The following information is available for Prime Company as of April 30, 2011: a. Cash on the

Question:

The following information is available for Prime Company as of April 30, 2011:

a. Cash on the books as of April 30 amounted to $113,175.28. Cash on the bank statement for the same date was $140,717.08.

b. A deposit of $14,349.84, representing cash receipts of April 30, did not appear on the bank statement.

c. Outstanding checks totaled $7,302.64.

d. A check for $2,420.00 returned with the statement was recorded as $2,024.00. The check was for advertising.

e. The bank service charge for April amounted to $35.00.

f. The bank collected $36,300.00 for Prime Company on a note. The face value of the note was $36,000.00

g. An NSF check for $1,140.00 from a customer, Tom Jones, was returned with the statement.

h. The bank mistakenly deducted a check for $700.00 that was drawn by Tiger Corporation.

i. The bank reported a credit of $560.00 for interest on the average balance.

Required

1. Prepare a bank reconciliation for Prime Company as of April 30, 2011.

2. Prepare the necessary entries in journal form from the reconciliation.

3. State the amount of cash that should appear on Prime Company’s balance sheet as of April 30.

4. Why is a bank reconciliation a necessary internal control?

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