Shown below is the information needed to prepare a bank reconciliation for Warren Electric at December 31: 

1. At December 31, cash per the bank statement was $ 15,200; cash per the company’s records was $ 17,500.

2. Two debit memoranda accompanied the bank statement: service charges for December of $ 25, and a $ 775 check drawn by Jane Jones marked “ NSF.”

3. Cash receipts of $ 10,000 on December 31 were not deposited until January 4. 

4. The following checks had been issued in December but were not included among the paid checks returned by the bank: no. 620 for $ 1,000, no. 630 for $ 3,000, and no. 641 for $ 4,500. 

a. Prepare a bank reconciliation at December 31.

b. Prepare the necessary journal entry or entries to update the accounting records.

c. Assume that the company normally is not required to pay a bank service charge if it maintains a minimum average daily balance of $ 1,000 throughout the month. If the company’s average daily balance for December had been $ 8,000, why did it have to pay a $ 25 service charge?