BANK

RECONCILIATION

Problem 1

In preparing the August 31, 2014 bank reconciliation, Yalex Company provided the
following information:

Balance per bank statement P 1,555,000
Deposit in transit 275,000
Return of customer's check for insufficient fund 85,000
Outstanding checks 125,000
Bank service charge for August 5,000

On August 31, 2014, what is the adjusted cash in bank?

A. P1,830,000
B. P1,795,000
C. P1,705,000
D. P1,430,000

Solution:

Balance per bank statement P1,555,000
Deposit in transit 275,000
Total P1,830,000
Outstanding checks (125,000)
Adjusted bank balance P1,705,000

The customer’s check which is returned for insufficient fund and the bank service charge are
ignored because these are book reconciling items.


Problem 2

On preparing the bank reconciliation on December 31, 2014, Mase Company provided the
following data:

Balance per bank statement P 6,500,000
Deposit in transit 750,000
Amount erroneously credited by bank to Mase’s account 50,000
Bank service charge for December 3,000
Outstanding checks 325,000

What is the adjusted cash in bank on December 31, 2014?

A. P6,125,000
B. P6,457,000
C. P6,875,000
D. P6,925,000

Solution:

Balance per bank statement P6,500,000
Deposit in transit 750,000
Outstanding checks (325,000)
Bank error (50,000)
Adjusted bank balance P6,875,000


Problem 3

In an audit of Luzon Company on December 31, 2013, the following data are gathered:

Balance per book P2,000,000
Bank charges 6,000
Outstanding checks 470,000
Deposit in transit 600,000
Customer note collected by bank 750,000
Interest on customer note 30,000
Customer check returned NSF 124,000
Depositor’s note charged to account 500,000

What is the adjusted cash in bank on December 31, 2013?

A. P3,150,000
B. P2,130,000
C. P2,150,000
D. P2,650,000

Solution:

Balance per book P2,000,000
Bank charges (6,000)
Customer note collected by bank 750,000
Interest on customer note 30,000
Customer check returned NSF (124,000)
Depositor’s note charged to account (500,000)
Adjusted book balance P2,150,000







Problem 4

Central Company provided the following data for the purpose of reconciling the cash
balance per book with the balance per bank statement on December 31, 2013:

Balance per bank statement P4,000,000
Outstanding checks (including certified check of 200,000) 1,000,000
Deposit in transit 400,000
December NSF checks (of which 100,000 had been redeposited and
cleared by December 27) 300,000
Erroneous credit to Central’s account, representing proceeds of loan
granted to another company 600,000
Proceeds of note collected by bank for Central, net of service charge
of 40,000 1,500,000

What is the cash in bank to be reported on December 31, 2013?

A. P3,000,000
B. P2,800,000
C. P3,600,000
D. P2,900,000

Solution:

Balance per bank P4,000,000
Deposit in transit 400,000
Total P4,400,000
Outstanding checks (1,000,000 – 200,000) (800,000)
Erroneous bank credit (600,000)
Adjusted bank balance P3,000,000

The certified check of 200,000 is no longer outstanding for reconciliation purposes. Thus, it is
deducted from the total outstanding checks.










Problem 5

Libra Company keeps all its cash in a checking account. An examination of the entity’s
accounting records and bank statement for the month ended June 30, 2013 revealed the
following information:

• The cash balance per book on June 30 is P17,000,000.
• A deposit of P2,000,000 that was placed in the bank’s night depository on June 30
does not appear on the bank statement.
• The bank statement shows on June 30, the bank collected note for Libra and
credited the proceeds of P1,900,000 to the entity’s account.
• Checks outstanding on June 30 amount to P600,000.
• Libra discovered that a check written in June for P400,000 in payment of an account
payable, had been recorded in the entity’s records as P40,000.
• Included with the June bank statement was NSF check for P500,000 that Libra had
received from a customer on June 26.
• The bank statement shows a P40,000 service charge for June.

What is the cash in bank to be reported in the statement of financial position on June
30, 2013?

