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4. The 7-month treasury bills are not cash equivalents and should be shown as part of short-term
investments in the current assets section of the statement of financial position.
PAS 7 defines "cash equivalents" as short-term, highly liquid investments that are readily convertible to
known amounts of cash and which are subject to an insignificant risk of changes in value. These
normally include short-term investments with maturities of three months or less from the date of
acquisition.
PROBLEM 1-2
The following information has been extracted from the accounting records of the URSULA COMPANY at
December 31, 2018:
a. Cash on hand (see note below) P230,OOO
b. Impukan Bank savings account (the required
c. minimum Monthly Average Daily Balance is PIO,OOO) 9,500
c.364-day Treasury bills purchased March 1, 2018 400,000
d. Petty cash fund (see note below) 20,000
e. Tipid Bank current account (see note below) 160,000
f. Time deposit placements:
Date Term
Dec. 15, 2018 30 days 30,000
Oct. 31, 2018 90 days 40,000
Nov. 30, 2018 180 days 25,000
g. Employee travel advances 7,000
h. cash in bond sinking fund 500,000
i. customers note receivable 45,000
j. Postage stamps 2,400
The following are included in cash on hand:
• A customer check for returned by the bank December 28, 2018. It was redeposited and cleared the
batik on January 2, 2019.
• A customer check for P75,000 dated January 3, 2019, receiv December 27, 2018.
• PHLPost money orders received from customers, P30,000
The petty cash fund consists of the following:
Currency and coins P13,500
IOUs from officers and employees 3,000
Unreplenished petty cash disbursements 1,500
Currency in envelope with the notation:
"We were Bang Quay's coworkers. Words may
not be adequate to express how sorry we feel.
Please accept our heartfelt sympathies on the loss ofyour loved one." 1.500
P20.ooo
The following information pertains to Tipid Bank current account:
• A check for P13,000 was dated and recorded on December 29, 2018, but was delivered to payee
on January 5, 2019.
• A check for P5,000 dated January 10, 2019, payable to a supplier was recorded and released to
payee on December 19, 2018. Tipid Bank requires current account depositors to maintain a
monthly average daily balance of P50,000.
What total amount should be recorded as cash and cash equivalents on December 31, 2018?
A. P383,000 C. P378,OOO
B. P373,500 D. P408,OOO
Solution 1-2
Cash on hand (230,000-P43,000-P75,000) P112,OOO
Impukan Bank savings account 9,500
Petty cash fund 13,500
Bank current account (P160,OOO + P13,OOO + PS,OOO) 178,000
Time deposits:
30 days 30,000
90 days 40,000
Total cash and cash equivalents P383,000
Answer: A
PROBLEM 1-3
The controller of the LYRIC CO. is trying to determine the amount of cash and cash equivalents to be
reported on its December 31, 2018, statement of financial position. The following information is
provided:
1. Balances in the companys accounts at the Monte Bank:
• Checking account—P540,000
• Savings account—P884,000
2. Undeposited customer checks of P208,000.
3. Currency and coins on hand of P23,200.
4. Savings account at the Naic Bank with a balance of P350,000. This account is being used to
accumulate cash for future plant expansion (in 2020).
5. P800,000 balance in a checking account at the Naic Bank.
6. Treasury bills; 30-day maturity bills totaling and 180day bills totaling P800,000.
on December 31, 2018, what amount should be reported as cash and cash equivalents?
A. P3,055,200 C. P2,955,200
B. P2,455,200 D. P2,355,200
Solution 1-3
Balance in Monte Bank checking account P540,000
Balance in Monte Bank savings account 884,000
Undeposited customer checks 208,000
Currency and coins on hand 23,200
Checking account in Naic bank 800,000
Treasury bills with 30-day maturity 600,000
Total cash and cash equivalents P3,055,200
Answer: A
PROBLEM 1-4
The following facts apply to OTO COMPANY during 2018:
1. Savings account of P900,000 and a checking account balance of PI,200,000 are
held at Manila Bank.
2. Money market placement with maturity of 3 months, P7,500,000.
3. Currency and coins on hand amounted to PI 1,550.
4. Travel advances of P270,000 for the first quarter of next year (employee
reimbursement will be through salary deduction).
5. Oto Company has purchased P3,150,000 of commercial paper of mendez Corp
which is due in 60 Days.
6. A separate cash fund amounting to P2,250,000 is restricted for the retirement of
long-term debt.
7. Petty cash fund of P 1,500.
8. An IOU from an employee of Oto Company in the ampunt of P2,OOO.
9. Two certificates of deposit, each totaling P500,000. These CDs have a maturity of
120 days.
10. Oto Company has received a check from a customer in the amount of P 187,500
dated January 15, 2019.
1l. On January 1, 2018, Oto Company purchased marketable equity securities to be
held as "trading" for P3,000,000. On December 31, 2018, its market value is
P4,300,000.
What amount should be reported as cash and cash equivalents on December 31, 2018?
A. P13,736,050 C. P12,751,500
B. P12,575,550 D. P12,763,050
SOLUTION 1-4
Savings account — Manila Bank P 900,000
Checking account — Manila Bank 1,200,000
Money market placement 7,500,000
Petty cash 1,500
Commercial paper 3, 150,000
Currency and coins on hand 11,550
Total cash and cash equivalents P12,763,050
Answer: D
PROBLEM 1-5
Your audit of the December 31, 2018, financial statements of DIONISIO CORP.
reveals the following:
Current account at Prime Bank P(30,000)
Current account at Prudent 135,000
Treasury bills (acquired 3 months before maturity) 300,000
Treasury bills (maturity date is Dec. 31, 2019) 1,500,000
Payroll account 390,000
Foreign bank account — restricted (translated
using the December 31, 2018, exchange rate) 2,000,000
Postage stamps 1,250
Employee's postdated check 4,500
IOU from the vice-president 8,000
Credit memo from a supplier for a purchase return 8,100
Traveler's check 21,000
Money order 12,900
Petty cash fund (P3,000 in currency and expense
receipts for P12,000) 15,000
What amount would be reported as "cash and cash equivalents" in the statement of
financial position on December 31, 2018?
A. P840,050 C. P849,400
B. P873,900 D. P861,900
SOLUT10N 1-5
Current account at Prudent Bank P 135,000
Treasury bills (acquired 3 months before maturity) 300,000
Payroll account 390,000
Travelers Check 21,000
Money order 12,900
Petty cash fund 3,000
Total cash and cash equivalents P861,900
Answer: D
PROBLEM 1-6
Computation of Correct Cash Balance
The Cash account of the BEA CORPORATION as of December 31, 2018, was
composed of the following:
On deposit in current account with the Bank of PI P900,000
Cash collection not yet deposited to the bank 350,000
A customer's check returned by the bank for insufficient fund 150,000
A check drawn by the Vice-President of the company
dated January 15, 2019 70,000
A check drawn by a supplier dated December 28, 2018,
for goods returned by the company 60,000
A check dated May 31, 2018, drawn by the company
against the Bank of Manila in payment of customs duties.
