|Posted: 21 Nov 2009 at 21:39 | IP Logged
Hi, this is question from AICPA released questions. Can anybody please clarify why we donít net two balances to find amount of cash on the B/S? Thank you!
Smith Co. has a checking account at Small Bank and an interest-bearing savings account at Big Bank.
On December 31, year 1, the bank reconciliations for Smith are as follows:
Bank balance $150,000
Deposit in transit 5,000
Book balance 155,000
Bank balance $1,500
Outstanding checks (8,500)
Book balance (7,000)
What amount should be classified as cash on Smith's balance sheet at December 31, year 1?
I would say it's 148,000..
Choice "c" is correct. The amount that should be classified as cash on Smith's balance sheet is the
$155,000 book balance in the Big Bank account, which can be reconciled to the bank balance as follows:
$155,000 (book balance) = $150,000 + $5,000 (adjusted bank balance)
The $7,000 negative balance (overdraft) in the Small Bank account should be reported
on the balance
sheet as a current liability. Note that the Small Bank balance is reconciled as follows:
$-7,000 (book balance) = $1,500 - $8,500 (adjusted bank balance)
FAR - 81
BEC - 80
AUD - 71, 74, ?
REG - 75
I am getting there!