Xenon, Inc.’s August31 bank statement had an ending cash balance of $2,567. On August 31, Xenon’s general ledger showed a balance of $860. After comparing the general ledger to the bank statement, the following items were noted:
• Outstanding checks, $2,250
• Interest paid by the bank, $12
• An NSF check from one of Xenon’s customers, $32
• Deposits in transit, $1,900
• Service fee charged by the bank, $8
• A direct deposit from a customer, $1,400
• Check #345 was written to Acme Insurance; the amount of the check was $615. It was recorded in the general ledger for $600.
(a) Prepare a bank reconciliation for Xenon, Inc.
(b) Make the required journal entries associated with the bank reconciliation.
(c) Discuss the beneﬁts and drawbacks of maintaining a checking account at a ﬁnancial institution rather than paying all bills in cash.