 630 | 3,300 | Service charge | 20 | 2,040 |
Adjusted bank balance, December 31, 2016 | $ 17,010 | Adjusted book balance, December 31, 2016 | $ 17,010 | ||
Requirement 2
Date | Accounts and Explanation | Debit | Credit |
---|---|---|---|
Dec. 31 | Cash | 400 | |
Rent Revenue | 400 | ||
To record EFT rent collection. | |||
31 | Cash | 1,600 | |
Notes Receivable | 1,600 | ||
To record bank collection of notes receivable. | |||
31 | Rent Expense | 720 | |
Cash | 720 | ||
To record error on check 1419. | |||
31 | Accounts Receivable | 600 | |
Cash | 600 | ||
To record NSF check. | |||
31 | Insurance Expense | 700 | |
Cash | 700 | ||
To record EFT insurance payment. | |||
31 | Bank Expense | 20 | |
Cash | 20 | ||
To record bank service charges incurred. |
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