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29 September, 03:15

Exercise 8-14 Bank reconciliation LO P3 Wright Company's cash account shows a $30,500 debit balance and its bank statement shows $28,800 on deposit at the close of business on May 31. The May 31 bank statement lists $250 in bank service charges; the company has not yet recorded the cost of these services. Outstanding checks as of May 31 total $7,100. May 31 cash receipts of $7,700 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 $550 check written by Smith Company was mistakenly drawn against Wright's account. The bank statement shows a $300 NSF check from a customer; the company has not yet recorded this NSF check. Prepare its bank reconciliation using the above information.

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  1. 29 September, 03:41
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    Bank Reconciliation Statement

    Balance at Bank as per updated cash book $29,950

    Add Unpresented Cheques $7,100

    Less Bank Lodgements not yet credited ($7,700)

    Balance as per Bank Statement $29,350

    Explanation:

    The first step is to update the Cash Book Bank Balance as follows:

    Debit:

    Balance as at May 31 (un-adjusted) $30,500

    Totals $30,500

    Credit:

    Service Charges $250

    Dishonored Cheque $300

    Updated Cash Book Balance (balancing figure) $29,950

    Totals $30,500

    The next step is to prepare a Bank Reconciliation Statement

    Bank Reconciliation Statement

    Balance at Bank as per updated cash book $29,950

    Add Unpresented Cheques $7,100

    Less Bank Lodgements not yet credited ($7,700)

    Balance as per Bank Statement $29,350

    The Bank Statement has an error and must be reported:

    After the Error is Reported, the Bank Statement will show a Balance of $29,350.

    Adjustment Being as follows,

    Balance as at May $28,800

    Add Back Check Mistakenly drawn against Wright's account $550

    Balance as per Bank Statement $29,350
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