Question

Determining the true cash balance, starting with the unadjusted book balance

Nickleson Company had an unadjusted cash balance of $7,176 as of May 31. The company’s bank statement, also dated May 31, included a $67 NSF check written by one of Nickleson’s customers. There were $1,239 in outstanding checks and $255 in deposits in transit as of May 31. According to the bank statement, service charges were $35, and the bank collected an $600 note receivable for Nickleson. The bank statement also showed $14 of interest revenue earned by Nickleson.
Required:
Determine the true cash balance as of May 31. (Hint: It is not necessary to use all of the preceding items to determine the true balance.)
True cash balance

Answer 1

Answer: $‭7,688‬

True Cash balance = Unadjusted cash balance + Interest earned + Note received from Nickleson by bank - NSF (Non-sufficient funds) check - bank charges

= 7,176 + 14 + 600 - 67 - 35

= $‭7,688‬

Outstanding checks and deposits in transit do not need to be accounted for as they are already included in the unadjusted book balance.