The balance in the Colt Company's Cash account on August 31 was $19,700, before the bank reconciliation was prepared. After examining the August bank statement and items included with it, the company's accountant found:

Checks outstanding$4,300Check from customer returned NSF140Note collected by bank for the Colt Company1,200Deposits outstanding1,800Bank service fees60

What is the amount of cash that should be reported in the balance sheet as of August 31?

rev: 02_28_2019_QC_CS-161029

A)$22,200.
B)$20,700.
C)$17,200.
D)$18,700.

The amount of cash that should be reported in the balance sheet is $20700

Explanation:

We need to calculate the adjusted cash balance after taking into account the components of bank statement.

The adjusting cash balance is:

Cash balance as per Cash account     19700

(+)Notes collected by bank                     1200

(-) NSF                                                        (140)

(-) Bank service fees                                  (60)

Adjusted cash balance                           20700

The notes collected by bank are direct deposit into the bank account which are not recorded in the company's cash account. So, they should be added to the cash account balance.

The NSF amount is the amount that has been debited in the cash account of the company when check is received from the customer and deposited into the bank. The check has been deemed as NSF so its balance should be deducted from company's cash account.

The bank service fees has been directly deducted from the bank account so should be recorded and deducted from the company's cash account also.

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