If a Check Correctly Written and Paid by the Bank

question 157

Multiple Choice

If a check correctly written and paid by the bank for $749 is incorrectly recorded in the company's books for $794, how should this error be treated on the bank reconciliation?

• A) Add $45 to the bank's balance.
• B) Add $45 to the book balance.
• C) Subtract $45 from the bank's balance.
• D) Subtract $45 from the bank's balance and add $45 to the book's balance.
• E) Subtract $45 from the book balance.

---

Definitions:

Interest Rate

The percentage of a loan amount charged by lenders to borrowers for the use of money, or the rate earned on deposit accounts.

Net Present Value

A method used in capital budgeting to analyze the profitability of an investment by calculating the difference between the present value of cash inflows and the present value of cash outflows over a period of time.

Present Value

The present value of a future amount of money or a series of cash flows, discounted by a certain rate of return.

Net Present Value Rule

A principle that states an investment should be made if the net present value of its cash flows, discounted at the hurdle rate, is positive.