The cash account for pala medical co. at june 30, 20y1, indicated a balance of $166,436. the bank statement indicated a balance of $195,688 on june 30, 20y1. comparing the bank statement and the accompanying canceled checks and memos with the records revealed the following reconciling items:

a. checks outstanding totaled $19,427.
b. a deposit of $12,300, representing receipts of june 30, had been made too late to appear on the bank statement.
c. the bank collected $26,500 on a $25,000 note, including interest of $1,500.
d. a check for $4,000 returned with the statement had been incorrectly recorded by pala medical co. as $400. the check was for the payment of an obligation to skyline supply co. for a purchase on account.
e. a check drawn for $195 had been erroneously charged by the bank as $915.
f. bank service charges for june amounted to $55.

1. prepare a bank reconciliation. refer to the amount descriptions list provided for the exact wording of the answer choices for text entries. "add: " & "deduct: " will automatically appear if it is required. for those boxes in which you must enter subtracted or negative numbers use a minus sign.
2. journalize the necessary entries. refer to the chart of accounts for exact wording of account titles.
3. if a balance sheet were prepared for pala medical co. on june 30, 20y1, what amount should be reported as cash?

1. Pala Medical Co. Bank Reconciliation Statement as on June 30, 20Y1    

       PARTICULARS                                                        $                 $

Balance as per cash book                                              166,436  

Add: Cheques issued but not yet presented          19,427  

 25,000 note collected by Bank                          26,500  

                                                                                        45,927

                                                                                       212,363  

Deduct: Checks deposited but not yet collected

         by the bank                                                             12,300  

  Overstatement of figure by the bank                      720  

  Returned check wrongly recorded by Pala

         Medical Co.                                                            3,600  

  Bank service charge                                                55  

                                                                                          16,675  

Balance as per bank statement as on June 30, 20Y1         195,688  

2.          DETAIL                                                                  DR            CR

                                                                                               $                  $

Cash Account                                                             25,000  

  Investment                                                                                  25,000  

Matured Investment ($25,000 Notes)  

Cash Account                                                                 1,500  

  Interst Income                                                                             1,500  

Being interest on $25,000 Notes received  

Cash Account                                                                      400  

  Creditors - Skyline Supply Co.                                                                400  

Being correction of Payment to Skyline Supply Co. wronfly recorded  

Creditors - Skyline Supply Co.                                      4,000  

  Cash Account                                                                                  4,000  

Being Payment to Skyline Supply Co.  

Bank Charges                                                                    55  

Cash Account                                                                                55  

Bank Charges recorded captured in the bank statement

3. If a balance sheet were prepared for Pala Medical Co. on June 30, 20Y1 the amount to be reported as cask is $166,436  

Explanation:

1. The balance shown by the bank statement seldom agree with the balance shown by the cash book, bank reconciliation statement is usually drawn up to  agree the balance shown by the bank statement with the balance shown by the cash book.

In this question:

a. Check  outstanding of $19,427 are checks issued to creditors which where not presented for payment. generally known as unpresented checks.

b. The receipts of $12,300 recorded in Pala Medical Co. cash book was not credited by the bank, this will obviously cause a disagreement between the bank statement and the cash book at month end.

c. The amount of $26,500 recorded in the bank statement must be reported correctly the the cash book and the relevant ledger by debiting the cash book by the total receipt of $26,500 and crediting investment and with $25,000 and crediting the interest elements to interest income account.

d. The wrong recording of $400 instead of $4000 must be corrected by reversing the initial entry. this is done by debiting Cash book with $400 and crediting Creditor account - Skyline Supply Co. with $400   and recording the correct entry by debiting Creditor account - Skyline Supply Co. with $4000 and crediting cash book by $4000.

e. The check of $195 is recorded correctly already in the cash book, it is the bank to pass the necessary entry but it will only enter the company cash book.

f. Bank service charge should be recorded by debiting bank charges with $55 and crediting cash book with $55