P7-14 _ El Gato Painting Company_Bank Reconciliation

P7-14  _ El Gato Painting Company

Adjust the problem with the figure / replace the below amount with this item:  Balance per bank 7847 & Balance per books 8418

El Gato Painting Company maintains a checking account at American Bank. Bank statements are prepared at the end of each month. The November 30, 2011, reconciliation of the bank balance is as follows:

Balance per bank, November 30                                                                                               $3,231

Add: Deposits outstanding                                                                                          1,200

Less: Checks outstanding

                #363                                                                                      $123

                #365                                                                                      201

                #380                                                                                      56

                #381                                                                                      86

                #382                                                                                      340                           (806)

Adjusted balance per bank, November                                                                 $3,625

The company’s general ledger checking account showed the following for December:

                Balance, December 1                                                        $3,625

                Receipts                                                                                 42,650

                Disbursements                                                                 (41,853)

                Balance, December 31                                                   $ 4,422

The December  bank statement contained the following information:

                Balance, December 1                                                     $ 3,231

                Deposits                                                                              43,000

                Checks processed                                                            (41,918)

                Service charges                                                                       (22)

                NSF checks                                                                              (440)

                Balance, December 31                                                       $3,851

The checks that were processed by the bank in December include all of the outstanding checks at the end of November except for check #365. In addition, there are some December checks that had not been processed by the bank by the end of the month. Also, you discovered that check # 411 for $320 was correctly recorded by the bank but was incorrectly recorded on the books as a $230 disbursement for advertising expense. Included in the bank’s deposit is a $1,300 deposit incorrectly credited to the company’s account.  The deposit should have been posted to the credit of the Los Gatos Company. The NSF checks have not been re-deposited and the company will seek payment from the customers involved.

Review the information pertaining to El Gato Painting Company and prepare the following:

1. Prepare a bank reconciliation for the El Gato checking account at December 31, 2011.
2. Prepare any necessary adjusting journal entries indicated.