Cash

(1)

Question 1

Rommel Company keeps all its cash in a checking account. An examination of the company’s accounting records and bank statement for the month ended June 30, 2013 revealed the following information:

The cash balance per book on June 30 is P8,500,000.

A deposit of P1,000,000 that was placed in the bank’s night depository on June 30does not appear on the bank statement.

The bank statement shows on June 30, the bank collected note for Rommel and credited the proceeds of P950,000 to the Company’s account.

Checks outstanding on June 30 amount to P300,000.

Rommel discovered that a check written in June for P200,000 in payment of an account payable, had been recorded in the Company’s records as P20,000.

Included with the June bank statement was NSF check for P250,000 that Rommel had received from a customer on June 26.

The bank statement shows a P20,000 service charge for June.

The cash in bank to be shown in the statement of financial position on June 30, 2013 is 9,000,000

8,300,000 9,360,000 9,180,000

SOLUTION:

Balance per book 8,500,000

Note collected by bank 950,000 Book error (200,000 -

20,000)

(180,000)

NSF check (250,000)

Service charge (20,000)

Adjusted book balance 9,000,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 2

(2)

Balance per bank statement, June 30

3,000,000

Deposit in transit 400,000

Outstanding check (900,000)

Balance per book, June 30 2,500,000

The bank statement for the month of July showed the following:

Deposits (including P200,000 note collected for Roger) 9,000,000 Disbursements (including P140,000 NSF check and

P10,000 service charge)

7,000,000

All reconciling items on June 30 cleared through the bank in July. The outstanding checks totaled P600,000 and the deposit in transit amounted to P1,000,000 on July 31.

What is the cash balance per book on July 31? 5,400,000

5,350,000 5,550,000 4,500,000

SOLUTION:

Balance per bank-June 30 3,000,000

July bank deposits 9,000,000

July bank disbursements (7,000,000) Balance per bank - July 31 5,000,000 July deposit in transit 1,000,000 July outstanding checks (600,000) Adjusted bank balance 5,400,000 Balance per book (squeeze) 5,350,000 Note collected by bank in

July

200,000

NSF check in July (140,000)

Service charge in July (10,000) Adjusted book balance 5,400,000

(3)

Kenny Company had the following bank reconciliation on June 30, 2013: Balance per bank statement, June

30

3,000,000

Outstanding check (900,000)

Deposits (including P200,000 note collected for Kenny) 9,000,000 Disbursements (including P140,000 NSF check and

P10,000 service charge)

7,000,000

What is the amount of cash receipts per book in July? 9,400,000

9,600,000 8,600,000 9,800,000

SOLUTION:

Deposits per bank statement for

July 9,000,000

Note collected by bank (200,000) Deposit in transit-June 30 (400,000) Deposit in transit-July 31 1,000,000 Cash receipts per book for July 9,400,000

Question 4

Kareen Company had the following bank reconciliation on June 30, 2010: Balance per bank statement, June 30 3,000,000

(4)

Deposits (including P200,000 note collected for Kareen) 9,000,000 Disbursements (including P140,000 NSF check and

P10,000 service charge) 7,000,000

What is the amount of cash disbursements per book in July? 6,550,000

6,700,000 7,300,000 6,850,000

SOLUTION:

Disbursements per bank statement for July

7,000,000

NSF check in July (140,000)

Service charge in July (10,000)

Outstanding checks-June 30 (900,000)

Outstanding checks-July 31 600,000

Cash disbursements per book for July 6,550,000

Question 5

Reconciliation of Jam Company’s bank account at May 31 is: Balance per bank

statement

2,100,000 Deposits outstanding 300,000

Checks outstanding (30,000)

Correct cash balance 2,370,000

(5)

Correct cash balance 2,370,000 June data are as follows:

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 with the June 30

statement

10,000

Balances 1,830,000 1,810,000

The check outstanding on June 30 amounted to 30,000

90,000 60,000 0

SOLUTION:

Check outstanding - May 31 30,000 Checks recorded in June 2,360,000

Total 2,390,000

Checks recorded by bank in June (2,300,000) Check outstanding - June 30 90,000

Question 6

Cash data related to Ron Company for the month of January of the current year are shown below:

Balance per book, January 31 3,130,000

Balance per bank statement, January 31 3,500,000

Collections on January 31 but undeposited 550,000

NSF check received from a customer returned by the bank

on February 5 with the January bank statement 50,000

(6)

Bank debit memo for safety deposit box rental not recorded

by the depositor 5,000

A creditor’s check for P30,000 was incorrectly recorded in

the depositor’s book as 300,000

A customer’s check for P200,000 was recorded by the

depositor as 20,000

The depositor neglected to make an entry in its books for a

check drawn in payment of an accounts payable 125,000 What is the adjusted cash in bank on January 31?

