Acctg162 – Material 008

TRUE or FALSE
1. A stale check is a check encashed by the payee within a reasonable period of time.
2. A post-dated check delivered is a check drawn, recorded and already given to the payee but bears a date subsequent
to the end of the reporting period.
3. If the deposit is not legally restricted as to withdrawal by the borrower because of informal compensating balance
agreement, the compensating balance is not part of cash, but still classified as current asset.
4. If the deposit is legally restricted because of a formal compensating balance agreement, the compensating balance is
classified separately as cash held as compensating balance under current assets all the time.
5. Unreleased check is one that is merely drawn but not recorded and given to the payee before the end of the reporting
period.
6. Overdrafts are permitted in the Philippine jurisdiction.
7. Cash fund set aside for the acquisition of noncurrent assets should be classified as current when, at the end of the
reporting period, it is expected to be disbursed on the next accounting period.
8. If the cash fund is set aside for use in current operations or for the payment of current obligation, it is a current asset
but never included in line item “cash and cash equivalents.”
9. If the cash fund is set aside for noncurrent purpose or payment of noncurrent obligation, it is one among other
components of “long term investment” line item.
10. Preference share redemption fund and contingent fund are examples of long term investments.
11. The details comprising the cash and cash equivalents should be disclosed in the notes to financial statements.
12. Deposit in foreign bank which are subject to foreign exchange restriction should be classified separately among
noncurrent assets.
13. Checks, bank drafts, and money orders are considered cash items.
14. PAS 7 is the specific standard for cash and cash equivalents.
15. PAS 1 states that an asset shall be classified current when it is cash and cash equivalents unless it is restricted to
settle a liability for more than 12 months after the end of the reporting period.

16. The following information are provided the TONG CORPORATION:

Current account at PBCom P (35,000)
Current account at PNB 65,000
Treasury bills (acquired 3 months before maturity) 200,000
Treasury bills (maturity date is 12/31/17) 500,000
Payroll account 175,000
Foreign bank account - restricted (translated using the
12/31/16 exchange rate) 900,000
Postage stamps 600
Employees’ checks marked “DAIF” 10,000
IOU from the vice-president 50,000
Credit memo from a supplier for a purchase returns 25,000
Traveler’s check 60,000
Money order 10,000
Company’s check dated 12/30/16 but not mailed at year-end 30,000
Petty cash fund (P4,000 in currency and expense receipts for
(P6,000) 10,000
TONG CORPORATION’S cash and cash equivalents balance at December 31, 2016 is:

17. On December 31, 2016, ABC provided the following information:

Savings deposit in closed bank P120,000
Money market placement due February 1, 2017 (acquired December 1, 2016) 1,450,000
Sinking fund for bond liability due December 31, 2017 2,500,000
Petty cash fund (with unreplenished vouchers, P4,000) 5,000
Current account (overdraft) (200,000)
BSP treasury bill – 120 days 1,200,000
Time deposit – 90 days 1,000,000
Postal money order 50,000
Cash legally restricted for addition to plant expected to be disbursed in 2017 2,800,000
Postdated customers checks 250,000
Treasury bills purchased October 1, 2016 ad maturing January 31, 2017 1,800,000
Cash in bank – payroll account 800,000
Change fund 25,000
IOUs signed by employees 10,000
Compensating balance against short term borrowing arrangement, not legally restricted 1,570,000
Currency and coins awaiting deposit 175,000
No sufficient fund customer’s check 80,000
 Value added tax account 400,000
Cash in foreign bank restricted due to exchange control 1,450,500
Unrestricted foreign bank account in equivalent pesos 950,000
The amount of cash and cash equivalents to be shown in the statement of financial position at the end of the reporting
period December 31, 2016 is:

18. The controller of CPA Company is attempting to determine the amount of cash to be reported on its December 31,
2017 balance sheet. The following information is provided:
 Commercial savings account of P1,000,000 and a commercial checking account balance of P900,000 are held at
Phil. Banking Corporation.
 Money market fund account held at Allied Bank, P600,000
 Travel advance of P180,000 for executive travel for the first quarter of next year (employee to reimburse through
salary reduction)
 A separate fund in the amount of P1,500,000 is restricted for the retirement of long-term debt.
 Petty cash fund, P5,000
 An IOU from David Santos, a company officer, in the amount of P10,000.
 A bank overdraft of P110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At
the present time, the company has no other deposits at this bank.
 The company has two certificates of deposit, each totaling P500,000. These certificates of deposit have a
maturity of 120 days.
 CPA Company has received a check that is dated January 12, 2018 in the amount of P125,000.
 Currency and coins on hand amounted to P5,300.

