5-2 Application Problem: Reconciling a bank statement and recording a bank service charge 104,5 Forms are given in the Working Papers. On April 30 of the current year, Clean Carpets received a bank statement dated April 29. The following information is obtained from the records of the business. 1. Use the required formulas to complete the bank statement and the account reconciliation. 2. Make the selections to print the worksheet. Bank statement balance $1,812.00 Bank service charge 25.00 Outstanding deposit, April 29 805.10 Outstanding checks: 1. No. 475 325.95 2. No. 476 200.00 Checkbook balance on Check Stub No. 477 2,116.15 Instructions: 1. Prepare a bank statement reconciliation. Use April 30 of the current year as the date. 2. Record the service charge on Check Stub No. 477. 3. Record the service charge on journal page by use Memorandum No. 36 as the source document.
The Correct Answer and Explanation is:
✅ Correct Answer:
1. Bank Reconciliation (April 30, Current Year)
Bank Statement Balance (April 29): \$1,812.00
Add: Outstanding Deposit (April 29): +\$805.10
Subtotal: \$2,617.10
Less: Outstanding Checks
- Check No. 475: \$325.95
- Check No. 476: \$200.00
Total Outstanding Checks: -\$525.95
Adjusted Bank Balance:
= \$2,617.10 – \$525.95 = \$2,091.15
Checkbook Balance on Stub No. 477: \$2,116.15
Less: Bank Service Charge: -\$25.00
Adjusted Checkbook Balance:
= \$2,116.15 – \$25.00 = \$2,091.15
✅ Both the adjusted bank balance and checkbook balance match: \$2,091.15
2. Record Service Charge on Check Stub No. 477
- Subtract \$25.00 from the checkbook balance on the check stub.
- New balance after recording service charge: \$2,091.15
3. Journal Entry on Page __ (use Memorandum No. 36)
| Date | Account Title | Debit | Credit | Source Document |
|---|---|---|---|---|
| April 30 | Miscellaneous Expense | \$25.00 | Memo No. 36 | |
| Cash | \$25.00 | Memo No. 36 |
🧾 Explanation (300+ words):
Reconciling a bank statement is a critical accounting task to ensure that the balance in a company’s checkbook matches the bank’s records. Discrepancies between the two can arise due to timing differences, such as outstanding deposits or checks that haven’t cleared, or charges like service fees that the business hasn’t yet recorded.
In this problem, we start with a bank statement balance of \$1,812.00. We know there was a deposit of \$805.10 made on April 29, which has not yet cleared the bank. This is considered an outstanding deposit and must be added to the bank balance to reflect the true available amount. Adding this brings the subtotal to \$2,617.10.
Next, we subtract the two outstanding checks (No. 475 for \$325.95 and No. 476 for \$200.00) which have been recorded in the books but not yet cleared by the bank. These checks total \$525.95, which we subtract from \$2,617.10 to get the adjusted bank balance of \$2,091.15.
On the check stub (No. 477), the business had previously recorded a balance of \$2,116.15. However, the bank charged a \$25.00 service fee which had not yet been recorded in the checkbook. We subtract this fee to bring the checkbook balance also to \$2,091.15, ensuring both balances agree.
Finally, the service charge must be recorded in the accounting journal. Since it is an expense not linked to a specific transaction, it is classified under Miscellaneous Expense. A memorandum (Memo No. 36) is used as the source document for this transaction. The journal entry debits Miscellaneous Expense for \$25.00 and credits Cash for the same amount, reflecting the fee and reducing the cash balance.
This reconciliation ensures that Clean Carpets’ financial records are accurate and up to date.