The cash account for American Trumpet, Inc. showed a ledger balance of $5,234.99 on October 31, 2016. The bank statement as of that date showed a balance of $4,399.89. Upon comparing the bank statement with the cash records of the company, the following items were noted:
The bank charged the company $185.00 for printing a new batch of checks. The company was not aware of the charge until the bank statement was received. In addition, the bank statement revealed the normal monthly processing charge of $42.50.
At October 1, 2016, there were deposits in transit of $1,234.75. At the end of the month, the deposits in transit amounted to $1,867.50.
At October 1, 2016, the checks outstanding totaled $867.42. At the end of the month, the checks outstanding totaled $789.90.
A check that American Trumpet, Inc. received from one of its customers on October 27, 2016 in the amount of $275.00 bounced. On the October bank statement the insufficient funds check was charged.
The bank collected a note receivable from one of American Trumpet, Inc.'s customers on October 31, 2016 in the amount of $1,000. Interest of $35 was also collected but the bank charged a special collection fee of $100 to process the transaction.
American Trumpet, Inc.'s check #4907 which cleared the bank during October, was entered in the cash records for $567.00, but the check was actually written for $657.00.
A check received from one of American Trumpet, Inc.'s customers was entered in the cash records for $237.00 when in fact the check was prepared in the amount of $137.00.
Required:
Prepare a bank reconciliation dated October 31, 2016, proceeding to a correct balance.
Prepare the journal entries necessary to adjust the book balance to the correct balance.