Bank reconciliation and adjusting entries; cash and cash equivalents; financial statement effects:
The bank statement for the checking account of Management Systems Incorporated MSI showed a December balance of $ Information that might be useful in preparing a bank reconciliation is as follows:
Outstanding checks were $
The December cash receipts of $ were not deposited in the bank until January
One check written in payment of rent for $ was correctly recorded by the bank but was recorded by MSI as a $ disbursement.
In accordance with prior authorization, the bank withdrew $ directly from the checking account as payment on a note payable. The interest portion of that payment was $ MSI has made no entry to record the automatic payment.
Bank service charges of $ were listed on the bank statement.
A deposit of $ was recorded by the bank on December but it did not belong to MSI. The deposit should have been made to the checking account of MIS, Incorporated.
The bank statement included a charge of $ for an NSF check. The check was returned with the bank statement and the company will seek payment from the customer.
MSI maintains a $ petty cash fund that was appropriately reimbursed at the end of December.
According to instructions from MSI on December the bank withdrew $ from the account and purchased US Treasury bills for MSI. MSI recorded the transaction in its books on December when it received notice from the bank. Half of the Treasury bills mature in two months and the other half in six months.
Required:
Prepare a bank reconciliation for the MSI checking account at December You will have to compute the balance per books.
Prepare any necessary adjusting journal entries indicated. Use the miscellaneous expense account to record the bank service charges.
What amount would MSI report as cash and cash equivalents in the December balance sheet?
