Question 1

Thunder Corp. has the following information for its bank reconciliation at month-end:
- Balance per bank statement: $45,200
- Outstanding checks: $8,300
- Deposits in transit: $3,700
- Bank service charges: $150
- NSF check from customer: $1,200
- Interest earned on account: $75

What is the correct cash balance that should appear on Thunder's balance sheet?

Accepted Answer

Start with bank balance, adjust for timing differences (outstanding checks and deposits in transit) to get adjusted bank balance. This should equal the book balance after adjusting for bank-initiated items (service charges, NSF checks, interest).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Not adjusting for all book items, confusing which items adjust bank vs. book balance, or calculation errors

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 2

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