Since the importation did not materialize, the check
was returned by the customs broker. This check was
an outstanding check in the reconciliation of the
Bank of Manila 410,000
Petty cash fund of which P 10,000 is in currency; P7,200
in form of employees' IOUs; and P2,800 is supported
by approved petty cash vouchers for expenses all
dated prior to closing of the books on December 31,2018 20 000
Total P1,960,000
Less: Overdraft with the Bank of Manila secured by
a chattel mortgage on the inventories 300.000
Cash balance per ledger P1, 660,000
What is the amount of cash to be reported on the December 31, 2018, statement of
financial position of Bea Company?
SOLUTION 1-6
Current account — Bank of PI P900,OOO
Undeposited collection 350,000
Supplier's check for goods returned by.the company 60,000
Petty cash fund 10,000
Bank of Manila (P410,OOO - P300,OOO) 110,000
Correct cash balance P1,430,000
PROBLEM 1-7
In connection with your audit of the financial statements of ONOR COMPANY for
the year ended December 31, 2018, you gathered the following information.
1. The company maintains its current account with Tsunami Bank. The bank
statement on December 31, 2018, showed a balance of P638,340.
Your audit of the companys account with Tsunami Bank disclosed the following:
• A check for P22,500 received from a customer whose account is current had been
deposited and then returned by the bank on December 28, 2018. No entry was made
for the return of this check. The customer replaced the check on January 15, 2019.
• A check for P5,720 was cleared by the bank as P7,520. The bank made the
correction on January 2, 2019.
• A check for P3,500 representing payment of an employee advance was received and deposited on
December 27, 2018, but was not recorded until January 3, 2019.
• Postdated checks totaling P67,300 were included in the deposits in transit. These represent collections
of current accounts receivable from customers. The checks were actually deposited on January 5, 2019.
• Various debit memos for drafts purchased for payment of importation of equipment totaling P230,000
were not yet recorded. These purchases were previously set up as accounts payable. Said equipment
arrived in December 2018.
• Interest earned on the bank balance for the 4th quarter of 2018, amounting to P 1,950 was not
recorded. • Bank service charges totaling P 1,260 were not recorded.
• Deposit in transit and outstanding checks at December 31, 2018, totaled P 136,250 and P276,380,
respectively.
2. Various expenses from the companys imprest petty cash fund dated December 2018, totaled P
16,250, while those dated January 2019, amounted to P5,903. Another disbursement from the
fund dated December 2018 was a cash advance to an employee amounting to P3,500. A
replenishment of the petty cash fund was made on January 8, 2019
3. The companys trial balance on December 31, 2018, includes the following accounts:
Cash in bank - Tsunami Bank P 748,320
Cash in bank - Earthquake Bank (restricted
account for plant expansion, expected to
be disbursed in 2019) 700,000
Petty cash fund 30,000
Time deposit, placed December 20, 2018, and due March 20, 2019 1,000,000
1. What is the adjusted petty cash fund balance on December 31, 2018?
A.P4,347 C. P30,OOO
B.P1O,250 D. P24,097
2. The petty cash shortage on December C. P3ßOO31, 2018, is
A.P0 C. P3,500
B.P5,903 D. P4,347
3. What is the adjusted Cash in bank—Tsunami Bank balance on December 31, 2018?
A.P500,010 C. P432,710
B.P748,320 D. P429,110
4. The entry to adjust the Cash in bank - Tsunami Bank account should include a debit to
A.Accounts receivable for P89,800.
B. Accounts receivable for P86,300.
C. Accounts payable for P228,200.
D Interest expense for P1,950.
5. The December 31, 2018, statement of financial position should show "Cash and cash
equivalents" at
A. P 6,142,960 C. P4,442,960
B. P5,439,360 D. P5,442,960
SOLUTION 1-7
3. Book Bank
Unadjusted balances P748,320 P638,340
NSF check (22,500)
Bank error (P7,520 -- P5,720) 1,800
Unrecorded cash receipt 3,500
Postdated checks (67,300)
Deposits in transit (P136,250 — P67,300) 68,950
Bank debit memos (230,000)
Interest earned 1,950
Bank service charges (1,260)
Outstanding checks _______ (276,380)
Adjusted balances P432,710 P432,710
Answer: C
PROBLEM 1-8
The auditor for SAMANTHA, INC. examined the petty cash fund immediately after the close of
business, July 31, 2018, the end of the company's natural business year. The petty cash
custodian presented the following during the count:
Currency PI,650
Petty cash vouchers 420
Postage 420
Office supplies expense 900
Transportation expense 340
Computer repairs 800
Advances to office staff 1,500
A check drawn by Samantha, Inc., payable to
the petty cash custodian 7,200
2. What is the adjusted balance of the petty cash fund at July 3 1' 2018?
A. PIO,740 C. P7,200
B.P3,540 D. P8,850
Solution 1-8
1. Currency PI,650
Petty cash vouchers (P420 + P900 + P340 + P800 + PI,500) 3,960
Replenishment check 7,200
Employee's NSF check 1,000
Petty cash accounted 13,810
Petty cash fund per ledger (custodian's accountability) 16,000
Petty cash shortage P2,190
Answer: B
2 .Currency PI,650
Replenishment check 7,200
Adjusted petty cash balance P8,850
Answer: D
Problem 1-9
Petty Cash Fund
On January 1, TANYA CO. establishes a petty cash account and designates Orly Reyes as petty cash
custodian. The original amount included in the petty cash fund is P 10,000. The following disbursements
are made from the fund:
Office supplies P3,460
Postage 2,240
Entertainment 840
The balance in the petty cash box is P3,200.
1. The person responsible, at all times, for the amount of the petty cash fund is the
A. Chairman of the Board of Directors
B. President of the company
C. Petty cash custodian
D. General cashier
2. The following are appropriate procedures for controlling the petty cash fund, except
A. To monitor variations in different types of expenditures, the petty cash custodian files petty cash
vouchers by category of expenditure after replenishing the fund.
B To replenish the fund, the general cashier issues a company check to the petty cash custodian, rather
than cash.
C. To determine that the fund is being accounted for satisfactorily, surprise counts of the fund are made
from time to time by the internal auditor or other responsible official.
D. Each individual to whom petty cash is paid is required to present signed receipts to the petty cash
custodian.
3. The entry to replenish the fund is
A.. Office supplies expense 3,460
Postage expense 2,240
Entertainment expense 840
Cash 6,540
B.Office supplies expense 3,460
Postage expense 2,240
Entertainment expense 840
Cash over and short 260
Petty cash 6,800
C. Office supplies expense 3,460
Postage expense 2,240
Entertainment expense 840
Cash over and short 260
Cash 6,800
SOLUTION 1-9
1.One individual, the petty cash custodian, should be responsible for
the petty cash fund.
Answer: C
2. The petty cashier should not have custody of paid petty cash
vouchers to prevent their reuse.
