Question

On October 31, 2015, the bank statement shows that your company has $12,956.73 in its checking account. You are aware of three outstanding checks for a total of $2,112.19. During October, 2015, the bank rejected two deposited checks from customers totaling $654.19 because of insufficient funds and charged you $12.00 in service fees. You had not yet received notice about the bad checks, but you were aware of and have recorded the $12.00 of service fees. Prior to adjustment on October 31, 2015, your Cash account would have a balance of:

A. $14,402.73.
B. $15,711.11.
C. $11,498.73.
D. $10,202.35.

Answer 1

Answer:

C. $11,498.73.

Explanation:

Solving this question, we will have to make use of this formula:

The Adjusted Bank Balance = Unadjusted Balance as per Bank Statement as at Oct 31, 2015 - Checks Outstanding

= $12,956.73 - $2,112.19 = $10,844.54

Now,

Before the adjustment on the 31st of October, 2015,

The Cash account Balance = Adjusted Bank Balance + insufficient funds checks

= $10,844.54 - $654.19 = $11,498.73

Hence third option in the question is the correct answer.

Answer 2

Answer:

$11,498.73

Explanation:

Deduct $2,112.19 outstanding checks from the bank statements balance of $12,956.73 and add $654.19 rejected checks.

Balance as per bank statement: $12,956.73

Less outstanding check: ($2,112.19)

Add Rejected checks: $654.19

Balance as per cash book: $11,498.73

**Note that $12.00 is ignored due to the fact that it had been recorded prior to adjustments and already included in the cashbook