Conceptual Framework Quiz 2: Intermediate Accounting- Cash and Cash Equivalents

1. Any instrument that is acceptable by the bank for deposit or encashment is considered cash.
2. All items reported under “cash and cash equivalents” are acceptable by the bank for deposit or
encashment
3. What is the requirement in order that a cash item may be reported as part of “cash and cash
equivalents.”
4. What is the basis for measurement of a cash deposit in a bank that is in the process of liquidation.
5. What is the balance sheet classification of the cash deposit in no. 4 if it is not collectible within
one year from balance sheet date

Write “yes” if the item described is considered cash and cash equivalents. If not, write “no” and beside
it write the correct balance sheet classification. Balance Sheet date December 31, 2018.

6. A customer check dated Dec. 30 2018 and received Dec. 31 2018.

7. A customer check dated Jan 3 2018 and received Dec. 31, 2018.
8. A customer check dated Dec 31, 2018 and received Jan 2, 2019.
9. A preference share purchased on Nov. 1 2018 and with a mandatory redemption date of Jan 31,
2019.
10. Cash in saving account, set aside for the construction of a bldg. The bldg. is due for construction
in January, 2019.
11. Treasury Bills acquired on feb 1, 2018 and will mature on Jan 31, 2019
12. Treasury Bills acquired on Dec. 1, 2018 and will mature on Feb.28, 2019.
13. Time deposit placed with the bank on March 11, 2016 and will mature on Feb. 28, 2019.
14. Bonds purchased on Nov. 1, 2018. The bonds have maturity date of Oct. 31, 2019 but the company
intends to sell them in January, 2019.
15. Checking Account in a bank closed by Bangko Sentral ng Pilipinas.
16. Deposit in a foreign country where there is no foreign exchange restriction.
17. Sinking Fund set aside for the payment of a bank loan obtained in 2014. The bank loan is payable
in 2019.
18. What is a compensating balance?
19. Refer to no. 18, what is its balance sheet classification if it is related to a short term loan
20. Refer to no. 18, what is its balance sheet classification if it is related to a long-term loan.
21. From the view point of a payee (i.e recipient of check), what is the balance sheet classification of
a stale check?

Give the pro-forma journal entry to:

22. Set up the petty cash fund

23. Record money taken from petty cash fund
24. Replenish the petty cash fund
25. Record a cash shortage in the petty cash fund
26. Based on the ffg. Give the correct amount of cash in bank:
Cash in bank- PNB#103256 100, 000
Cash in bank-RBC#98241 (50, 000)
Cash in bank-BDO# 032578 200, 000
Cash in bank-BDO# 032593 (100, 000)
 Answers
1. Yes
2. No, cash equivalents are not acceptable by the bank for encashment and deposit
3. Unrestricted
4. Face value or estimated realizable value
5. Non-current asset : Other Non-current asset
 Current asset-Separate line item when collectible within one year
6. Yes, Rule: Payment is recognized when the check can be presented on the bank (not post
dated)
7. No, trade and other receivable : Post dated check
8. No, trade and other receivable: Undelivered check
9. Yes
10. No, Non-current asset--Long-term investment
11. No, Current asset—short term investment
12. Yes
13. No, Current asset--- short term investment
 Dec 31, 2016 --- Long-term
 Dec 31, 2017---- Long-term
 Dec 31, 2018- -- short-term
14. No, Current asset---short term investment or temporary or financial asset
15. No, Rule: Silent – Other non-current asset
16. Yes
17. Yes , 2014-2017 non-current liability and sinking fund, 2018- reclassify current asset operation
18. Minimum deposit balance
19. Current asset- Separate line item/ cash held compensating
20. Non-current asset: Long-term investment
21. Trade and other receivable
22. Petty Cash Fund xxx
Cash in Bank xxx
23. No entry Non-current asset
24. Expenses xxxx
Cash in bank xxx Pension Fund Plant expansion Fund
25. Cash short or over xxx
Insurance Fund Replacement Fund
Cash in bank xxx
26. 200, 000 Preference Share Redemption Fund
Same bank : offset

Equity shares can never be considered as cash and cash equivalents

Preference shares with a mandatory redemption date

Redeemable Shares treated as liability (at the option of the holder)

Callable at the option of the issuer