ExpertHard1 markMultiple Choice
CPA · Question 18 · Area II: Balance Sheet Accounts
Zeta Corp.'s book balance for cash at October 31 is $25,000. The following data is available for the bank reconciliation:<br/>- Outstanding checks: $4,000<br/>- Deposits in transit: $3,000<br/>- Bank service charges recorded by bank but not company: $100<br/>- NSF check returned by bank, not recorded by company: $500<br/>- Check for $200 paid to vendor recorded by company as $2,000 error.<br/><br/>What is the adjusted cash balance to be reported on the balance sheet?
Zeta Corp.'s book balance for cash at October 31 is $25,000. The following data is available for the bank reconciliation:<br/>- Outstanding checks: $4,000<br/>- Deposits in transit: $3,000<br/>- Bank service charges recorded by bank but not company: $100<br/>- NSF check returned by bank, not recorded by company: $500<br/>- Check for $200 paid to vendor recorded by company as $2,000 error.<br/><br/>What is the adjusted cash balance to be reported on the balance sheet?
Answer options:
A.
$24,000
B.
$25,200
C.
$26,200
D.
$24,400
How to approach this question
Start with Book Balance. Adjust for items the company doesn't know about or recorded wrong: - Service Charges, - NSF Checks, +/- Errors. (Bank side items like outstanding checks/deposits in transit are used to reconcile to Bank Balance, but we start with Book here).
Full Answer
C.$26,200✓ Correct
C
Unadjusted Book Balance: $25,000<br/>- Service Charge: ($100)<br/>- NSF Check: ($500)<br/>+ Error Correction: $1,800 (Recorded $2,000, should be $200. Add back difference)<br/>Adjusted Book Balance: $26,200.<br/>(Note: Outstanding checks and deposits in transit adjust the Bank Balance, not the Book Balance).
Common mistakes
Adjusting book balance for bank-side items (outstanding checks); correcting the error in the wrong direction.
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