Record the necessary cash adjustments

Reference no: EM131520160

Question: Oscar's Red Carpet Store maintains a checking account with Academy Bank. Oscar's sells carpet each day but makes bank deposits only once per week. The following provides information from the company's cash ledger for the month ending February 28, 2012.

Information from February's bank statement and company records reveals the following additional information:

a. The ending cash balance recorded in the bank statement is $10,350.

b. Cash receipts of $1,100 from 2/26-2/28 are outstanding.

c. Checks 325 and 327 are outstanding.

d. The deposit on 2/11 includes a customer's check for $300 that did not clear the bank (NSF check).

e. Check 323 was written for $2,800 for advertising in February. The bank properly recorded the check for this amount.

f. An automatic withdrawal for Oscar's February rent was made on February 4 for $1,200.

g. Oscar's checking account earns interest based on the average daily balance. The
amount of interest earned for February is $150.

h. In January, one of Oscar's suppliers, Titanic Fabrics, borrowed $5,000 from Oscar. On February 24, Titanic paid $5,200 ($5,000 borrowed amount plus $200 interest) directly to Academy Bank in payment for January's borrowing.

i. Academy Bank charged the following service fees to Oscar's: $50 for NSF check, $10 for automatic withdrawal for rent payment, and $40 for collection of the loan amount from Titanic.

Required: 1. Prepare a bank reconciliation for Oscar's checking account on February 28, 2012.

2. Record the necessary cash adjustments.

Reference no: EM131520160

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