CHAPTER 2
CASH AND CASH EQUIVALENTS PROBLEMS
2-1. (Money Company)
Checking account in Metrobank P105,200 Savings account at Far East Bank 30,800 Petty cash fund (1,500 – 250) 1,250 Cash on hand (undeposited sales receipts) 4,200 Cash in foreign bank (in equivalent pesos) 65,000 Customers’ check on hand:
Traveler’s check 14,000
Manager’s check 23,120
Total amount of cash P243,570
Alternative computation:
Reported total P330,820
Adjustments: Sinking fund cash ( 35,000)
Short term treasury bills ( 52,000) Unreplenished petty cash expenses ( 250)
Correct cash balance P243,570
The outstanding checks of P15,200 was ignored since the given balance of cash is a cash balance per books. Short-term treasury bills of P52,000 is reported as part of trading securities unless there is an indication of a maturity of three months or less in which case, they are included as part of cash and cash equivalents. Meanwhile, sinking fund cash of P35,000 is reported as a noncurrent financial asset.
2-2. (Cotton Company)
(a)
Reported checkbook balance P180,000
Adjustments:
Customer’s post dated check included in the balance ( 65,000) Customer’s check returned by bank marked DAIF ( 20,000) Company check recorded but not yet mailed 15,000 Cash reported on December 31, 2016 statement of financial position P110,000
(b) Accounts receivable 65,000 Cash in bank 65,000 Accounts receivable 20,000 Cash in bank 20,000 Cash in bank 15,000 Accounts payable 15,000
2-3. (Grain Company)
Balance per general ledger P2,205,600 Non-cash items:
Customer’s DAIF checks returned by bank P 20,000 Cash in BDO earmarked for purchase
of equipment 750,000 IOUs from employees 5,200 Cash in sinking fund 500,000 Customers’ post dated checks 25,400
Travel advances 8,000 1,308,600
Correct cash balance P 897,000
Customers’ DAIF checks, IOUs and customers’ post dated checks are reported as receivables; travel advances are prepaid expenses; while savings account in BDO and cash in sinking fund are reported as noncurrent financial assets.
2-4. (Rod Company)
Petty cash (10,000 – 1,250) P 8,750 Cash on hand (625,000 – 17,500) 607,500 Cash in bank- General (525,000 + 12,500) 537,500 Cash in bank, Payroll (320,000 + 10,000) 330,000
Total P1,483,750
IOU from an employee and customers’ post dated check are receivable items; the bank overdraft in another bank is reported as a current liability (offset can be made only if the accounts are with the same bank); the savings deposit is a non-current item since it is intended for a non-current purpose (for plant expansion).
2-5. (Latte Company)
Cash and cash equivalents: Savings account with Allied Bank
Per books P 900,000
Customer’s postdated check (320,000) P580,000 Checking account with Allied Bank
Per books P1,400,000
Issued postdated check 300,000 1,700,000 Bills and coins in the petty cash fund 9,850 Money market fund which allows check writing 2,000,000 Certificate of deposit with term of 90 days 1,000,000 Payroll fund with BDO
Per books P6,000,000
Unissued but recorded check 50,000 6,050,000
Cash balance with BPI 5,000,000
Correct cash and cash equivalents P16,339,850 The items not included in cash and cash equivalents shall be presented as follows:
Expenses in the statement of comprehensive income (P150 cash
shortage in petty cash fund + expense receipts of P5,000) P 5,150 Current assets:
Certificates of deposit (with term of 120 days) 2,000,000 Accounts receivable (customer’s postdated check) 320,000 Non-current assets:
Cash fund for retirement of bonds payable 1,500,000 Current liabilities
Accounts payable (PDC issued to supplier) 300,000 Salaries payable (unissued check to employee) 50,000