Answer: A
3. Office supplies expense 3,460
Postage expense 2,240
Entertainment expense 840
Cash over and short 260
Cash 6,800
Conmputation Of cash shortage:
Curreny and coins P3,200
Petty cash vouchers (P3,460 + p2,240 + P840) 6,540
Petty cash accounted 9,740
Petty cash fund per ledger 10,000
Shortage P 260
Answer: C
4. Facilitate payment of small, miscellaneous items.
Answer: D
3. Cash will be overstated and expenses understated.
Answer: C
PROBLEM 1-10
Count of Petty Cash Fund and Undeposited Collections
In connection with your audit of the financial statements of BENJAMIN CORP. for the year ended
December 31, 2018, you conducted a .surprise count of the company's petty cash fund and
undeposited collections at 8:20 a.m. on January 3, 2019. Your count disclosed the following:
Bills and coins
PIOO.OO 5 pieces
Bills Coins
P100.00 5 pieces 5.00 18 pieces
50.00 40 pieces 1.00 206 pieces
20.00 48 pieces 0.25 32 pieces
Postage stamps (unused)-P365
Checks
Date Payee Maker Amount
Dec. 30 Cash Custodian P 1,200
Dec. 30 Benjamin Corp SLV, Inc. 14,000
Dec. 31 Benjamin Corp. Mario Lansang,
sales manager 1,680
Dec. 31 Benjamin Corp. MSU corp. 17,800
Dec. 31 Benjamin Corp. Ateneo, Inc. 8,300
Dec. 31 Taiwan Corp. Benjamin Corp. 27,000
Unreimbursed vouchers
Date payee Description Amount
Dec. 23 Mario Lansang, Advance for trip to P20,OOO
sales manager Tagaytay City
28 Central Post Office Postage stamps 1,620
29 Messengers Transportation 150
29 Byte, Inc. Cömputer repair 800
Other itemsfound inside the cash box:
1. Unclaimed pay envelope of Juan MacDonut. Indicated on the pay slip is his net salary of P 7,500. Your
inquiry revealed that Juan's salary is mingled with the petty cash fund.
2. The sales manager's liquidation report for his Tagaytay City trip.
Cash advance received on Dec. 23 P20,OOO
Less: Hotel accommodation, meals, etc. P 16,000
Bus fare for two 1,200
Cash given to Pablo, salesman 1.000 18,200
Balance P1,800
Additional information:
1. The custodian is not authorized to cash checks.
2. The last official receipt included in the deposit on December 30 is No. 4351 and the last official
receipt issued for the current year is No. 4355. The following official receipts are all dated Decemb
31, 2018.
OR No. Amount. Form of Payment
4352 P13,600 Cash
4353 17,800 Check
4354 3,600 Cash
4355 8,300 Check
3. The petty cash balance per general ledger is P25,000. The last replenishment of the fund was made on
December 22, 2018.
1. What is the amount of shortage due from the sales manager?
A P240 C P120
B. PI,800 D. PO
2. What is the amount of undeposited collections on December 31,
A. P44,300 C. P57,300
B. P84,300 D. P41,OOO
December 31, 2018, should include a net
A. P17,320 C. P18,200
B. P18,320 D. P18,080
4. The cash count should include total checks of
A. P69,980 C P41,780
B. P42,980 D. P41,300
Benjamin Corp.
CASH COUNT SHEET
January 3, 2019 — 8:20 a.m.
Bills and coins:
Denomination Quantity Amount Total
P100.00 5 P500
50.00 40 2,000
20.00 48 960
5.00 18 90
1.00 206 206
0.25 32 8 P3,764
Checks:
Date Maker Amount
Dec. 30 Custodian P1,200
Dec. 30 SLV, Inc. 14,000
Dec. 31 Mario Lansang 1,680
Dec. 31 MSU Corp. 17,800
Dec. 31 Ateneo, Inc 8,300 42,980
Unreimbursed vouchers:
Date Account Amount
Dec. 23 Advances P20,ooo
Dec. 28 Postage 1,620
Dec. 29 Transportation 150
Dec. 29 Repairs 800 22,570
Total cash accounted P69,314
Less: Accountabilities
Petty cash P25,OOO
Collections (per official receipts) 43,300
Unclaimed salary 7,500
Excess travel advance 1,680
Unreceipted collection from SLV, Inc 14,000 91,480
CASH SHORTAGE (P22,166)
Benjamin Corp.
ADJUSTING JOURNAL ENTRIES
December 31, 2018
1. Cash 14,000
Accounts receivable 14,000
2. Advances to officers and employees 20,000
Postage expense 1,620
Transportation expense 150
Repairs expense 800
Petty cash fund 22,570
3. Unused postage 365
Postage expense 365
4. Cash 27,000
Accounts payable 27,000
5. Cash 7,500
Salaries payable 7,500
6. Receivable from custodian 22,166
Cash 22,166
7. Travel expenses (P16,OOO + PI,200 + P880) 18,080
Petty cash fund 1,680
Advances to officers and employees 19,760
PROBLEM 1-1 1
Petty Cash Fund; Bank Reconciliation
Anying Velasco is reviewing the cash accounting for ABX, Inc. vAnying's review will focus on the
petty cash fund account and the bank reconciliation for the month ended May 31, 2018. She has
collected the following information from ABX's bookkeeper for this task.
Petty Cash Fund
1. The petty cash fund was established on May 2, 2018, in the amount of PI 0,000.
2. Expenditures from the fund by the custodian as of May 31, 2010, were evidenced by
approved petty cash vouchers for the following:
Various office supplies P3,920
IOU from employees 1,200
Shipping charges 2,298
Miscellaneous expense 1,526
On May 31, 2018, the petty cash fund was replenished and increased to P12,000; currency and
coins in the fund at that time totaled P756.
Bank Reconciliation
Shore Bank
Bank Statement
Disbursements Receipts Balance
Balance, May 1, 2018 P350,760
Deposits P1,120,000
Note payment direct from
customer (interest of PI,200) 37,200
Checks cleared during May P1,246,000
Bank service charges 1,080
Balance, May 31, 2018 260,880
3. Book Bank
Unadjusted balances P320,600 P260,880
Deposit in transit 120,000
Cash on hand 9,840
Outstanding checks (34,000)
Note collected by bank 37,200
Bank service charges (1,080)
Adjusted balances p-356.72Q usa.2Q
Adjusted cash balance (P356,720 + P12,OOO) P368,720
Answer: A
PROBLEM 1-1 2
Bank Reconciliation; Computation of Cash Balance
Presented below are a series of unrelated situations. Answer the question at the end of each situation.
1. The accountant of NARCISA CO. provided the following data in reconciling the April 30 cash in bank
balance:
Balance per bank, April 30 P130,350
Balance per books, April 30 85,000
Bank service charge 2,000
Deposits in transit 49,000
Outstanding checks 17,650
Note collected by bank including
P 11,200 interest (Narcisa Co. not yet informed) 136,000
Check
drawn by XYZ Co. erroneously
charged by bank to Narcisa's account 54,600
A transposition error was made in recording a sale and deposit in the sales journal and cash receipts
journal in April.
Correct amount P13,658
Recorded as P16,358
What is the adjusted cash balance on April 30?
2. The following information is included in EMIL CORPORATION's bank statement for the month of
March:
In comparing the bank statement to the companys cash records, you found:
Outstanding checks on March 31 P184,OOO
Deposits made but are not yet shown in the
April bank statement 14,000
The deposits in transit and outstanding checks have been correctly taken up in the companys books. You
also found a customer's check for PI7,400 that had not yet been deposited and had not been recorded in
Emil's books. Your client's books show a cash balance of P36,420.
