Computing Outstanding Checks and Deposits in Transit and Preparing a Bank Reconciliation and Journal Entries
The August 2011 bank statement for Allison Company and the August 2011 ledger account for cash follow:

Outstanding checks at the end of July were for $270, $430, and $320. No deposits were in transit at the end of July.
Required:
1. Compute the deposits in transit at the end of August by comparing the deposits on the bank statement to the deposits listed on the cash ledger account.
2. Compute the outstanding checks at the end of August by comparing the checks listed on the bank statement with those on the cash ledger account and the list of outstanding checks at the end of July.
3. Prepare a bank reconciliation for August.
4. Give any journal entries that the company should make as a result of the bank reconciliation. Why are they necessary?
5. What total amount of cash should be reported on the August 31, 2011, balancesheet?

BANK STATEMENT Date Checks Deposits Balance Aug. 1 $17,510 $ 320 17,190 28,890 28,460 28,190 27,310 $11,700 3 4 430 270 880 10 250 27.060 15 4,000 31,060 30,710 10,310 16.810 21 350 20,400 24 25 6,500 30 850 15,960 18,310 30 2,350* 120* 31 18.190 *$2,350 interest collected. *Bank service charge. Cash (A) Aug. 1 Balance Deposits Aug. 2 12 24 31 16,490 Checks written Aug. 2 250 11,700 4,000 6,500 5,200 088 15 17 18 20 23 280 510 850 350 20,400