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Topic
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I don’t think this is even worth asking but it is irking me so can someone please offer some insight into the following:
At June 30, Almond Co.’s cash balance was $10,012 before adjustments, while its ending bank statement balance was $10,772. Check number 101 was issued June 2 in the amount of $95, but was erroneously recorded in Almond’s general ledger balance as $59. The check was correctly listed in the bank statement at $95. The bank statement also included a credit memo for interest earned in the amount of $35, and a debit memo for monthly service charges in the amount of $50. What was Almond’s adjusted cash balance at June 30?
a. $10,462
b. $10,048
c. $9,598
d. $9,961
Explanation
Choice “b” is correct. Almond’s adjusted cash balance is computed as follows:
Adjusted cash balance = Unadjusted cash balance +/- bank errors + credit memos – service charges
Adjusted cash balance = $10,012 – ($95 – $59) + $35 – $50 = $9,961
My question is WHY do you subtract the $36 for the check that was recorded incorrectly? What is the objective here? To get to correct balance per books? Wouldn’t you want to add the $36? What is this?
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