2-6. (Jessie Company)
Nov. 20 Petty cash fund 5,000
Cash in bank 5,000
Nov. 20 to No entry Dec. 15
Dec. 16 Transportation expense 1,500
Representation expense 1,200
Freight-in 1,300
Repairs expense 920
Cash in bank 4,920
Dec. 16 –31 No entry
Dec. 31 Transportation expense 340
Supplies expense 1,400
Petty cash fund 1,740
Jan. 1 Petty cash fund 1,740
Transportation expense 340
Supplies expense 1,400
Jan. 1-8 No entry
Jan. 9 Transportation expense (340 + 120) 460 Supplies expense (1,400 + 1,300) 2,700
Representation expense 1,800
Cash in bank 4,960
9 Petty cash fund 3,000
Cash in bank 3,000
2-7. (Coral Company)
(a) Petty cash fund P5,000.00
Amount of cash on hand P 670.40 Total petty cash vouchers:
Office supplies P 341,60 Postage 780.00 Representation 1,000.00 Transportation 1,321.40
Miscellaneous 837.60 4,280.60 4,951.00 Shortage in the petty cash fund P 49.00 (b) Office supplies expense 341.60
Postage expense 780.00 Representation expense 1,000.00 Transportation expense 1,321.40 Miscellaneous expense 837.60 Cash short and over 49.00
Petty cash fund 4,329.60
2-8. (Prada Company)
1. May 2 Petty cash fund 8,000
Cash in bank 8,000 2. May 2-20 No entry
4. May 20 Freight-in 2,500 Freight-out 3,000 Supplies expense 800 Cash in bank 6,300 5. No entry 6. May 31 Freight in 1,200 Transportation expense 150 Employee benefit expense 320 Advances to employees* 630
Petty cash fund (8,000 – 5,700) 2,300
*(IOU of 500 + short of 130) Per count
Bills and coins P5,700 Paid petty cash vouchers
(1,200 + 150 + 320 + 500) 2,170
Total P7,870
Petty cash fund, imprest balance 8,000
Cash shortage P 130
2-9. (Canon Company)
(a) Bills and coins 1,450
PCVs dated July 1-4, 2016 (undisbursed as of June 30) 800 Adjusted balance of petty cash fund 2,250 Unreleased payroll (1,500)
Correct petty cash balance 750
(b) Per count
Bills and coins P 1,450
PCVs dated June 3,300
PCVs dated July 800
IOU from an employee 1,400
Employee’s post dated check 2,000 Total per count P 8,950 Cashier’s accountability
Petty cash fund P10,000
Unreleased payroll 1,500
Total accountability 11,500
Cash shortage P 2,550
(c) Miscellaneous expenses 3,300 Receivable from employees (1,400 + 2,000) 3,400 Cash short/over 2,550
Petty cash fund 9,250
2-10.
(a)
Bills and coins P4,560
Petty cash vouchers dated January 2016 1,130
IOUs dated January 2016 1,000
Total P6,690
Unreleased payroll ( 2,000)
(b) Per count
Bills and coins P4,560
Paid PCV’s dated Dec. 2015 3,140 dated Jan. 2016 1,130 IOUs dated Dec. 2015 1,800 dated Jan. 2016 1,000
Total per count P11,630
Cashier’s accountability
Petty cash fund P10,000
Unreleased payroll 2,000
Total accountability P12,000
Cash shortage P 370
(c) Expenses 3,140
Receivables from employees 1,800
Cash short/over 370
Petty cash fund 5,310
Correct PCF = 10,000 – 5,310 = P4,690
2-11. (Giordano Corporation)
Giordano Corporation Bank Reconciliation Statement
December 31, 2016
Balance per bank statement P199,925
Add: Cash on hand for undeposited receipts P13,025
Deposit in transit 35,000 48,025
Total P252,950
Deduct: Outstanding checks 204,055
Adjusted balance P 43,895
Balance per books P(32,560)
Add: Note receivable collected by bank, incl interest of P2,500 252,500
Total P219,940
Deduct: Customer’s NSF check returned by bank P42,040 Customer’s check for P29,040 erroneously
recorded as P94,020 64,980
Cash sales missing 64,025
Petty cash fund 5,000 176,045
Adjusted balance P 43,895 (b) Adjusting entries: Cash in bank 252,500 Notes Receivable 250,000 Interest Revenue 2,500 Accounts Receivable (42,040 + 64,980) 107,020
Loss from Theft 64,025
