The cash receipts and the cash payments of Ace Hardware for January 2017 are as follows:

The Cash account of Ace Hardware shows a balance of $39,478 at January 31, 2017.
Ace Hardware received the following bank statement on January 31, 2017:

Additional data for the bank reconciliation:
a. The EFT deposit was a receipt of monthly rent. The EFT debit was payment of monthly insurance.
b. The NSF cheque was received from A. Levine.
c. The $12,744 bank collection of a note receivable on January 22 included $200 interest revenue.
d. The correct amount of cheque #313, a payment on account, is $12,436. (Ace Hardware's accountant mistakenly recorded the cheque for $12,562.)
Required
1. Prepare the Ace Hardware bank reconciliation at January 31, 2017.
2. Describe how a bank account and the bank reconciliation help Ace Hardware's owner control the business's cash.
3. How would you handle items that were outstanding (bank side) from the previous month's bank reconciliation?

Transcribed Image Text:

Cash Receipts (Posting Reference is CR) Cash Payments (Posting Reference is CP) Date Cash Debit $20,988 1,480 1,980 7,788 20,736 2,404 1,428 $56,804 Cheque No 311 312 313 314 315 316 317 318 319 320 Total Cash Credit $3,672 1,668 12,562 2,584 8,588 3,900 1,304 6,268 800 12,664 $54,010 an. 10 16 29 31 Total Bank Statement for January 2017 Withdrawals Deposits Description Balance Forward EFT Dividend Collection Deposit Chq#00311 Deposit Deposit Chq#00313 NSF Cheque Chq#00312 Deposit Chq#00314 EFT Insurance Bank Collection Deposit Chq#00315 Chq#00316 Service Charge Date Jan01 Jan01 Jan04 Jan07 Jan09 Jan12 Jan13 Jan14 Jan15 Jan17 Jan18 Jan21 Jan22 20,736 Jan23 Jan26 Jan30 Jan31 Balance 36,684 37,736 58,724 55,052 56,532 58,512 46,076 42,620 40,952 48,740 46,156 44,840 57,584 78,320 69,732 65,832 65,792 1,052 20,988 3,672 1,480 1,980 12,436 3,456 1,668 7,788 2,584 1,316 12,744 8,588 3,900 40 37,660 66,768