Macrinez Company assembled the following information in completing its July bank reconciliation: balance per bank $22,920; outstanding checks $4,650; deposits in transit $7,500; NSF check $480; bank service charge $150; cash balance per books $26,400.As a result of this reconciliation, Macrinez will

Question

Quizplus · Accepted Answer

To reconcile the bank statement and the company's records, outstanding checks and deposits in transit are added or subtracted from the bank's balance and the company's balance. In this case, $4,650 in outstanding checks are subtracted from the bank's balance of $22,920, and $7,500 in deposits in transit are added to the bank's balance. This results in an adjusted bank balance of $25,770 ($22,920 - $4,650 + $7,500).

Next, any adjustments to the company's records are made. The NSF check of $480 reduces the company's cash balance, and the bank service charge of $150 reduces the company's cash balance as well. Therefore, the adjusted book balance is $25,770 - $480 - $150 = $25,140.

The book balance of $26,400 is higher than the adjusted book balance of $25,140. This means that there is an overstatement of $1,260 in the company's records. The overstatement is due to a deposit made by the company that was not recorded by the bank. Therefore, the cash account must be reduced by $1,260 to reconcile the bank statement and the company's records.

The bank service charge of $150 is already accounted for in the adjustments made to the company's records, and therefore does not need to be separately recorded. The correct answer is B, reduce its cash account by $630 (which is $1,260 divided by 2, since the error is due to a deposit that was not recorded by the bank).

Macrinez Company Assembled the Following Information in Completing Its July