Acct Chapter 7

As used in a bank reconciliation, how are deposits in transit handled?

Added to the bank balance

Springer Company listed outstanding checks totaling $4,500 on its September bank reconciliation. In October, the company issued checks totaling $45,700. The October bank statement shows that checks totaling $39,800 cleared the bank. In addition, a check from one of Springer's customers in the amount of $500 was returned as NSF. The outstanding checks on the October bank reconciliation should total

$10,400. The amount of checks outstanding at the beginning of the period plus the checks issued in the period represents the total checks that should clear the bank account. Subtracting the checks that cleared results in the October outstanding checks amount. The NSF check was added to the bank account balance when initially presented, and then deducted when the customer's bank returned it for insufficient funds.

Barker Company collected the following information to prepare its November bank reconciliation: Cash balance per bank, November 30 $21,000 Note receivable plus interest collected 9,000 Outstanding checks 6,000 Deposits in transit 5,400 Bank service charges 85 NSF check 2,100 How much is the cash balance per books prior to preparing the reconciliation?

$13,585 From the bank's ending balance ($21,000), add the deposits in transit ($5,400) and subtract the outstanding checks ($6,000), to arrive at the adjusted bank balance totaling $20,400. The total of the book side is the same as the total of the bank side, $20,400. You can then solve for the unadjusted book balance of $13,585 (Algebraically, x + $9,000 -$85 - $2,100 = $20,400, therefore unadjusted book balance should be $13,585).

Jones Company collected the following information to prepare its May bank reconciliation: Cash balance per books, May 31 $5,300 Deposits in transit 510 Notes receivable with interest collected by bank 580 Bank service charges 30 Outstanding checks 180 NSF check 150 How much is the adjusted cash balance per books on May 31?

$5,700 The book side of the cash reconciliation begins with $5,300 to which adjustments are made for amounts collected by the bank, here the note receivable of $580. Deductions are made for amounts the bank deducted from the account, which include the bank service charges of $30 and the NSF check of $150, to arrive at the adjusted cash balance per books of $5,700. Outstanding check and deposits in transit affect the bank side of the reconciliation.

Which is the adjusting entry Max Company would prepare when the bank collects a $200 note receivable from one of Max's customers?

Cash 200 Notes Receivable 200

A company's monthly bank statement shows a collection of a note receivable by the bank in the amount of $500. Which of the following is one part of the journal entry needed to record the note collection by the company?

Credit to Notes Receivable for $500

Which of the following will not require an adjusting entry?

Deposits in transit

For which item below might a bank issue a credit memorandum to a depositor's account?

Interest earned

Which of the following is the correct adjusting entry for the account holder when the bank submits a debit memorandum for a monthly service charge of $30?

Miscellaneous Expense 30 Cash 30

For which of the following might a bank issue a debit memorandum to a depositor's account?

Monthly service charges

For which of the following will an adjusting entry be required as the result of a bank reconciliation?

NSF checks

TorF: Deposits in transit are added to the cash balance per books on the bank reconciliation.

False Deposits in transit are deposits the business knows are in route to the financial institution, but are not yet processed by the bank. They need to be added to the bank's balance in the bank reconciliation process.

Which one of the statements below is true? Both deposits in transit and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process. Both deposits in transit and outstanding checks are added to the balance per the bank statement during the bank reconciliation process. Deposits in transit are deducted from the balance per the bank statement, and outstanding checks are added to the balance per the bank statement during the bank reconciliation process. The deposits in transit are added to the balance per the bank statement, and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process.

The deposits in transit are added to the balance per the bank statement, and outstanding checks are deducted from the balance per the bank statement during the bank reconciliation process.

Why should a bank reconciliation be prepared?

To explain any difference between the depositor's balance per books and the balance per bank.