Dug Corporation had outstanding checks totaling $5,400 on its June bank reconciliation. In July, DigDug issued checks totaling $38,900. The July bank statement shows that $26,300 in checks cleared the bank in July. The amount of outstanding checks on DigDug's July bank reconciliation should:

A. $12,600. B. $18,000. C. $5,400. D. $7,200.

B. $18,000.

Explanation:

The amount of outstanding checks in the July bank reconciliation is the net/difference of the sum of the outstanding checks as at end of june and the checks issued in July less the checks cleared in July.

This may be expressed mathematically as,

Closing outstanding checks in June + Checks issued in July - Checks cleared in July = Outstanding checks at the end of July

Hence the outstanding checks on DigDug's July bank reconciliation

= $5,400 + $38,900 - $26,300

= $18,000

At the end of July, the amount of outstanding checks on July's bank statement is $18000. Sp, option b is the correct answer.

Explanation:

The opening balance of the outstanding checks is $5400.

In July, after the issuance of further checks, the balance of the outstanding checks would have increased to 5400 + 38900 = $44300

The closing balance of outstanding checks at the end of July are,

Closing balance = Opening balance + Checks issued - Checks cleared

Closing balance = 5400 + 38900 - 26300

Closing balance = $18000