Chapter 3 Problem 3-3

a. Reconciliation on July 1

Adjusted book balance 1,270,000

Balance per bank 1,720,000

Add: Deposit in transit 500,000
Total 2,220,000
Less: Outstanding checks 950,000
Adjusted bank balance 1, 270,000

Reconciliation on July 31

Balance per book 470,000

Add: Note collected by bank 1,500,000
Total 1, 970,000
Less: Bank service charge 20,000
Adjusted book balance 1,950,000

Balance per bank 2,700,000

Add: Deposit in transit 400,000
Total 3,100,000
Less: Outstanding check no. 107 650,000
108 500,000 1,150,000
Adjusted bank balance 1, 950,000

b. Adjusting entries
1. Cash 1,500,000
Note receivable 1,500,000

2. Bank service charge 20,000

Cash 20,000
Deposit in transit – July 1 500,000 (SQUEEZE)
Add: Cash receipts per book 3,400,000
Total 3,900,000
Less: Deposits credited by bank 3,500,000
Deposit in transit – July 31 400,000

Outstanding check – July 1 950,000 (SQUEEZE)

Add: Cash drawn by depositor 4,200,000
Total 5,150,000
Less: Checks paid by bank 4,000,000
Outstanding checks – July 31 1,150,000