Question

At July 31, Farmer Company has this bank information: cash balance per bank $8,344; outstanding checks $804; deposits in transit $1,383; and a bank service charge $58.

Determine the adjusted cash balance per bank at July 31.
The adjusted cash balance per bank at July 31:___________.

Answer 1

The adjusted balance per bank is $8923

Step-by-step explanation:

Adjusted cash balance per bank

Cash balance per bank (unadjusted) 8344

(+) Deposits in transit 1383

(-) Outstanding checks (804)

Cash balance per bank (adjusted) 8923

The adjusted cash balance per bank is calculated by adjusting the transactions that do not appear on the current bank statement.

The deposits in transit is the amount of cash deposited in the bank, that will increase the bank balance, which is still in process and has not been added to the bank account as of now. Thus, we will add this amount to calculate the adjusted bank balance.

The outstanding checks amount is the amount of checks that have been issued by the business but which are yet to be presented by the recipients of checks and will result in a reduction in the bank balance. Thus, we deduct them to calculate the adjusted balance.

The bank charge is deducted by the bank itself thus we assume that it has already been deducted. So, no adjustment is made for this.