Easton Co.deposits all cash receipts on the day they are received and makes all cash payments by check.At the close of business on June 30,its Cash account shows a debit balance of $60,209.Easton's June bank statement shows $58,349 on deposit in the bank.Determine the adjusted cash balance using the following information: The adjusted cash balance should be:

Question

Easton Co.deposits all cash receipts on the day they are received and makes all cash payments by check.At the close of business on June 30,its Cash account shows a debit balance of $60,209.Easton's June bank statement shows $58,349 on deposit in the bank.Determine the adjusted cash balance using the following information:  The adjusted cash balance should be:

Quizplus · Accepted Answer

We start with the Cash account balance of $60,209 and add/subtract the following items:

Add:
- Deposit in transit (not yet on June bank statement): $1,421
- Check outstanding (issued in June but not yet cashed by recipient): $563
Adjusted balance (before comparing to bank statement): $62,193 ($60,209 + $1,421 - $563)

Then we compare this adjusted balance to the amount on the June bank statement ($58,349):
- If adjusted balance is higher, we need to subtract any bank errors or fees and add any interest earned.
- If adjusted balance is lower, we need to add any bank errors or fees and subtract any interest earned.

In this case, adjusted balance ($62,193) is higher than bank statement ($58,349). We assume that there are no bank errors or fees, and the bank statement indicates that interest earned in June was $20. We add this interest earned to our adjusted balance:
Adjusted balance (after comparing to bank statement): $62,213 ($62,193 + $20)

Therefore, the adjusted cash balance is $60,224 ($62,213 - $1,989 NSF check). The correct answer is E.

Easton CoDeposits All Cash Receipts on the Day They Are Received