Petty Cash Fund 5,000
Cash in bank 176,045
Miscellaneous Expenses 1,800
Total Cash on the statement of financial position:
Petty cash fund of P3,200 + Cash in bank of P43,895 P47,095
2-12. (Pound Company)
(a) Per Per
Bank Books
Balances before adjustments P31,848 P17,194
Bank service charge ( 109)
Debit memo for printed checks ( 225)
Outstanding checks (6,728)
Deposit of July 31 not yet recorded by bank 4,880
Proceeds of a bank loan, net of P300 interest 5,700 Proceeds from customer’s note, including P100 interest 8,100 Check #1210 for P2,100 erroneously deducted by bank as P1,200 (900)
Stolen check lacking authorized signature deducted by bank in
error 800
Customer’s NSF check returned by bank _______ (760)
Correct cash balance P29,900 P29,900
(b) Adjusting entry at July 31, 2016 (compound form)
Miscellaneous Expenses (109 + 125) 234 Accounts Receivable 760 Interest Expense 300 Cash in Bank 12,806 Bank Loan 6,000 Notes Receivable 8,000 Interest Revenue 100 2-13. (Bench Company)
Per Bank Per Books Balances before adjustments P892,346.30 P590,884.60
Outstanding checks (333,788.20)
Receipts of 12/31/16 deposited on 1/2/17 53,172.00
Service charges for December ( 225.00)
Proceeds of bank loan omitted from co. records 97,000.00 Deposit of 12/23/16 omitted from bank records 28,924.10
Check of Rome Products charged for lack of counter
signature (8,737.40)
Bank error for a deposit of P31,824 recorded as P31,814 10.00 Check of Birch Company erroneously charged by bank 26,900.00
Proceeds of note collected by bank 20,350.00
Erroneous debit by bank for bank loan paid by the co. 50,000.00 Bank error for a deposit of P48,071 recorded as P48,171 ( 100.00
Deposit of Birch Co. erroneously credited by bank (18,192.00) __________
Adjusted cash balance P699,272.20 P699,272.20
2-14. (Amethyst Corporation)
Balance per bank statement P169,263
Deposit in transit, April 30 18,200
Outstanding checks, April 30 ( 59,435)
Erroneous charge by bank 2,200
NSF checks not yet redeposited (3,435 – 1,835) 1,600 Proceeds of note collected by bank ( 7,548)
Bank service charge 180
2-15. (Silver Company)
Balance per bank statement P380,750
Deposits in transit 52,000
Outstanding checks (67,500 – 9,000) (58,500)
Erroneous credit by bank ( 4,000)
Check of Silver Lining charged by bank to Silver Co.’s account 12,000
Correct cash balance P382,250
2-16. Cash balance per books, March 1 P115,963.70
Cash receipts during March 246,475.00
Cash disbursements during March (334,709.10)
Bank service charge for March (92.00) Cash balance per books at March 31 P 27,637.60 Cash balance per bank statement P15,341.40
Deposit in transit 9,000.00
Outstanding checks (2,703.80)
Cash balance reflected per bank 21,637.60 Suspected cash shortage (undeposited collections) P 6,000.00
2-17. (Pearl Corporation)
Balance per bank statement P400,000
Add receipts of 12/31/16 not yet deposited 100,000 Balance per bank statement before outstanding checks P500,000
Balance per books P387,000
Bank service charge for December (1,000) Paid check for P40,000 recorded as P4,000 (36,000)
Customer’s check returned by bank marked DAIF (22,000) 328,000 Outstanding checks at December 31, 2016 P172,000 Proof:
Per bank Per books Reported balances P400,000 P387,000 Receipts not yet deposited 100,000
December bank service charge (1,000) Paid check for P40,000 recorded as P4,000 (36,000) Customer’s check returned by bank (22,000) Outstanding checks at December 31 (172,000)
Correct cash balance P328,000 P328,000
2-18. (ABC Services, Inc.)
Note: Customer’s check for P5,947 deposited on December 28, 2016 (not 2015) was . . .
ABC Services, Inc.
