Question 1

At year-end, a company has a bank balance of $25,000. The following information is available:
- Deposits in transit: $2,000
- Outstanding checks: $4,500
- Bank service charge not recorded: $100
- NSF check from customer returned by bank: $400

What is the correct adjusted cash balance?

Accepted Answer

Start with Bank Balance. Add Deposits in Transit. Subtract Outstanding Checks. (Book errors/adjustments like NSF and Service Charges affect the BOOK balance to match this adjusted bank balance, but aren't needed if you start with Bank Balance and have the transit/outstanding data).

Question 2

What mistakes do candidates make on this CPA question?

Accepted Answer

Adjusting the bank balance for items the bank has already recorded (NSF, Service Charge).

How to approach this question

Full Answer

Common mistakes

Practice the full CPA FAR Practice Exam 5

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