In Preparing a Bank Reconciliation Statement for a Business with a Substantial

question 3

Multiple Choice

In preparing a bank reconciliation statement for a business with a substantial bank balance, the appropriate treatment for $240 in interest earned on the account is to:

• A) add it to the balance as per bank statement.
• B) deduct it from the balance as per bank statement.
• C) add it to the balance per company records.
• D) deduct it from the balance per company records.

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Definitions:

Coupon Payments

Periodic interest payments made to bondholders, typically on a semi-annual basis, based on the coupon rate of the bond.

Municipal

Relating to a city or town or its governing body.

Sinking Fund

A reserve fund established by a company to set aside revenue over time for the purpose of paying off debt or replacing a major asset in the future.

Bond Issue

The act of a borrower issuing bonds to raise money from investors willing to lend them money for a certain amount of time.