You are auditing general cash for the Pittsburgh Supply Company

You are auditing general cash for the Pittsburgh Supply Company for the fiscal year ended July31, 2011. The client has not prepared the July 31 bank reconciliation. After a brief discussionwith the owner, you agree to prepare the reconciliation, with assistance from one of PittsburghSupply’s clerks. You obtain the following information:Beginning balance 7/1/11DepositsCash receipts journalChecks clearedCash disbursements journalJuly bank service chargeNote paid directlyNSF CheckEnding balance 7/31/11General LedgerStatement$6,400Bank$8,37825,47426,874(25,307)(23,171)$10,103(107)(6,400)(516)$1,522June 30 Bank ReconciliationInformation in General Ledger and Bank StatementBalance per Bank$8,378Deposits in transit$600Outstanding checks $2,578Balance per books$6,400Additional information obtained is as follows:1. Checks clearing that were outstanding on June 30 totled $2,411.2. Checks clearing that were recorded in the July disbursements journal totaled $21,120.3. A check for $1,130 cleared the bank but had not been recorded in the cash disbursementsjournal. It was for an acquisition of inventory. Pittsburgh Supply uses the periodic-inventorymethod.4. A check for $646 was charged to Pittsburgh Supply but had been written on a differentcompany’s bank account.5. Deposits included $600 from June and $24,874 for July.6. The bank charged Pittsburgh Supply’s account for a nonsufficient check totaling $516. Thecredit manager concluded that the customer intentionally closed its account and he owner left thecity. The check was turned over to a collection agency.7. A note for $6,000, plus interest, was paid directly to the bank under an agreement signed 4months ago. The note payable was recorded at $6,000 on Pittsburgh Supply’s books.a. Prepare a bank reconciliation that shows both the unadjusted and adjusted balance per books.b. Prepare all adjusting entries.c. What audit procedures would you use to verify each item in the bank reconciliation.d. What is the cash balance that should appear on the July 31, 2011, financial statements?