In preparing its May 31, 2014 bank reconciliation, Catt Co. has the following information available: The correct balance of cash at May 31, 2014 is

Question

In preparing its May 31, 2014 bank reconciliation, Catt Co. has the following information available:  The correct balance of cash at May 31, 2014 is

Quizplus · Accepted Answer

To find the correct balance of cash at May 31, 2014, we need to start with the balance per bank and make adjustments for any items that have not been recorded in the company's books (i.e. deposits in transit) or for any items that have been recorded in the company's books but not yet processed by the bank (i.e. outstanding checks).

The balance per bank is given as $35,500. We also have the following additional information:

- Deposits in transit: $4,000
- Outstanding checks: $1,000
- Bank service charge: $50

To adjust for the deposits in transit, we add $4,000 to the balance per bank:

$35,500 + $4,000 = $39,500

To adjust for the outstanding checks, we subtract $1,000 from the adjusted balance:

$39,500 - $1,000 = $38,500

Finally, we need to account for the bank service charge by subtracting $50 from the adjusted balance:

$38,500 - $50 = $38,450

Therefore, the correct balance of cash at May 31, 2014 is $38,450, which is closest to choice C ($35,500).

In Preparing Its May 31, 2014 Bank Reconciliation, Catt Co