A. P18,000,000
B. P16,600,000
C. P18,720,000
D. P18,360,000

Solution:

Balance per book P17,000,000
Note collected by bank 1,900,000
Total P18,900,000
Book error (P400,000 – P40,000) (360,000)
NSF check (500,000)
Service charge (40,000)
Adjusted book balance P18,000,000








Problem 6
On March 31, 2016, Mcgonagal Company received its bank statement. However, the closing
balance of the account was unreadable. Attempts to contact the bank after hours did not
secure the desired information. The following data are available in preparing a bank
reconciliation:

February 29 book balance P1,460,000

Note collected by bank 100,000
Interest earned on note 10,000
NSF Check of customer 130,000
Bank service Charge on NSF Check 2,000
Other bank charges 3,000
Outstanding Checks 202,000
Deposit - February 29 placed in night depository 85,000
check issued by Flitwick Co. charged to Mcgonagal's account 20,000

What is the cash balance per bank statement?

A. P1, 435, 000
B. P1, 532, 000
C. P1, 338, 000
D. P1, 557, 000

February 29 book balance P1,460,000

Note collected by bank 100,000

Interest earned on note 10,000
NSF Check of customer 130,000
Bank charges (2000 + 3000) 5,000
Adjusted book balance P1,435,000

Balance per bank statement (SQUEEZE) P1,532,000
Deposit in Transit 85,000

Bank error - erroneous charge 20,000
Outstanding checks 202,000
Adjusted bank balance P1,435,000

Problem 7

Lucy Company’s bank statement for the month of December included the following
information:


Ending balance P3,000,000
Bank service charge 15,000
Interest paid by Lucy Company for December 12,000

In companying the bank statement to its own cash records, the entity found the following:

Deposits made but not yet recorded by the bank P380,000
Checks written and mailed but not yet recorded by the bank 640,000

In addition, the entity discovered that it had drawn and erroneously recorded a check of
P46, 000 that should have been recorded for P64, 000.

What is the cash balance per ledger on December 31?

A. P 2, 520, 000
B. P 2, 740, 000
C. P 2, 761, 000
D. P 3, 000, 000

Answer

Balance per bank statement P 3,000,000
Deposits in transit 380,000
Outstanding Checks 640,000
Adjusted bank balance P 2,740,000

Balance per book (SQUEEZE) 2,761,000
Interest income 12,000
Service charge 15,000
Book error (64, 000 - 46, 000) 18,000
Adjusted book balance P 2,740,000











Problem 8

On June 30, 2015, the bank statement of Steele Company had an ending balance of
P4,000,000. The following data were assembled in the course of reconciling the bank
balance:

• The bank erroneously credited Steele Company for P20,000.
• During the month, the bank charged back NSF checks amounting to P25,000 of
which P5, 000 had been re-deposited by June 25.
• Collection for June 30 totaling P115, 000 was deposited the following month.
• Checks outstanding on June 30 amounted to P300,000.
• Note collected by the bank for Steele Company was P75,000 and the corresponding
bank charge was P5,000.

What is the unadjusted cash in bank per ledger on June 30, 2015?
A. P4,000,000
B. P 3, 745, 000
C. P 3, 850, 000
D. P 3, 795, 000

Answer:

Balance per bank P4,000,000
Erroneous bank credit (20,000)
Deposit in transit 115,000
Outstanding Checks (300,000)
Adjusted bank balance P 3,795,000

Balance per book (SQUEEZE) P3,745,000
NSF Checks (25000 - 5000) (20,000)
Note collected by bank 75,000
Service charge ( 5,000)
Adjusted book balance P 3,795,000














Problem 9

Cyrus Company’s bank statement for the month of April included the following information:

Bank service charge for April P30,000
Check deposited by Cyrus during April was not collectible and
has been marked “NSF” by the bank and returned 80,000


In comparing the bank statement to its own records, the entity found the following:

Deposits made but not yet recorded by bank P260,000
Checks written and mailed but not yet recorded by bank 200,000

All deposits in transit and outstanding checks have been properly recorded in the entity’s
books.

A customer’s check for P70,000 payable to Cyrus Company had not yet been deposited and
had not been recorded by the entity. The cash in bank account balance per ledger is
P1,840,000.

