ExpertHard1 markMultiple Choice
CPA · Question 45 · Area II: Balance Sheet Accounts
Thunder Corp. has the following information for its bank reconciliation at month-end:<br/>- Balance per bank statement: $45,200<br/>- Outstanding checks: $8,300<br/>- Deposits in transit: $3,700<br/>- Bank service charges: $150<br/>- NSF check from customer: $1,200<br/>- Interest earned on account: $75<br/><br/>What is the correct cash balance that should appear on Thunder's balance sheet?
Thunder Corp. has the following information for its bank reconciliation at month-end:<br/>- Balance per bank statement: $45,200<br/>- Outstanding checks: $8,300<br/>- Deposits in transit: $3,700<br/>- Bank service charges: $150<br/>- NSF check from customer: $1,200<br/>- Interest earned on account: $75<br/><br/>What is the correct cash balance that should appear on Thunder's balance sheet?
Answer options:
A.
$40,600
B.
$39,525
C.
$39,325
D.
$41,725
How to approach this question
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).
Full Answer
C.$39,325✓ Correct
$39,325
Bank reconciliation adjusts both bank and book balances to the true cash balance. Adjusted bank balance = $45,200 - $8,300 + $3,700 = $40,600. Book adjustments for items not yet recorded: $40,600 - $150 - $1,200 + $75 = $39,325. This is the correct balance sheet amount.
Common mistakes
Not adjusting for all book items, confusing which items adjust bank vs. book balance, or calculation errors
Practice the full CPA FAR Practice Exam 2
50 questions · hints · full answers · grading
More questions from this exam
Q01Madison Inc. reported the following for Year 1:<br/>- Net income: $200,000<br/>- Depreciation exp...HardQ02Apex Corp. owns a manufacturing facility with the following data at year-end:<br/>- Net carrying ...HardQ03On January 1, Year 1, Corbin Co. enters a 5-year lease for equipment. Annual lease payments of $1...HardQ04Riverview City received a $300,000 grant from the state government restricted exclusively for roa...HardQ05Summit Corp. has the following book-to-tax differences at December 31, Year 1 (enacted tax rate: ...Hard