3,130,000 3,500,000 3,400,000 2,950,000

SOLUTION:

Overstatement of creditor’s check 270,000 Understatement of customer’s check 180,000

NSF check (50,000)

Bank debit memo for safety deposit

box (5,000)

Unrecorded check (125,000)

Balance per bank 3,500,000

Uneposited collections 550,000

Checks outstanding (650,000)

Adjusted bank balance 3,400,000

Question 7

Philip Company had the following account balances on December 31, 2013

Cash in bank-current account 5,000,000

Cash in bank-payroll account 1,000,000

(7)

Cash in bank-restricted account for building construction

expected to be finished in 2013 3,000,000

Time deposit purchased on December 15, 2013 and due

on March 15, 2014 2,000,000

The cash on hand includes a P200,000 check payable to Philip, dated January 15, 2014. What amount should be reported as cash and cash equivalents on December 31, 2013.

6,300,000 8,300,000 6,500,000 8,700,000

SOLUTION:

Cash in bank-current account 5,000,000 Cash in bank - payroll account 1,000,000 Cash on hand (500,000 -

200,000)

300,000

Time deposit 2,000,000

8,300,000

The cash in bank set aside for payroll is included in cash because it is for the payment of current liability.

Question 8

Daina Company provided the following information with respect to its cash and cash equivalents on December 31, 2013:

Checking account at First Bank (200,000)

Checking account at Second Bank 3,500,000

Treasury bonds 1,000,000

Payroll account 500,000

Value added tax account 400,000

Foreign bank account - restricted 2,000,000

Postage stamps 50,000

Employee’s postdated check 300,000

(8)

Credit memo from a vendor for a purchase return

80,000

Traveler’s check 300,000

NSF check 150,000

Petty cash (P20,000 in currency and expense

receipts for P30,000) 50,000

Money order 180,000

What amount should be reported as unrestricted cash on December 31, 2013: 5,900,000

4,600,000 4,900,000 6,900,000

SOLUTION:

Checking account at Second

Bank 3,500,000

value added tax account 400,000

Traveler’s check 300,000

Petty cash fund 20,000

Money order 180,000

4,900,000

Question 9

The following data pertain to the cash transactions and bank account of James Company for May of the current year:

Cash balance per accounting record 1,719,000

Cash balance per bank statement 3,195,000

Bank service charge 10,000

Debit memo for the cost of printed checks delivered by the bank; the charge has not been recorded in the accounting record

12,000

Outstanding checks 685,000

(9)

Proceeds of a bank loan on May 30, not recorded in the

accounting record, net of interest of P30,000 570,000 Proceeds from a customer’s promissory notes, principal

amount of P800,000 collected by the bank not taken up in the

accounting record with interest 810,000

Check no 1086 issued to a supplier entered in the accounting record as P210,000 but deducted in the bank statement at an

erroneous amount of 120,000

Stolen check lacking an authorized signature deducted from

James’s account by bank in error 80,000

Customer’s check returned by the bank marked NSF, indicating that the customer’s balance was not adequate to cover the check; no entry has been made in the accounting record to

record the returned check. 77,000

The adjusted cash in bank is 3,000,000

2,910,000 3,080,000 2,990,000

SOLUTION:

Service charge (10,000)

Debit memo for printed checks (12,000)

Proceeds of bank loan 570,000

Proceeds of customer’s note 810,000

NSF check (77,000)

Balance per bank 3,195,000

Outstanding checks (685,000)

Bank error in recording check (90,000) Stolen check deducted by bank in

error

80,000

Adjusted bank balance 3,000,000

(10)

Question 10

Michael Company reported the following information as of the end ofthe current year. Investment securities of P1,000,000. These securities are share investments in entities that are traded in the Philippine Stock Exchange. As a result, the shares are very actively traded in the market.

Investment securities of P2,000,000. These securities are government treasury bills. The treasury bills have a 10-year term and purchased on December 31 at which time they had two months to go until they mature.

Cash of P3,400,000 in the form of coin, currency, saving account and checking account.

Investment securities of P 1,500,000. These securities are commercial papers. The term of the papers is nine months and they were purchased on December 31 at which time they had three months to go until they mature.

How much should be reported as cash and cash equivalents at the endof the current year? 5,400,000

6,400,000 6,900,000 7,900,000

SOLUTION:

Government treasury bills 2,000,000

Cash 3,400,000

Commercial papers 1,500,000

Total cash and cash equivalents 6,900,000

The share investments cannot qualify as cash equivalents because although they are very actively traded they do not have a maturity. The commercial papers are actually money market placements. Since the remaining term is three months from the date of acquisition, the

commercial papers are considered cash equivalents

(11)

Jason Company provided the following information with respect to its cash and cash equivalents on December 31, 2009.

