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You have been hired by Algiers Manufacturing Company as an internal auditor.

You have been hired by Algiers Manufacturing Company as an internal auditor. One of your first assignments is to reconcile the bank account for the Dresden Division.

The bank statement shows the following:

Beginning Balance, August 1 $ 90,425
Deposits-(20) 915,176
Checks-(64) plus debit memos ( 851,715 )
Service charges- new checks ( 44 )
Ending Balance, August 31 $ 153,842
The cash account on the books of the Dresden Division is as follows:


Cash

July 1 64,192 July 31-Cash Disbursement 665,441
July 31-Cash Receipts 682,429 August 1-Bank Reconciliation 375
August 31-Cash Receipts 919,872 August 31-Cash Disbursement 856,446
Your review of last month's bank reconciliation and the current bank statement reveals the following:

Outstanding checks
July 31 $26,042
August 31 33,561
Deposits in transit
July 31 16,422
August 31 21,118
Check #216 for office furniture was written for $695 but recorded in the cash disbursements journal as $965. The bank deducted the check as $695.
A check written on the account of Algiers Manufacturing Co. for $583 was deducted by the bank from the Dresden Division account.
Included with the bank statement was a debit memorandum dated August 31 for $2,475 for interest on a note taken out by the Dresden Division on July 30.
The service charge for new checks has not been recorded.
The July 31 bank reconciliation (prior month) showed as reconciling items a service charge of $26 and an NSF check for $349.
Instructions

Prepare a four-column "proof of cash" reconciling the "balance per bank" to the "balance per book."
Prepare a four-column "proof of cash" reconciling "balance per bank" to the "correct balance" and "balance per books" to the "correct balance."
Prepare any adjusting journal entries necessary to correct the cash account per the books of the Dresden Division

This question was asked on Jan 02, 2013.

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