What is adjusted cash in bank on April 30?

A. P1,800,000
B. P1,730,000
C. P1,860,000
D. P1,930,000

Solution:

Balance per ledger P1,840,000
Unrecorded customer check 70,000
Bank service charge (30,000)
NSF check (80,000)
Adjusted book balance P1,800,000








Problem 10

Edward Company prepared the following bank reconciliation on March 31:

Book balance P 2,810,000
Add: March 31 deposit P1,500,000
Collection of note 5,000,000
Interest on note 300,000 6,800,000
Total P 9,610,000
Less: Cyrus Company's deposit to our account P2,200,000
Bank service charge 90,000 2,290,000
Adjusted book balance P 7,320,000

Bank balance P11,260,000
Add: Error on check no. 175 90,000
Total P11,350,000
Less: Preauthorized payments for water bills P 410,000
NSF check 440,000
Outstanding check 3,300,000 4,150,000
Adjusted bank balance P 7,200,000


Check No. 175 was made for the proper amount of P498,000 I payment of account.
However it was entered in the cash payments journal as P588,000. The entity authorized
the bank to automatically pay its water bills as submitted directly to the bank. What is the
adjusted cash in bank on March 31?

A. P7,320,000
B. P7,200,000
C. P7,260,000
D. P5,760,000

Solution:

Book balance P2,810,000
Collection of note 5,000,000
Interest on note 300,000
Book error on Check No. 175 90,000
Bank service charge (90,000)
Water bills (410,000)
NSF check (440,000)
Adjusted book balance P7,260,000

Problem 11

Cassandra Company prepared the following bank reconciliation on December 31,2013:

Balance per bank statement P5,600,000
Add: Deposit in transit P390,000
Checkbook printing charge 10,000
Error made by Divine in recording check no.
45 (issued in December) 70,000
NSF check 220,000 690,000
Total P4,910,000
Less: Outstanding check P200,000
Note collected by bank (includes P30,000
interest) 430,000 630,000
Balance per book P5,660,000



The entity had P400,000 cash on hand on December 31,2013. What amount should be
reported as cash in the statement of financial position on December 31,2013?

A. P5,860,000
B. 6,190,000
C. 5,790,000
D. 6,260,000

Solution:
Balance per bank P5,600,000
Deposit in transit 390,000
Outstanding check (200,000)
Adjusted cash in bank 5,790,000
Cash on hand 400,000
Total cash P6,190,000

Problem 12

Pearl Company keeps all cash in a checking account. An examination of the entity’s
accounting records and the bank statement for the month ended December 31,2013
revealed a bank statement balance of P8,469,000 and a book balance of P8,524,000.

A deposit of P950,000 placed in the bank’s night depository on December 29 does not
appear on the bank statement. Checks outstanding on December 31 amount to P270,000.

The bank statement shows that on December 25, the bank collected a note for Pearl
Company and credited the proceeds of P935,000 to the entity’s account. The proceeds
included P35,000 interest, all of which Pearl Company earned during the current period.
Pearl Company has not yet recorded the said collection.

Pearl Company discovered the check number 1000759 written in December for P183,000 in
payment of an account had been recorded in the entity’s records as P138,000.

Included with the December 31 bank statement was an NSF check for P250,000 that Pearl
Company had received from Ana Company on December 20. Pearl Company has not yet
recorded the returned check. The bank statement shows a P15,000 service charge for
December.

What is the journal entry to adjust the cash in bank on December 31, 2013?

A. Net debit to cash in bank of P625,000
B. Net credit to cash in bank of P625,000
C. Debit to cash in bank of P935,000
D. Credit to cash in bank of P310,000

Solution:

Book balance P8,524,000

Add: Note collected 935,000
Total P9,459,000
Less: Book error (183,000-138,000) (45,000)
NSF check (250,000)
Service charge (15,000)
Adjusted book balance P9,149,000

Debit to cash in bank P935,000
Credit to cash in bank 310,000
Net debit to cash in bank P625,000

Problem 13

While checking the cash of Pearl Company on December 31, 2013, the following information
is discovered:

Balance per book P6,776,000

Balance per bank statement (outstanding checks of P987,000) 6,532,000
Deposit in bank closed by BSP 1,600,000
Deposit in transit 1,234,000
Currency and coins counted 950,000
Petty cash fund (of which P10,000 is in the form of paid 50,000
vouchers)
Bank charges not yet taken up in the book 6,000
Bond sinking fund 1,000,000
Receivables from employees 70,000
Error in recording a check in the book. The correct amount as
paid by the bank is P89,000 instead of P98,000 as recorded in
the book, or a difference of 9,000

What is the adjusted cash in bank on December 31, 2013?

