Reference no: EM132804167

As of 12/31 the cash balance in Ellery, Inc.'s books is $75,000. The bank statement, however, showed a balance of $100,000 as of the same date. The only reconciling items were deposits in transit of $15,000, interest earned of $225, a bank service charge of $115 and outstanding checks.

problem 1: In determining the Adjusted Book Balance, the following adjustment is made in regards to the outstanding checks:

Option 1: The value of outstanding checks is subtracted from the balance of Ellery, Inc.'s 12/31 cash balance on its books.

Option 2: The value of outstanding checks is added to the balance of Ellery, Inc.'s 12/31 cash balance on its books.

Option 3: The value of outstanding checks is subtracted from the balance of Ellery, Inc.'s 12/31 cash balance on its bank statement.

Option 4: No adjustment is required.

Option 5: The value of outstanding checks is added to the balance of Ellery, Inc.'s 12/31 cash balance on its bank statement.