The following information is available for Sedona, Inc., as of May 31, 2014:
Cashon the books as of May 31 amounted to $42,754.16. Cash on the bank statement for the same date was $52,351.46.
A deposit of $5,220.94, representing cash receipts of May 31, did not appear on the bank statement.
Outstanding checks totaled $3,936.80.
A check for $1,920.00 returned with the statement was recorded incorrectly in the check register as $1,380.00. The check was for a cash purchase of merchandise.
The bank service charge for May amounted to $25.
The bank collected $12,360.00 for Sedona, on a note. The face value of the note was $12,000.00.
An NSF check for $183.56 from a customer, Eva Mendez, was returned with the statement.
The bank mistakenly charged to the company account a check for $850.00 drawn by another company.
The bank reported that it had credited the account for $120.00 inintereston the average balance for May.
1. Prepare a bank reconciliation for Sedona as of May 31, 2014. Round all amounts to the nearest cent.
2. Prepare the journal entries necessary to adjust the accounts. List all the accounts in the order presented in the bank reconciliation above. For compound entries, if an amount box does not require an entry, leave it blank.
3. What amount of cash should appear on Sedona's balance sheet as of May 31?
4. Why is a bank reconciliation considered an important control over cash?