Checking account at First Bank ( 200,000)

Foreign bank account - restricted (in equivalent pesos) 2,000,000

Employee's postdated check 300,000

IOU from president's brother 750,000

Credit memo from a vendor for a purchase return 80,000

Traveler's check 300,000

Not-sufficient-fund check 150,000

Petty cash fund (P20,000 in currency and expense receipts for

P30,000) 50,000

Money order 180,000

What amount would be reported as unrestricted cash on December 31, 2009? 5,900,000

4,600,000 4,900,000 6,900,000

SOLUTION:

Money order 180,000

Total unrestricted cash 4,900,000

(12)

The checkbook balance of JR Company on December 31, 2009was P4,000,000. Data about certain cash items follow:

A customer check amounting to P200,000 dated January 2, 2010 was included in the December 31, 2009 checkbook balance.

Another customer check for P500,000 deposited on December 22, 2009 was included in its checkbook balance but returned by the bank for insufficiency of fund. This check was redeposited on December 26, 2009 and cleared two days later.

A P400,000 check payable to supplier dated and recorded on December 30, 2009 was mailed on January 16, 2010.

A petty cash fund of P50,000 with the following summary on December 31, 2009:

Coins and currencies 5,000

Petty cash vouchers 43,000

Return value of 20 cases of soft

drinks 2,000

50,000

A check of P43,000 was drawn on December 31, 2009 payable to Petty Cash. What is the "cash" balance on December 31, 2009?

4,248,000 4,200,000 4,205,000 3,748,000

SOLUTION:

Checkbook balance 4,000,000

Postdated customer check ( 200,000)

Undelivered check payable to

supplier 400,000

Adjusted cash in bank 4,200,000

Petty cash:

Coins and currencies 5,000

Replenishment check 43,000 48,000

(13)

The return value of the soft drink bottles is shown as refundable deposit as a current asset. The NSF check is redeposited and cleared before December 31, 2009. Thus, the same is not deducted anymore from the checkbook balance

Question 13

On December 31, 2009, Ally Company's "cash account" balance per ledger of P3,600,000 includes the following:

Demand deposit 1,500,000

Time deposit - 30 days 500,000

NSF check of customer 20,000

Money market placement due on June 30,

2010 1,000,000

Saving deposit 50,000

IOU from an employee 30,000

Pension fund 400,000

Customer check dated January 31, 2010 60,000 Customer check outstanding for 18 months 30,000 3,600,000

Check of P 100,000 in payment of accounts payable was dated and recorded on December 31, 2009 but mailed to creditors on January 15, 2010.

Check of P50,000 dated January 31, 2010 in payment of accounts payable was recorded and mailed December 31, 2009.

The entity uses the calendar year. The cash receipts journal was held open until January 15, 2010, during which time P200,000 was collected and recorded on December 31, 2009. The "cash and cash equivalents" on December 31, 2009 should be

2,010,000 1,960,000 1,860,000 1,510,000

(14)

Demand deposit 1,450,000

Time deposit - 30 days 500,000

Saving deposit 50,000

Demand deposit per book 1,500,000

Undelivered check 100,000

Postdated check delivered 50,000

Window dressing of collection ( 200,000)

Adjusted balance 1,450,000

Question 14

The December 31, 2009 trial balance of Fernandez Company includes the following accounts:

Cash on hand 500,000

Security Bank current account 1,000,000 PNB Current account No. 1 400,000 PNB Current account No. 2 ( 50,000) BSP treasury bill - 60 days 3,000,000 BPI time deposit - 30 days 2,000,000

The cash on hand includes a customer postdated check of P 1 00,000 and postal money order of P40,000.

The petty cash fund includes unreplenished petty cash vouchers for P2,000 and an employee check for P3,000 dated January 31, 2010.

A check for P200,000 was drawn against Security Bank account, dated January 15, 2010, delivered to the payee and recorded December 31, 2009.

The BPI time deposit is set aside for acquisition of land to be used as a factory site. The statement of financial position on December 31, 2009 shouldshow cash and cash equivalents at

4,965,000 6,965,000 4,765,000

(15)

1,965,000

SOLUTION:

Cash on hand (500,000 - 100,000) 400,000

Petty cash fund (20,000 - 2,000 - 3,000) 15,000 Security Bank current account (1,000,000 +

200,000) 1,200,000

PNB current account No. 1 400,000

PNB current account No. 2 ( 50,000)

BSP treasury bill - 60 days 3,000,000

Question 15

Jason Company provided the following information with respect to its cash and cash equivalents on December 31, 2009.

Checking account at First Bank ( 200,000)

Foreign bank account - restricted (in equivalent pesos) 2,000,000

Employee's postdated check 300,000

IOU from president's brother 750,000

Credit memo from a vendor for a purchase return 80,000

Not-sufficient-fund check 150,000

Petty cash fund (P20,000 in currency and expense receipts for

P30,000) 50,000

Money order 180,000

What amount would be reported as unrestricted cash on December 31, 2009? 5,900,000 4,600,000 6,900,000 4,900,000

SOLUTION:

(16)

Money order 180,000

Total unrestricted cash 4,900,000