3. The following information pertains to a checking account of a company at June 30, 2018.
Balance per bank statement P200,OO0
Interest earned for the second quarter 500
Outstanding checks 15,000
Customers' checks returned for insufficient funds 5,000
Deposit in transit 25,000
5. A company shows a cash balance of P 175,000 on its bank statement dated June 30. As of June
30, there are P55,COO of outstanding checks and P37,500 of deposits in transit.
6. The Cash account shows a balance of P 225,000 before reconciliation. The bank statement does
not include a deposit of P 11,500 made on the last day of the month. The bank statement shows a
collection by the bank of P4,700 and a customer's check for P 1,600 was returned because it was
NSF. A customer*s check for P2,250 was recorded on the books as P 2,700, and a check written for
P395 was recorded as P485.
7. On July 5, 2018, EMILIA CORP. received its bank statement for the month ending June 30. The
statement showed a P 209,500 balance while the cash account balance on June 30 was P35,000. In
reconciling the balances, the auditor discovered that:
1. The June 30 collections of P 176,000 were recorded on the books but were not deposited until
'July.
2. The bank service charges for the month of June totaled P3,000.
3. A paid check for P24,30() was entered incorrectly in the cash payments journal as P34,200.
SOLUTION 1-12
Book Bank
1. Unadjusted balances P 85,000
Bank service charge (2,000)
Deposits in transit 49,000
Outstanding checks (17,650)
Collection of note 136,000
Erroneous bank debit 54,600
Transposition error (P16,358 - P13,658) (2,700) _______
Adjusted balances P216,300 P216,300
Problem 1-13
Bank Reconciliation
The bank statement for the current account of IAN Co. showed a December 31, 2018, balance of
P585,284. Information that might be useful in preparing a bank reconciliation is as follows:
a) Outstanding checks were P52,810.
b) The December 31, 2018, cash receipts of P23,000 were not deposited in the bank until January 2,
2019.
c) recorded One check by written the bank in but payment was recorded of rent by P8,940 Ian Co. was
as a correctlyP9,840 disbursement.
d) In accordance with prior authorization, the bank withdrew P18,OOO directly from the current
account as payment on a mortgage note payable. The interest portion of that payment was p14,OOO.
Ian Co. has made no entry to record the automatic payment.
e) Bank service charges of P 740 were listed on the bank statement.
f) A deposit of P35,000 was recorded by the bank on December 12, but it did not belong to Ian Co.
g) The bank statement included a charge of P 3,400 for a notsufficient-fund check. The company will
seek payment from the customer.
h) Ian Co. maintains an P8,000 petty cash fund that was appropriately reimbursed at the end of
December.
i) According to instructions from Ian Co. on December 301 the bank withdrew P40,000 from the account
and purchased treasury bills for Ian Co. The company recorded the transaction in its books on December
31 when it received notice from the bank. Half of the treasury bills mature in three months and the
other half in six months.
1. What is the cash in bank balance per books on December 31, 2018?
A. P549,714 C. P534,914
B. P543,514 D. P541,714
2. What is the adjusted cash in bank balance on December 31, 2018?
A. P520,474 C. P518,674
B. P527,274 D. P520,154
3. What amount of cash and cash equivalents should be shown under current assets on December 31,
2018?
A. P928,474 C. P720,474
B. P728,474 D. P735,274
SOLUTION 1-1 3
1. Balance per bank statement P585,284
Outstanding checks (52,810)
Undeposited collections 23,000
Error in recording rent check (P9,840 -- P8,940) (900)
Automatic mortgage payment 18,000
Bank service charges 740
Bank error — deposit incorrectly credited to Ian Co. (35,000)
NSF check 3,400
Balance per books P541,714
Answer: D
2. Book Bank
Unadjusted balances P541,714 P585,284
Outstanding checks (52,810)
Undeposited collections 23,000
Error in recording rent check 900
Automatic mortgage payment (18,000)
Bank service charges (740)
Bank error — deposit incorrectly credited
to Ian Co. account (35,000)
NSF check (3,400)
Adjusted balances P520,474 P520,474
Answer: A
3.
Current account balance P520,474
Petty cash 8,000
Treasury bills (P400,OOO x 1/2) 200,000
Total cash and cash equivalents P728,474
Answer: B
PROBLEM 1-14
Bank Reconciliation:
Unadjusted to Adjusted Balances Format
The following data were taken from GARAY's check register for the month of April. Garays 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).
A. P26,833 C. P30,426
B. P26,838 D. P26,872
SOLUTION 1-14
Book Bank
Unadjusted balances P20,490 P30,426
Outstanding checks:
Check no. 178 P2,150
Check no. 181 13,217 (15,367)
Deposit in transit 11,774
Error in recording deposit (P26,417 - P26,167) 250
Automatic loan 8,150
Interest 82
NSF check (1,000)
Bank service charge 600)
Arithmetic error for:
Check no. 179 (500)
Check no. 180 (P21,898- P21,894) (4)
Check no. 181 (35) ________
Adjusted balance P26,833 P26,833
Answer: A
PROBLEM 1-15
Reconciliation: Unadjusted to Adjusted Balances Format
The following information pertains to FLINT CORP.:
Flint Corp.
BANK RECONCILIATION
November 30, 2018
Balance per bank statement P435,OOO
Less: Outstanding checks
No. 4321 P 6,000
4329 15,000
4340 1,700
4341 4,675 27,375
P407,625
Add: Deposit in transit 16,200
Balance per books P423,825
CHECK REGISTER
December 2018
Vouchers
A. P801,660 C. P1,201,660
B. P651,660 D. P803,660
Solution 1-16
1.Sales P6,235,200
Less: Accounts Receivable 165,400
Collections from customers P6,069,800
Answer: D
2.Cost of sales (P6,235,200 x 70%) P4,364,640
Add: Merchandise inventory, December 31 69,000
Goods available for sale/Purchases (there is no
beginning inventory) 4,433,640
Less: Accounts payable, December 31 389,650
Payments for purchases P4,043,990
Answer: C
3. Issue price of ordinary shares
(1,500,000 + P150,OOO) P1,650,000
Notes payable — bank 500,000
Collections 6,069,800
Total cash receipts per books P8,219,800
Answer: C
4. Land P1,000,000
Building 1,400,000
Furniture and fixtures 367,000
Operating expenses paid (PI,005,150 p400,000) 605,150
Payments for purchases 4,043,990
Total cash disbursements per books P7,416,140
Answer: C
6. Book Bank
Unadjusted balances P803,660 P892,OOO
Deposits in transit 384,660
Service charge (2,000)
Outstanding checks ________ (475,000)
Adjusted balances P801,660 P801,660
Answer: A
PROBLEM 1-1 7
Computation of Cash Receipts and Disbursements
In connection with your audit of the cash account ofANNIE CORP., you gathered the following
information.
