The Cash account in the general ledger of Lyco Corporation showed a balance of $21,749 at December 31 (but prior to performing a bank reconciliation). The company’s bank statement showed a balance of $22,000 at the same date. The only reconciling items consisted of: (1) a $5,000 deposit in transit, (2) a bank service charge of $200, (3) outstanding checks totaling $9,000, (4) a $3,000 check marked “NSF” from Susque Company, one of Lyco’s customers, and
(5) a check written for office supplies in the amount of $1,832, recorded by the company’s book-keeper as a debit to Office Supplies of $1,283, and a credit to Cash of $1,283.
In addition to the above information, Lyco owned the following financial assets at December 31: (1) a money market account of $60,000,
(2) $3,000 of high-grade, 120-day commercial paper, and
(3) $5,000 of highly liquid stock investments.
a. Prepare the company’s December 31 bank reconciliation.
b. Determine the amount at which cash and cash equivalents will be reported in the company’s balance sheet dated December 31.
c. Prepare the necessary journal entry to update the accounting records.