Chapter 8 - Cash and Internal Controls

158. Following are seven items a through g that would cause Xavier Company's book balance
of cash to differ from its bank statement balance of cash.
a. A service charge imposed by the bank.
b. A check listed as outstanding on the previous period's reconciliation and still outstanding at
the end of this month.
c. A customer's check returned by the bank is marked "Not Sufficient Funds(NSF)".
d. A deposit that was mailed to the bank on the last day of the current month and is
unrecorded on this month's bank statement.
e. A check paid by the bank at its correct $190 amount was recorded in error in the company's
Check Register at $109.
f. An unrecorded credit memorandum indicated that bank had collected a note receivable for
Xavier Company and deposited the proceeds in the company's account.
g. A check was written in the current period that is not yet paid or returned by the bank.
Indicate where each item a through g would appear on Xavier Company's bank reconciliation
by placing its identifying letter in the parentheses in the proper section of the form below.

AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Bloom's: Understand
Difficulty: Medium
Learning Objective: P3 Prepare a bank reconciliation.

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Chapter 8 - Cash and Internal Controls

160. Brown Company's bank statement for September 30 showed a cash balance of $1,350.
The company's Cash account in its general ledger showed a $995 debit balance. The
following information was also available as of September 30.
a. A $125 debit memoranda is included with the bank statement and dealt with a customer's
check for $100 marked NSF and returned to Brown Company by the bank. In addition, the
bank charged the company's a $25 processing fee.
b. The September 30 cash receipts, $1,250, were placed in the bank's night depository after
banking hours on that date and this amount did not appear on the September 30 bank
statement.
c. A $15 debit memorandum for checks printed by the September 30 bank was included with
the canceled checks.
d. Outstanding checks amounted to $1,145.
e. A customer's note for $900 was collected by the bank. A collection fee of $25 was deducted
by the bank and the difference was deposited in the account.
f. Included with the canceled checks was a check for $275, drawn on another company,
Browne Inc.
1. Prepare a bank reconciliation as of September 30.
2. Prepare any necessary adjusting journal entries necessary as a result of the bank
reconciliation.

1.

2.

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Chapter 8 - Cash and Internal Controls

171. The following information is available to reconcile Cloy Company's book balance of
cash with its bank statement cash balance as of June 30. The June 30 cash balance according
to the accounting records is $58,542, and the bank statement cash balance for that date is
$68,047.
a. The bank erroneously cleared a $395 check against the account in June that was not issued
by Cloy. The check documentation included with the bank statement indicates the check was
actually issued by Clare Co.
b. On June 30, the bank issued a credit memorandum for $35 interest earned on Cloy's
account.
c. When the June checks are compared with entries in the accounting records, it is found that
Check No. 1727 had been correctly drawn for $1,450 to pay for advertising but was
erroneously entered in the accounting records as $1,540.
d. A credit memorandum indicates that the bank collected $9,000 cash on a note receivable
for Cloy, deducted a $30 collection fee, and credited the balance to the company's Cash
account. Cloy did not record this transaction before receiving the statement.
e. A debit memorandum of $895 is enclosed with the bank statement for an NSF check for
$870 received from a customer. The bank assessed a $25 fee for processing it.
f. Cloy's June 30 daily cash receipts of $6,325 were placed in the bank's night depository on
that date, but do not appear on the June 30 bank statement.
g. Cloy's June 30 cash disbursements journal indicates that Check No. 1737 for $4,830 and
Check No. 1740 for $3,280 were both written and entered in the accounting records, but are
not among the canceled checks.
h. A debit memorandum for $85.00 indicates the bank deducted the annual lock box fee for
the company.
1. Prepare the bank reconciliation for this company as of June 30.
2. Prepare the journal entries necessary to bring the company's book balance of cash into
conformity with the reconciled cash balance as of June 30.

1.

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2.

AACSB: Analytic
AICPA BB: Industry
AICPA FN: Measurement
Bloom's: Apply
Difficulty: Hard
Learning Objective: P3 Prepare a bank reconciliation.

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