Alternative computation:
Bank disbursements in December P376,500
Add: Outstanding checks, December 31 94,162
Total P470,662
Less: Outstanding checks, Nov. 30 P67,000
NSF check 11,143 78,143
Book disbursements in December P392,519
Answer: D
PROBLEM 1-1 8
Petty Cash Fund; Bank Reconciliation
Your audit of the cash accöunt of JUNIE CORP. disclosed the following information:
1. Cash in bank balance per books, Dec. 31, 2018 P35,OOO
2. Bank statement balance, Dec. 31, 2018 60,000
3. Note collected by bank in December (Principal plus
interest of P800, less collection fee of P 200) 27,600
4. Debit memo for a checkbook ?
5. Deposits in transit, Dec. 31, 2018 15,200
6. Transposition error made by bank in
recording deposit of December 28:
Correct amount P45,OOO
Recorded as 54 000 9,000
_______________________________CASH______________________________
Date Item Ref Debit Credit Balance
April 1 Balance 95,550
30 CR 6 528,900 624,450
30 CP 11 546,200 73,250
Liezel Company received the following bank statement on April 30, 2018:
Bank Statement for April 2018
SOLUTION 1-19
1. Deposits in transit, April 30:
April 29 collection per CR P53,OOO
April 30 collection per CR 16,850
Total P69,850
Answer: B
FERMIN COMPANY's check register shows the following entries for the month of December:
Date Checks Deposits Balance
2018
Dec. 1 Beginning Balance P 89,300
5 Deposit P 65,000 154,300
7 Check #14344 P 32,500 120,800
11 Check # 14345 14,000 106,800
26 Deposit 49,000 155,800
29 Check #14346 8,600 147,200
Fermin's bank reconciliation for November revealed one outstanding check (No. 14343) for P 12,000
(written on November 28)) and one deposit in transit for P5,550 (made on November 29).
The following is from Fermin's bank statement for December 2018:
Date Checks Deposits Balance
2018
Dec. 1 Beginning Balance P950,750
1 Deposit P 5,550 101,300
4 Check No. 14344 P32,500 68,800
5 Deposit 56,000 124,800
14 Check No. 14345 14,000 110,800
15 Loan proceeds 500,000 610,800
20 NSF check 7,600 603,200
29 Service charge 1,000 602,200
31 Interest 3,600 605,800
Assume that all errors were committed by Fermin Company, not the bank.
Based on the preceding information, determine the following:
1. Adjusted cash balance on November 30
A, P89,300 C. P102,200
B. P95,750 D. P101,300
2. Outstanding checks on December 31
A. P46,500 C. P8,600
B. P45,500 D. P20,600
3. Deposit in transit on December 31
A. P52,600 C. P5,550
B. P49,000 D. P43,450
4. Total bank receipts in December
A. P114,000 C. P565,150
B. P119,550 D.P 61,550
5. Adjusted cash balance on December 31
A. P663,800 C. P748,200
B. P634,200 D. P597,200
Solution 1-20
1. Balance per bank, Nov. 30 P95,750
Outstanding in check (no. 14343) (12,000)
Deposit transit 5,550
Adjusted bank balance, Nov. 30 P89,300
Answer: A
Since there are no book reconciling items in November, the adjusted bank balance agrees with the cash
in bank balance per ledger on November 30.
5. Book Bank
Unadjusted balances P147,200 P605,800
Deposit in transit 49,000
Outstanding checks (see no. 2) (20,600)
Error in recording deposit
(P65,OOO - P56,OOO) (9,000)
Error in arithmetic for Check No. 14344 1,000
Loan proceeds 500,000
NSF check (7,600)
Interest 3,600
Service charge (1,000)
Adjusted balances P634,200 P634,200
Answer: B
PROBLEM 1-2 1
Bank Reconciliation:
Unadjusted to Adjusted Balances Format
In connection with an audit, you are given the following bank reconciliation
BANK RECONCILIATION
December 31, 2018
Balance per ledger, December 31, 2018 P 34,350
Add: Collections received on the last day of
December and charged to "Cash in Bank"
on books but not deposited 5,325
Debit memo for customer's check returned
unpaid (check is on hand but no entry has
been Inade on the books) 4,000
Debit memo for bank service charge for December 1,000
P46,675
Deduct:
Outstanding checks
(see detailed list below) P18,625
Credit memo for proceeds of a
note receivable which had been
left at the bank for collection but
which has not been recorded as
collected 8,000
Check for an account payable
entered on books as P12,625
but drawn and paid by bank
as P16,225 3,600 32,225
Computed balance P14,450
Unlocated difference 36,600
Balance per bank (checked to confirmation) P51,050
LIST OF OUTSTANDING CHECKS, Dec. 31, 2018
Check No. Amount
14344 P 5,820
14358 1,295
14367 3,543
14399 2,001
14401 4,892
14407 5,074
PI 8,625
4. Book Bank
Unadjusted balances P34,350 P51,050
Deposits in transit 5,325
Customer's check returned (4,000)
Bank service charge (1,000)
Outstanding checks (22,625)
Credit memo for note collected 8,000
Understatement of book disbursement (3,600) _______
Adjusted balances P33,750 P33,750
Answer: C
5. ADJUSTING JOURNAL ENTRIES
December 31, 2018
a. Accounts receivable 4,000
Cash in bank 4,000
b. Bank service charges 1,000
Cash in bank 1,000
c. Cash in bank 8,000
Notes receivable 8,000
d. Accounts payable 3,600
Cash in bank 3,600
Debit to cash in bank P8,OOO
Credit to cash in bank (P4,000 + PI,OOO + P3,600) (8,600)
Net credit to cash in bank (P600)
Problem 1-22
Computation of Book Disbursements
In connection with your audit of the MARCELO COMPANY at December 31, 2018, the following bank
reconciliation was submitted to you by an employee of your client:
Balance per bank P30,534
Deposits in transit 37, 856
P68,390
Outstanding checks 42 ,756
Balance per books P25,634
As part of your verification, you obtained the bank statement and canceled checks from the bank on
January 15, 2019. According to the records of the company, checksissued from January 1 to January 15,
2019;amounted to P22,482. Checks returned by the bank on January 15, 2019, totaled P58,438. Of the
checks outstanding on December 31, 2018, P9,600 were not returned by the bank with the January 15,
2019, bank statement; and of those issued, according to the records of the company, in January 2019,
P7,200 were not returned by the bank.
Based on the above data, calculate the disbursements per company records.
1. The difference between the disbursements per books as computed and as reported is
A. P61,912 C. PIO,OOO
B. P2,800 D. P29,874
2. Suggest three possible explanations for the difference between the disbursements per company as
computed and as reported
SOLUTION 1-22
1. Outstanding checks, January 15:
From December or before P9,600
From January 7 200 P16,800
Add: Disbursements per bank statement 58 438
Total 75,238
Less: Outstanding checks, December 31 42,756
Disbursements per books as computed P32,482
a. The bank disbursements (P58,438) may be overstated by PIO,OOO. Another company check
for PIO,OOO may have been charged erroneously by the bank against the client's account.
b. Tie December 31 outstanding checks may be understated by PIO,OOO. Since the bank
reconciliation given in the problem was prepared by a company employee, there is no assurance
that it is correct.
c. The client's employee may have failed to record check/s issued in January, thus, understating
the book disbursements (P22,482).
