Osborn Company assembled the following information in completing its March bank reconciliation: balance per bank $3,820; outstanding checks $775; deposits in transit $1,250; NSF check $80; bank service charge $25; cash balance per books $4,400. As a result of this reconciliation, Osborn will
A) reduce its cash account by $475.
B) reduce its cash account by $25.
C) increase its cash account by $55.
D) reduce its cash account by $105.

Question

Quizplus · Accepted Answer

The adjusted balance per books will be calculated as follows: 
Beginning balance per books: $4,400 
Add: Deposits in transit: $1,250 
Less: Outstanding checks: $775 
Less: NSF check: $80 
Less: Bank service charge: $25 
Adjusted balance per books: $5,020 
The adjusted balance per books is $5,020, which is higher than the balance per bank of $3,820. This means that Osborn has recorded more cash than what was actually in the bank. Therefore, the cash account will be reduced by $105 ($5,020 - $3,820) to reflect the true cash balance.

Osborn Company Assembled the Following Information in Completing Its March