ExpertMedium1 markMultiple Choice
CPA · Question 16 · Area II: Balance Sheet Accounts
At year-end, a company has a bank balance of $25,000. The following information is available:<br/>- Deposits in transit: $2,000<br/>- Outstanding checks: $4,500<br/>- Bank service charge not recorded: $100<br/>- NSF check from customer returned by bank: $400<br/><br/>What is the correct adjusted cash balance?
At year-end, a company has a bank balance of $25,000. The following information is available:<br/>- Deposits in transit: $2,000<br/>- Outstanding checks: $4,500<br/>- Bank service charge not recorded: $100<br/>- NSF check from customer returned by bank: $400<br/><br/>What is the correct adjusted cash balance?
Answer options:
A.
$22,000
B.
$22,900
C.
$22,500
D.
$23,000
How to approach this question
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).
Full Answer
C.$22,500✓ Correct
Adjusted Balance = Unadjusted Bank Balance + Deposits in Transit - Outstanding Checks.<br/>$25,000 + $2,000 - $4,500 = $22,500.<br/>The NSF check and service charge are already reflected in the bank balance.
Common mistakes
Adjusting the bank balance for items the bank has already recorded (NSF, Service Charge).
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