Problem - The cash account for Interactive Systems at February 28, 2010, indicated a balance of $7,635. The bank statement indicated a balance of $13,333 on February 28, 2010. Comparing the bank statement and the accompanying canceled checks and memos with the records reveals the following reconciling items:

a. Checks outstanding totaled $4,118.

b. A deposit of $4,500, representing receipts of February 28, had been made too late to appear on the bank statement.

c. The bank had collected $5,200 on a note left for collection. The face of the note was $5,000.

d. A check for $290 returned with the statement had been incorrectly recorded by Interactive Systems as $920. The check was for the payment of an obligation to Busser Co. for the purchase of office supplies on account.

e. A check drawn for $415 had been incorrectly charged by the bank as $145.

f. Bank service charges for February amounted to $20.

Instructions

1. Prepare a bank reconciliation.

2. Illustrate the effects on the accounts and financial statements of the bank reconciliation.