A. P6,535,000
B. P6,779,000
C. P7,769,000
D. P8,379,000

Solution:

Balance per book P6,776,000

Bank charges (6,000)
Book error in recording bank 9,000
Adjusted cash in bank P6,779,000

Problem 10-14 (IAA)

Pearl Company provided the following data for the month of January of the current year:

Balance per book, January 31 P3,130,000

Balance per bank statement, January 31 3,500,000
Collections on January 31 but undeposited 550,000
NSF check received from a customer returned by the bank on
February 5 with the January bank statement 50,000
Checks outstanding on January 31 650,000
Bank debit memo for safety deposit box rental not recorded by 5,000
depositor
A creditor’s check for P30,000 was incorrectly recorded in the
depositor’s book as 300,000
A customer’s check for P200,000 was recorded by the depositor as 20,000
The depositor neglected to make an entry in its book far a check
drawn in payment of an account payable 125,000

What is the adjusted cash in bank on January 31?
A. P3,130,000
B. P3,500,000
C. P3,400,000
D. P2,950,000

Solution:

Balance per book P3,130,000

Overstatement of customer’s check 270,000
Understatement of customer’s check 180,000
NSF check (50,000)
Bank debit memo for safety deposit box (5,000)
Unrecorded check (125,000)
Adjusted book balance P3,400,000

Balance per bank P3,500,000
Undeposited collections 550,000
Checks outstanding (650,000)
Adjusted bank balance P3,400,000











PROBLEM 15

Westcott Company’s month-end bank statement showed a balance of P3,600,000.
Outstanding checks amounted to P1,200,000, a deposit of P400,000 was in transit at month-
end, and a check for P50,000 was erroneously charged by the bank against the account.
What is the correct balance in the bank account at month-end?

A. P2,750,000
B. P2,850,000
C. P2,050,000
D. P4,350,000

Solution:

Adjusted bank balance
(P3,600,000 – P1,200,000 + P400,000 + P50,000) P2,850,000


Problem 16

The cash account of Sushi Company showed a balance of P4,500,000. The bank statement
did not include a deposit of P230,000 made on the last day of the month. The bank
statement showed a collection by the bank of P94,000 and a customer’s check for P45,000
was recorded on the books as P54,000, and a check written for P79,000 was recorded as
P97,000. What is the correct balance in the cash account?

A. P4,765,000
B. P4,819,000
C. P4,571,000
D. P4,801,000

SOLUTION:

Balance per book P 4,500,000
Collection by the bank 94,000
NSF check (32,000)
Book error – customer’s check (9,000)
Book error – check written 18,000
Adjusted book balance P4,571,000

The deposit in transit of P230,000 is a bank reconciling item.

Problem 17
The cash account in the ledger of Katsa Company shows a balance, of P1,652,000 at
December 31. The bank statement, however, shows a balance of P2,090,000 at the same
date. The onlyreconciling items consist of a bank service charge of P2,000, a large number of
outstanding checks totaling P590,000 and a deposit in transit.

How much is the deposit in transit in the December 31 bank reconciliation?

A. P592,000
B. P440,000
C. P154,000
D. P150,000

SOLUTION:

Balance per book P1,652,000
Service charge (2,000)
Adjusted book balance P1,650,000

Balance per bank P2,090,000
Deposit in transit (SQUEEZE) 150,000
Total P 2,240,000
Outstanding checks (590,000)
Adjusted bank balance P1,650,000

The deposit in transit is “squeeze” by working back from the adjusted balance.