Asked by Blair Harrell on Apr 27, 2024
Verified
Huntress, Inc.reported a balance of $141 in its cash account at the end of the month.There were $120 of deposits in transit and $115 of checks outstanding.The bank statement showed a balance of $151, service charges of $7, and the collection of a note plus interest.The note had a face value of $17.How much interest did the bank collect for the company?
A) $ 5
B) $15
C) $17
D) $29
Deposits In Transit
Funds that have been transferred or deposited by a company but not yet reflected in the bank's records.
Notes Collected
Notes collected refer to the process of receiving payment or settling the amount due on promissory notes that a company holds, impacting its cash flow.
- Find and rectify mistakes in cash transaction records and the creation of bank reconciliation reports.
Verified Answer
ZK
Zybrea KnightMay 03, 2024
Final Answer :
A
Explanation :
The bank collected $5 as interest. This is determined by adjusting the company's cash account balance for deposits in transit and outstanding checks, and comparing it to the bank statement balance after accounting for service charges and the collection of a note. The adjusted bank statement balance is $151 + $115 - $120 - $7 = $139. Since the note's face value is $17 and the adjusted balance is $2 less than the company's book balance ($141 - $139), the difference of $2 represents the note's face value minus the interest collected. Therefore, the total collected (note plus interest) that brought the balance from $139 to $151 must be $12, indicating the interest is $5 ($12 - $7 for service charges - $17 for note's face value).
Learning Objectives
- Find and rectify mistakes in cash transaction records and the creation of bank reconciliation reports.
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