Problem 1-23
Bank Reconciliation:
Unadjusted to Adjusted Balances Format
In auditing the HECTOR COMPANY, you obtained the bank statement, canceled checks, and other
memoranda which relate to the company’s bank account for December 2018. In reconciling the bank
balance with that shown on the company's books, you observed the facts set forth below;
SOLUTION 1-23
1. Proceeds = Principal -Interest
47,750=P - (Px180/0 x 3/12)
47,750=P - 0.045P
47/750=0.955 P
P= 47,750 + 0.955
P= P50,000
Answer: A
2. Prepaid interest, Dec.31 (2/250 x 2.5/3) PI ,875
Answer: D
3. Principal
Interest income
Maturity value
Proceeds
Answer: C
4. Book Bank
Unadjusted balances P19,289 P47,174
Outstanding checks (63,000)
Receipts of 12/31/18, deposited 1/02/19 6,260
Service charge for November (1,000)
Proceeds ofbank loan 47,750
Deposit of 12/22/18, omitted from bank
Statement 9,170
Check of Milano Company, charged back (77,320)
Error in entering deposit of 12/18/18 1,440
Check of Yek Company charged in
error to Hector Company 13,600
Proceeds of note of Harthur Co. 25,625
Erroneous debit memo of 12/28/18,
charged by bank in settlement
of loan paid by check no. 112170 5,000
4. The following audit procedures would be performed to verify the note payment:
1. Examine cancelled check.
2.Recompute interest.
3. Check for absence of note on July 31 bank confirmation.
Answer: B
5. The following audit procedures would be performed to verify the unrecorded check:
1. Examine check returned with July bank statement.
2. Trace number to absence in July cash disbursements journal and recording in August.
3. Examine supporting documentation.
4. Investigate why it was unrecorded.
The cutoffbank statement WI/ no longer show the unrecorded check because it was already paid by the
bank in July.
Answer: A
Problem 1-25
Proof of Cash: Unadjusted to Adjusted Balances Format
The cash account of VELASCO COMPANY shows the following activities:
Date Debit Credit Balance
Nov. 30 Balance P115,OOO
Dec. 2 November bank charges P 50 114,950
4 November bank credit for
notes receivable collected P10,000 124,950
15 NSF check 1,300 123,650
20 Loan proceeds 48,500 172,150
21 December bank charges 60 172,090
31 Cash receipts book 707,300 879,390
31 Cash disbursements book 408,000 471,390
CASH BOOKS
RECEIPTS PAYMENTS
Solution 1-25
1. OUTSTANDING CHECKS, NOVEMBER 30:
check no. 792 P2,500
799 7, 050
Total P9,550
Answer: A
2. OUTSTANDING CHECKS, DECEMBER 31:
Check no. 806 P 19,000
807 26,000
810 7,000
812 16,000
817 11,000
819 7,000
822 12,000
823 13,000
824 29,000
825 2,000
826 11,000
Total P153,000
Answer: C
Balance Balance
November 30 Receipts Disbursements Dec. 31
Balances per books P115,OOO P765,800 P409,410 P471,390
Bank service charges:
November 30 (50) (50)
December 31 120 (120)
Notes collected by bank:
November 30 10,000 (10,000)
December 31 12,000 12,000
Unrecorded disburse
ment — Check no. 815 _______ _______ 6 000 (6,000)
Adj. bank balances P124,950 P767,800 P415,480 P477,270
5. Adjusted book balance, Nov. 30 P124,950
Answer: B
6. Adjusted bank receipts in December P767,800
Answer: D
7. Adjusted book disbursements in December P415,480
Answer: C
8. Adjusted bank balance, December 31 P477,270
Answer: B
PROBLEM 1-26
Proof of Cash: Bank to Book Balances Format
Shown below is the May 31, 2018, bank reconciliation prepared by your client's staff.
Reconciliation
May 31, 2018
Bank balance P652,000
Add: Deposit in transit 10,000
Total P662,000
Less: Outstanding
No, 640 P10,000
652 8,000
653 2,000 20,000
Adjusted bank balance P642,000
Book balance P570,800
Add: Proceeds of note receivable
collected in May P70,OOO
Deposit on May 31 not
recorded on books until June 2,000 72,000
Total P642,800
Less: Bank service charge ____800
Adjusted book balance P642,000
June 30 3,000 DM
The paid checks accompanying this bank statement (all clearing in June) are the following:
No. 652 P8,OOO No. 654 P14,OOO No. 657 P12,OOO
No. 653 P2,OOO No. 655 P 4,000 No. 658 P18,OOO
The check register reveals that the last check issued in June is No. 659 for P5,000 and that check no. 656
is for P2,600.
Cash received for the period June 22 through June 30 of P70,000 was deposited in the bank on July 1.
The debit memos on June 13 and June 30 represent customers' NSF checks returned by the bank. The
June 13 NSF check was immediately redeposited without entry. The June 30 NSF check was redeposited
on July 1 without entry.
PROOF OF CASH
June 1-30, 2018
Balance June Balance
May 31 Receipts Disbursements June 30
Bank balances P652,OOO P88,000 P63,200 P676,800
Deposits in transit:
May 31 10,000 (10,000)
June 30 70,000 70,000
Outstanding checks:
May 31 (20,000) (20,000)
June 30 17,600 (17,600)
Bank service charges:
May 31 800 800
June 30 200 200
Bank collection in May (70,000) 70,000
May deposit recorded
By the company in
June (2,000) 2,000
NSF checks:
Already redoposited (1,000) (1,000)
Not yet deposited (3,000) 3,000
Bank error corrected
On the same date ______ (1,000) (1,000) _______
Book balances P570,800 P218,000 P56,400 P732,400
4.Total book receipts in June P218,000
Answer: D
5. Total book disbursements in June P56,4OO
Answer: C
6.Book balance on June 30, 2018 P732,400
Answer: C
PROBLEM 1-27
Proof of Cash: Bank to Book Balances Format
The following information was obtained in an audit of the cash account of CHELSEE.COMPANY as of
December 31, 2018. Assume that the CPA has satisfied himself as to the propriety of the cash book, the
bank statements, and the returned checks, except as noted:
1. The bookkeeper's bank reconciliation at November 30, 2018.
Solution 1-28
1. Deposit in transit, November 30 P12,500
Add: Company collections in December 152 500
Total 165,000
Less: Deposits credited by bank in December 145,000
Deposit in transit, December 31 P20,000
Answer: B
2. Bank service charges per December bank statement P3,250
Less: December bank service charges recorded
on company books in December
(2,500 - PI,500) 1 000
Unrecorded December bank service charges P2,250
Answer: B
SOLUTION 1-28
1. Deposit in transit, November 30 P12,500
Add: Company collections in December 152 500
Total 165,000
Less: Deposits credited by bank in December 145 000
Deposit in transit, December 3 20,000
Answer: B
Answer: B
Answer: A
Answer: D
Answer: D
Answer: A
Pinky Co.
PROOF OF CASH
For the Month of December 2018
Problem 1-29
Proof of Cash: Unadjusted to Adjusted Balances Format
In your audit of HARRY INC.'s cash account as of December 31, 2018, you ascertain the following
information:
The Cash Receipts Journal shows total receipts for December of P371, 766. The Check Register reflects
total checks issued in December of P377, 632. A collection of P5, 912 was recorded on company books
on December 31 but was not deposited until January 2, 2019.
The balance per bank statement at December 31, 2018, is PI 7,516. This statement shows total receipts
of P373, 502 and checks paid of P380,284.
