The following is information for the Donut Holes Cafe: a. Balance per the bank statement dated December


The following is information for the Donut Holes Cafe:

a. Balance per the bank statement dated December 31, 2020, is $50,860.

b. Balance of Cash account on the company books as of December 31, 2020, is $57,285.

c. A cheque from customer Della Armstrong for $7,860 that had been deposited in the bank was erroneously recorded by the bookkeeper as $8,760.

d. A cheque made out by Neon Company for $10,140 deposited on December 21 is returned by the bank marked NSF; no entry has been made on the company records to reflect the returned cheque.

e. Among the cancelled cheques is one for $692 given in payment of an account payable to CT Financial; the bookkeeper had incorrectly recorded the cheque at $962 in the company records.

f. Bank service charges for December amount to $35.

g. The bank erroneously charged the Donut Holes Cafe account for a $5,000 cheque of HRD Company; the cheque was found among the cancelled cheques returned with the bank statement.

h. The bank had collected a $14,150 electronic fund transfer for a customer payment; $14,150 was credited to the Donut Holes Cafe’s bank account; a collection fee of $50 was debited to the Donut Holes Cafe’s bank account.

i. The bank deposit of December 31 for $6,860 does not appear on the bank statement.

j. Outstanding cheques as of December 31: #197, $920; #199, $1,220.


1. Prepare a bank reconciliation as of December 31, 2020.

2. Prepare the necessary entries to make the Cash account agree with the bank reconciliation adjusted Cash balance as of December 31.

Analysis Component: Identify the effects on the income statement and balance sheet if the adjustments in Part 2 were not recorded.

Balance Sheet
Balance sheet is a statement of the financial position of a business that list all the assets, liabilities, and owner’s equity and shareholder’s equity at a particular point of time. A balance sheet is also called as a “statement of financial...
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Fundamental Accounting Principles Volume I

ISBN: 978-1260305821

16th Canadian edition

Authors: Kermit Larson, Tilly Jensen, Heidi Dieckmann

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