CPA COMPANY’S adjusted cash and cash equivalents balance at December 31, 2017 is:

19. On May 31, 2016, the Herson Amolo Fabricators had a cash balance per books of P57,815. The May bank statement
from the Katipunan Development Bank reported a balance of P68,586. A comparison of the statement with the cash
account revealved the following facts:
 The statement included a debit memo of P300 for the cost of two checkbooks.
 Cash sales of P8,361.50 on May 12 were deposited in the bank. The cash receipts journal entry and the deposit
slip were incorrectly made for P8,461.50. the bank credited Herson Amolo Fabricators for the correct amount.
 Outstanding checks at May 31 totaled P12,762.50, and deposits in transit were P9,361.50.
 On May 18, the company issued check no. 1181 for P6,580 to Citra Steel on account. The check which cleared
the bank in May, was incorrectly journalized and posted by Herson Amolo Fabricators for P6,850.
 A P20,000 note receivable was collected by the bank for Herson Amolo Fabricators on May 31 plus P800 interest.
The bank charged a collection fee of P200. The only entry made in May by the company for the note was to
accrue interest through May 31.
 Included with the cancelled check issued by the Garcia Company to E. Flores for P6,000 that was incorrectly
charged to the Herson Amolo Fabricators.
 On May 31, the bank statement showed an DAIF charge of P7,100 for a check issued by Gomez Realty, a
customer to the Herson Amolo Fabricators on account.
Adjusted balance of cash in bank

20. ABC prepared the following bank reconciliation on November 30:

Balance per bank statement P2,100,000
Deposits outstanding 300,000
Checks outstanding (30,000)
Correct cash balance 2,370,000
Balance per book 2,372,000
Bank service charge (2,000)
Correct book balance – May 31 2,370,000
December data
Bank Book
Checks recorded 2,300,000 2,360,000
Deposits recorded 1,620,000 1,800,000
Collection by bank, P400,000 note plus interest 420,000 -
NSF check returned 10,000
Balances 1,830,000 1,810,000
What is the adjusted cash in bank balance on December 31?

21. The following data were taken from Garay’s check register for the month of April. Garay’s bank reconciliation for
March showed one outstanding check, check no. 178 for P2,150 (written on March 20), and one deposit in transit for
P4,350 (made on March 31).
 Date (2017) Item Checks Deposits Balance
April 01 Beginning bal. 6,150
01 Deposit 26,167 32,317
01 Check no. 179 250 32,567
04 Check no. 180 10,673 21,898
27 Deposit 11,774 33,672
29 Check no. 181 13,217 20,490

The following is from Garay’s bank statement for April:

Date (2017) Item Checks Deposits Balance

April 01 Beginning bal. 3,950
03 Check no. 179 250 3,700
03 Deposit 4,350 8,050
05 Check no. 180 10,673 (2,623)
05 Automatic loan 8,150 5,527
05 Deposit 26,417 31,944
20 NSF Check 1,000 30,944
20 Service charge 600 30,344
30 Interest 82 30,426

Assume that any errors or discrepancies you find are Garay’s, not the bank’s. What is the adjusted cash balance as of
April 30

22. The following data were taken from ABCD’s check register for the month of April. ABCD’s bank reconciliation for
March showed one outstanding check, check no. 178 for P2,150 (written on March 20), and one deposit in transit for
P4,350 (made on March 31).
Date (2015) Item Checks Deposits Balance
April 01 Beginning bal. 6,150
01 Deposit 26,167 32,317
01 Check no. 179 250 32,567
04 Check no. 180 10,673 21,898
27 Deposit 11,774 33,672
29 Check no. 181 13,217 20,490

The following is from ABCD’s bank statement for April:

Date (2015) Item Checks Deposits Balance
April 01 Beginning bal. 3,950
03 Check no. 179 250 3,700
03 Deposit 4,350 8,050
05 Check no. 180 10,673 (2,623)
05 Automatic loan 8,150 5,527
05 Deposit 26,417 31,944
20 NSF Check 1,000 30,944
20 Service charge 600 30,344
30 Interest 82 30,426