1) Check no. 3413 dated November 24, 2018, was entered in the Check Register as P300. Your
examination of the paid checks returned with the December bank statement reveals that the amount of
this check is P'3ff
2) Check no. 3417 was mutilated and returned by the payee. A replacement check (no. 3453) was
issued. Both checks were entered in the Check Register but no entry was made to cancel check no. 3417.
4) On January 3, 2019, the bank informed your client that a December bank service charge of P42 was
omitted from the statement.
5) Your examination of the bank credit memo accompanying the December bank statement discloses
that it represents proceeds from the note receivable' collection in December for P4,000.
Solution 1-29
Answer:
Answer: C
8. A proof of cash usually consists of four columns, with reconciliations of beginning and end-of-period
cash balances and reconciliations of cash receipts and disbursements during the period. The amounts
appearing in the ledger and on bank statement should reconcile both horizontally and vertically. This
reconciliation detects unauthorized disbursements and unrecorded deposits for the period. This is useful
when internal control over cash transactions is weak or inadequate.
Answer: D
Problem 1 – 30
Proof of Cash: Unadjusted to Adjusted Balances Format
The following data are assembled by the accountant of the HAROLD COMPANY:
*Redeposited in the same month. No entries made to take up the return and redeposit.
The bank statement and the company's cash records show the following total:
Canceled checks and debit memos per bank statement P545, 932.50
Cash receipts per cash book 411,592.50
Checks written per cash book 529,792.50
Deposits and credit memos per bank statement 622,770.00
l. What is the total book receipt in December?
A. 613, 842.50 C. P411, 592.50
B. P591, 130.OO D. P580, 330.00
Solution 1-30
PROBLEM 1-31
Proof of Cash: Book to Bank Balances Format
1. The November 30 bank statement balance included bank service charges of P2, 000.
2. The November 30 cash balance in the general ledger was P244, 500.
3. Outstanding checks on November 30 were P63, 000 while undeposited receipts were P36, 000.
4. The bank service charges as shown on the bank statement totaled P3, OOO.
5. The December 31 cash balance in the general ledger was P319, 750, which recognized P482, 750 for
December receipts and P405, 500 for checks written during December. In transit to the bank were
receipts of P28, 750. Checks of P 15,000 written prior to December and checks of P60, 500 written in
December had not yet cleared the bank.
Balance per books P244, 500 P482, 750 P407, 500 P319, 750
Undeposited receipts
Nov. 30 (36, 000) 36, 000
Dec. 31
Outstanding checks:
Nov. 30 63, 000 63, 000
Dec. 31 (12,500) 12,500
Bank service charges:
Nov. 30 (2, 000) (2, 000)
Dec. 31 3,000 3,000
Bank balances P269, 500 P490, 000 P369, 000 P 363,500
2. Bank balance, November 30 P 269, 500
Answer: B
PROBLEM 1-32
Proof of Cash: Unadjusted to Adjusted Balances Format
RODELIO CO. has a current account in Pinoy Bank. Your audit of the company's cash account reveals the
following:
SOLUTION 1-32
Answer: D
PROBLEM 1-33
Nov. 30 Dec. 31
Cash account balance P 20,340 P 48,540
Bank statement balance 107,060 137,820
Deposits in transit 8,200 12,880
Outstanding checks 27,700 30,100
Bank service charge for the month,
not shown on company books 720 600
NSF checks returned by banks, not shown
on company books 4, 300 8, 240
Bank collections from company
customer, not shown on company books 72, 240 80, 900
Additional information:
SOLUTION 1-33
On January 10, 2019, you started the audit of the financial records of the KEMIRARA COMPANY for the
year ended December 31, 2018. From your investigation, you discovered the following:
1. The bookkeeper acts also as the cashier. Her December 31, 2018, year-end cash reconciliation
contained the following items:
Cash per ledger, Dec. 31, 2018 P184,200
Cash per bank, Dec. 31, 2018 194,550
Checks outstanding 15,660
Amnesia Co. check charged by the bank in error
Dec. 20, 2018; corrected by the bank on Jan. 5, 2019 450
Cash in transit, credited by the bank on Jan. 2, 2019 2,160
2. The cash account balances per ledger as of December 21, 2018
were :
Cash P184,200
Petty cash 450
3, The count of the cash on hand at the close of the business on January 10, 2019, including the
pettY8sh, was as follows:
Currency and coins PI,155
Expense vouchers 60
Employees' IOU's dated Jan. 5, 2019 165
Customers' checks in payment of account 870
4. From January 2, 2019 to January 10, 2019, the date ofyour cash count, total cash receipts appearing in
the cash records were P25,800. According to the bank statement for the period from January 2, 2019 to
January 10, 2019, total deposits were
5. On July 5, 2018, cash of P 1,200 was received on account from a customer; the Allowance for Doubtful
Accounts was charged and Accounts Receivable was credited.
6. On December 5, 2018, cash of P900 was received on account from a customer; Inventory was charged
and Accounts Receivable was credited.
7. Cash of P 2,190 received during 2018 was not recorded.
8. Checks received from customers from January 2, 2019 to
January 10, 2019, totaling P 1,260, were not recorded but were deposited in the bank.
9. On July 1, 2018, the bank refunded interest of P60 because
a note of the Kemirara Company was paid before maturity. No entry was made for the refund.
10. In the. cashier's petty cash, there were receipts for collection from the customers on January 9,
2019, totaling PZ,550; these were unrecorded and undeposited.
11. In the outstanding checks, there is one for P 150 made
payable to a trade creditor; investigation shows that this check had been returned by the creditor on
November 14, 2018 and a new check for P300 was issued in its place; the original check for P 150 was
made in error as to amount.
Required:
1. Compute the correct bank balance as of December 31, 2018.
2. Compute the ca h shortage as of December 31, 2018.
3. Compute the c sh shortage for the period January 1, 2019 to
January 10, 2019.
Book Bank
Requirement 3
Cashier's accountability:
Cash receipts per cash records, Jan. 2-10, 2019 P25,800
Unrecorded deposited collections, Jan. 2-10, 2019 1,260
Unrecorded undeposited collections, Jan. 9, 2019 2,550
Petty cash fund 450
Total P30,060
Accounted for as follows:
Count of cash on hand and petty cash fund:
Currency and coins PI,155
Expense vouchers 60
Employees' IOUs 165
Customers' checks 870 P2,250
Total deposits per bank
Statement P22,800
Correction of bank error (450)
Deposit in transit, Dec. 31 (2,160) 20,190 22,440
CASH SHORTAGE, Jan. 2-10,2019 P7,620
Problem 1-35
The bookkeeper-cashier of the TANYING COMPANY absconded on the evening of April 16, 2019,
apparently with a large portion of the company's cash. He had taken with him certain accounting
records, including the cash journals and the general ledger. You are called upon to ascertain, if possible,
the shortage with which the missing employee may be charged.
you obtained the following information from the available subsidiary journals, ledgers, and other data.
