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You obtained the following information in connection with the audit of Bonsoir Company cash account
as of December 31, 20x1:
Questions:
1. How much is the deposit in transit on December 31, 20x1? 20,000
2. What is the total unrecorded bank service charges as of December 31, 20x1? 2,250
3. What is the total book receipts in December? 150,000
4. What is the total amount of company checks issued in December? 126,250
5. What is the total book disbursements in December? 128,750
6. What is the book balance on November 30, 20x1? 16,250
7. What is the bank balance on November 30, 20x1? 18,500
8. What is the total bank receipts in December? 145,000
9. What is the total bank disbursements in December? 137,000
10. What is the bank balance on December 31, 20x1? 26,500
Solution:
Bonsoir Company
Proof of Cash
For the month ended December 31, 20x1
Explanations:
1. Outstanding checks, 11/30/20x1, 16,250
These are considered as disbursements for the month of November that's why you subtract 16,250
from the November 30 Bank Balance. Subsequently, you also subtract 16,250 from the bank
disbursements of December because the checks are presumed to be encashed in the bank during
December unless otherwise specified.
These items reflect that the bank service charges recorded on the company books in December
includes the November bank service charge plus an estimate of the December bank service charge.
The following solution reflects the existence of unrecorded bank service charges.
Bank service charges recorded on the company books in December 2,500
November bank service charges recorded on company books in December (1,500)
Bank service charges per December bank statement (3,250)
Unrecorded bank service charge (2,250)
10. The bank erroneously charged the company's account for a 3,750 check of another depositor. This
bank error was corrected in January 20x2.
Since the bank error was corrected the following month, we must correct our December bank
balances to reconcile with our book balances. Hence, we subtract the bank disbursements and add it
back to the December 31 bank balance.