Assume that any errors or discrepancies you find are ABCD’s, not the bank’s. What is the adjusted cash balance as of
April 30

23. The books of Steve's Service, Inc. disclosed a cash balance of P68,757 on June 30. The bank statement as of June
30 showed a balance of P54,780. Additional information that might be useful in reconciling the two balances follows:
A Check number 748 for P3,000 was originally recorded on the books as P4,500.
B A customer's note dated March 25 was discounted on April 12. The note was dishonored on June 29 (maturity
date). The bank charged Steve's account for P14,265, including a protest fee of P42.
C The deposit of June 24 was recorded on the books as P2,895, but it was actually a deposit of P2,700.
D Outstanding checks totaled P9,885 as of June 30.
E There were bank service charges for June of P210 not yet recorded on the books.
F Steve's account had been charged on June 26 for a customer's NSF check for P1,296.
G Steve properly deposited P600 on June 3 that was not recorded by the bank.
H Receipts of June 30 for P13,425 were recorded by the bank on July 2.
I A bank memo stated that a customer's note for P4,500 and interest of P165 had been collected on June 27, and
the bank charged a P36 collection fee.
The adjusted cash in bank balance is

FOR THE NEXT 2 REQUIREMENTS: ABC Company provided the following information:
Balance per bank statement – May 31 P2,600,000
Deposits outstanding 300,000
 Checks outstanding (100,000)
Correct bank balance – May 31 2,800,000
Balance per book – May 31 2,810,000
Bank service charge (10,000)
Correct book balance – May 31 2,800,000
June data are as follows:
Bank Book
Checks recorded 2,200,000 2,500,000
Deposits recorded 1,600,000 1,800,000
Service charges recorded 50,000 -
Note collected by bank, P500,000 plus interest 550,000
NSF check returned with June 30 statement 100,000
Balances 2,400,000 2,100,000
24. What is the amount of outstanding checks on June 30?
25. What is the amount of deposit in transit on June 30?

FOR THE NEXT 6 REQUIREMENTS: In the process of your examination of the financial statements of the Malu-oy
Company for the year ended December 31, 2016, you obtained the following data on its current account.

The bank statement on November 30, 2016 showed a balance of P76,500. Among the bank credits in November was a
customer’s note for P25,000 collected for the account of the company which the company recognized in December
among its receipts. Included on the bank debits were cost of checkbooks amounting to P300 and a P10,000 check which
was charged by the bank in error against Malu-oy Company account. Also in November, you ascertained that there were
deposits in transit amounting to P20,000 and outstanding checks totaling P42,500. The bank statement for the month of
December showed total credit of P104,000 and total charges of P51,000. The company’s books for December showed
total receipts of P183,900, disbursements of P101,800 and a balance of P121,400. Bank debit memos for December
were: No. 14334 for service charges. P400 and No. 14346 on a customer’s returned check marked “DAIF” for P6,000. On
December 31, 2016 the company placed with the bank a customer’s promissory note with a face value of P30,000 for
collection. The company treated this note as part of its receipts although the bank was able to collect on the note only in
January, 2017. A check for P990 was recorded in the company cash payments books in December as P9,900.

Based on the above data, you are to provide the answers to the following:

26. How much is the undeposited collections as of December 31, 2016?

27. How much is the outstanding checks as of December 31, 2016?
28. How much is the adjusted cash balance as of November 30, 2016?
29. How much is the adjusted bank receipts for December?
30. How much is the adjusted book disbursements for December?
31. How much is the adjusted cash balance as of December 31, 2016?

The accountant for the Goshen Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge* 72 60
Customer's check deposited July 10, returned
by bank on July 16 marked NSF, and redeposited immediately;
no entry made on books for return or redeposit 8,250
Collection by bank of company's notes receivable 71,815 80,900
* (Recorded on books in month following charge or collection)

The bank statements and the company's cash records show these totals:
Disbursements in July per bank statement P218,373
Cash receipts in July per Goshen's books 236,452
Checks written in July per Goshen's books 212,529
Receipts in July per bank statement 249,108

Determine the correct balance of the following:

32. June 30 adjusted cash in bank balance
33. July 31 adjusted receipts
34. July 31 adjusted disbursements
35. July 31 adjusted cash in bank balance