A statement of financial position prepared from the books and other files follows:
Tanying Company
Statement of Financial Position
December 31, 2018
ASSETS
Cash P 32,670
Accounts receivable 226,230
Inventory (at cost) 440,350
Furniture P74,560
Less: Accumulated depreciation 31 800 42,760
Total assets P742,010
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable P114,720
Share capital 500,000
Retained earnings 127 290
Total liabilities and shareholders' equity P742,010
The cash books showed a balance of P94,508, which included undeposited receipts. A credit of P500 on
the banks records did not appear on the books of the company. The balance per bank statement was
P77,750. Outstanding checks were no. 8420 for P581, no. 8422 for P750, no. 8430 for PI,266, no. 8621
for P954,no. 8623 for PI,034, and no. 8632 for P726.
The cashier stole all undeposited receipts in excess of P 18,972 and prepared the following
reconciliation:
1. What is the correct amount of cash that should be on hand for deposit on November 30, 2018?
A. P23,069 C. P22,569
B. P18,972 D.P22,069
2. How much was stolen by the cashier?
A. P3,597 C. P4,097
B. P3,097 D. P O
3. The cashier attempted to conceal his theft by
I. Not listing all outstanding checks.
Il. Underfooting outstanding checks shown
on the reconciliation.
Ill. Adding an item
to the bank balance that should be deducted
from the book balance.
A. I and Il only C. I and Ill only
B. Il and Ill only D. l, Il, and Ill
4. Taking only the information giveny which of the following internal control deficiencies
allowed the cashier to steal cash and conceal his theft?
A. The cashier is also responsible for
preparing the reconciliation.
B. No one other than the cashier is
responsible for tracing cash receipts to
the deposits in the bank. C. Both A and B.
D, Neither A nor B.
5. What is the adjusted cash balance as of
November 30, 2018?
A. P95,008 C. P94,008
B. P91, D. P87,814
SOLUTION 1-36
1.Cash balance per books, Nov. 30 P94,508
Add:Bank credit 500
BU BE
A. P47,800 C. P48,OOO
B. P47,600 D. P47,664
B. PO D. P536
SOLUTION 1-37
June 15 P120
Correct Amount
Total P200
Answer: C
Answer: D
PROBLEM 1-38
You started the audit of the financial statements of ARCHIE, INC. on January 15, 2019, for the year
ended December 31, 2018. The general ledger shows cash account balance of P247j200 as at December
31, 2018.
The following items are included in the December 31, 2018, reconciliation prepared by the cashier:
From January 2, 2019, to January 15, 2019, the date of your cash count, total cash receipts appearing in
the cash records amounted to P53,500. During the same period, the bank had credited total deposits of
P47,965.
The following cash and cash items were on hand at the close of business on January 15, 2019:
Currency PI,425
P3,750
b. Unrecorded but deposited checks received from customers from January 2, 2019, to January 15,
c. The cashier presented receipts for collections from customers on January 10, 2019, totaling P4,500;
these were unrecorded and undeposited.
1. What adjusting entries would you provide for items (a) through (c)?
A. P21,180 C. P14,680
B.P16,180 D. P4,180
3. What is the total cash shortage as of January 15, 2019?
A. P26,465 C. P27,965
B. P18,430 D. P24,930
SOLUTION 1-38
a. 1. Cash 4,000
2. Cash 3,000
Inventory 3,000
3. Cash 3,500
c. 5. Cash 4,500
2. Book Bank
AJE 1 4,000
2 3,000
3 3 500 ______
Answer: C
AJE 4 P2,OOO
Total 63,500
Cash and cash items per count on Jan. 15, 2019 (3,750)
Answer: A
PROBLEM 1-39
The LEINOR COMPANY does not have adequate controls over its cash transactions. During an audit, you
found the following data concerning its cash position at December 3.1, 2018.
2. A credit ofP2,500 fora note collected by the bank does not appear on the company's records.
Number Amount
1428 P5,200
1431 3,600
1445 4,080
1446 3,460
No.
1431 P3,600
1445 4,080
P 124,860
A. P1l,200 c. P5,OOO
B. P8,700 D. P6,OOO
SOLUTION 1-39
1. Book Bank
Answer: A
2. Concealment of shortage:
PROBLEM 1-40
Additional information:
A. P0 B. P30,OO0
C. P76,OOO D. P66,OOO
SOLUTION 1-40
Total 1,204,000
Total 548,000
Less: Outstanding checks 42,000
Answer: D
NOTES:
1. Because there were no book and bank reconciling items on July 1, the bank balance on that date was
also the cash balance per books.
2. The receipts column of the table of cash receipts and disbursements is under-footed by P40,OOO
correct total - P964,OOO) while the is bursements column is overfooted by P36,000 (P668,000 —
PROBLEM 1-41
In connection with the audit of the financial statements of JEMCOMPANY for the year ended October
31, 2018, you conducted asurprise count of undeposited receipts on October 31, 2018. It was
witnessed by the company's cashier whose accountability on October 31 was determined to be P80,000.
Your count revealed the following:
Checks:
A. P7,080 C. P3,080
B. P3,480 D. P7,600
2. A cash shortage may be concealed by transporting funds from one location to another or by
converting negotiable assets to cash. Because of this, which of the following is vital?
A. Simultaneous confirmations
C. Simultaneous verification
SOLUTION 1-41
Unreleased
Answer: A
2. Simultaneous verification
Answer: C
PROBLEM 1-42
JAM COMPANY's unadjusted trial balance at December 31, 2018, included the following accounts:
Debit Credit
Cash P 69,200
Jam Co.'s year-end is December 31. At the end of 2018, it held its cash book open so that its statement
of financial position would show a more favorable financial condition. Your audit revealed the
following items:
1. The December cash book included January cash receipts of p65,460, of which P36,010 represents cash
salespnd P29,450 represents collections from customers, net of 5% cash
discounts.
2. The December check register included payments of accounts to suppliers of P37,240 on which
discounts of P 1,240 were taken.
1. What are Jam's working capital and current ratio at December 31, 2018, based on balances per
company books?
Working Current
Capital Ratio
A.P316,081 1.42
B. 316,081 1.39
c. 329,295 1.42
D. 329,295 1.39
2. What are Jam's correct working capital and current ratio at December 31, 2018?
AP244,381 1.29
B.278,831 0.33
c. 330,835 1.40
D. 280,381 1.33
2. A cash shortage may be concealed by transporting funds from one location to another or by
converting negotiable assets to cash. Because of this, which of the following is vital?
A. Simultaneous confirmations
C. Simultaneous verification
SOLUTION 1-41
Unreleased
Answer: A
2. Simultaneous verification
Answer: C
PROBLEM 1-42
JAM COMPANY's unadjusted trial balance at December 31, 2018, included the following accounts:
Debit Credit
Cash P 69,200
The bank statement for the month ended March 31, 2018, shows a cash balance of P590,000. The
following checks are outstanding on March 31:
The company's general ledger shows a cash balance of P696,499 on March 31, 2018.
Realizing that being the cashier-accountant of the company he can easily misappropriate collections and
conceal it, Alex removed all the cash on hand in excess of P 127,301, and then prepared the following
reconciliation in an effort to conceal this theft.
BANK RECONCILIATION
Balance per accounting records P696,499
Total 717,301
A. P30,555 C. P4,OOO
B. P157,856 D. P26,555
A. P127,301 C. P157,856
B. P131,301 D. P30,555
SOLUTION 1-44
1. Book Bank
Outstanding checks:
Answer: A
2. Cash on hand P127,301
Answer: C