Four-Column Reconciliation November 30-December 31, 2016
Nov. 30 December Receipts Disbursements December Dec. 31 Balances per bank statement P294,771.00 P1,065,620.00 P1,211,405.00 P148,986.00 Receipts not yet deposited
November 30 21,270.00 (21,270.00)
December 31 32,925.00 32,925.00
Outstanding checks
November 30 (40,525.00) (40,525.00)
December 31 35,191.50 (35,191.50)
Erroneous charge by bank __________ ____________ _____(625.00) _____625.00 Correct balances P275,516.00 P1,077,275.00 P1,205,446.50 P147,344.50
Balances per books P270,311.00 P1,072,850.00 P1,195,536.50 P147,624.50 Bank service charges
November 30 (295.00) (295.00)
December 31 158.00 (158.00)
Interest credit by bank
November 30 5,500.00 (5,500.00)
December 31 4,925.00 4,925.00
Uncollectible customer’s check 5,947.00 (5,947.00) NSF returned and redeposited
in Dec. 5,000.00 5,000.00 Check #137412 for P2,300 recorded as P3,200 in error __________ ____________ _____(900.00) _____900.00 Correct balances P275,516.00 P1,077,275.00 P1,205,446.50 P147,344.50 2-19. (Bruins Company) Bruins Company Proof of Cash March 31 – April 30, 2016
March 31 Receipts April Disbursements April April 30 Balances per bank statement P2,203,500 P5,251,500 P4,357,750 P3,097,250 Outstanding checks: March 31 (275,000) (275,000) April 30 580,000 (580,000) Deposits in transit March 31 125,000 (125,000) April 30 670,000 670,000
Erroneous bank credit (20,000) (20,000)
Undeposited receipts
Erroneous bank debit memo (45,000) 45,000
Adjusted balances P2,053,500 P5,776,500 P4,617,750 P3,212,250
Balances per books P2,055,300 P5,567,000 P4,619,800 P3,002,500
Note collected by bank in April 17,000 17,000
Bank service charges
March (1,800) (1,800)
April 2,450 (2,450)
Company’s note discounted with the bank 200,000 –
(200,000 x 12% x 6/12) 188,000 188,000
Overstatement in book
disbursements (2,700) 2,700
Understatement of April receipts 4,500 4,500
Adjusted balances P2,053,500 P5,776,500 P4,617,750 P3,212,250
2-20. (Lily Company)
a. August deposits per bank statement P275,000
Deposit in transit at August 31 35,000
Deposit in transit at July 31 (40,000)
Note collected by bank in behalf of Lily Company (50,000) Cash receipts per books during August P220,000
b. August disbursements per bank statement P220,000
Outstanding checks at August 31 25,000
Outstanding checks at July 31 (60,000)
Erroneous bank credit in July corrected in August (10,000)
NSF check (35,000)
Service charge by bank (1,500)
Cash disbursements per books during August P138,500
c. Balance per books at July 31 P150,000
Cash receipts per books (see a) 220,000 Cash disbursements per books (see b) (138,500) Unadjusted cash balance per books at August 31 P231,500 or
Unadjusted bank statement balance at August 31
(180,000 + 275,000 – 220,000) P235,000
Outstanding checks, August 31 (25,000)
Deposits in transit, August 31 35,000
NSF check 35,000
Bank service charges 1,500
Note collected by bank (50,000)
Unadjusted cash balance per ledger at August 31 P231,500
d. Unadjusted bank statement balance P235,000
Outstanding checks (25,000)
Deposits in transit 35,000
Correct cash balance at August 31 P245,000
or
Unadjusted cash balance per books P231,500
NSF check (35,000)
Bank service charges (1,500)
Note collected by bank 50,000
Correct cash balance at August 31 P245,000
2-21. (Leo Company)
a. Outstanding checks, July 31, 2016 P 6,400 Disbursements per books during August 349,000 Checks cleared during August ( 344,000) Outstanding checks, August 31, 2016 P 11,400 b. Deposits in transit, August 31, 2016 P 40,000 Deposits per bank records during August 320,000 Cash receipts per books during August ( 350,000)
Deposits in transit, July 31, 2016 P 10,000
2-22. (VAB, Inc.)
Outstanding checks at April 30 P 30,000 Add cash disbursements per books:
Total credits in all journals during May P90,000
Less Service charge in April recorded in May ( 1,000) 89,000
Total P119,000
Less checks cleared during May:
Checks and charges by bank in May P80,000 Less: May service charge (500) NSF check returned as a bank
charge in May (10,000) 69,500 Outstanding checks at May 31 P 49,500
2-23. (Diamond Company)
Deposits in transit at July 31 P 4,500
Receipts per books (40,000 – 5,120) 34,880 Deposits per bank (45,600 – 6,300 – 10,000)) (29,300) Deposits in transit at August 31 P 10,080
Proof: August Receipts
Per bank Per books
Reported receipts/credits P45,600 P40,000
Deposits in transit, July 31 (4,500)
Note collected by bank in August 6,300 Note collected by bank in July recorded
by the company in August (5,120)
Erroneous charge by bank in July
corrected in August (10,000)
Deposits in transit at August 31 (see above) 10,080 _________
Correct totals P41,180 P41,180
2-24. (Real Gem Company)
Outstanding checks, 12/31/16 P37,855.00
Add checks cleared by bank during December
Bank disbursements during December P62,277.00 Outstanding checks, 11/30/16 (24,750.00) Erroneous bank credit in November
cleared in December (9,218.00) 28,309.00 Cash disbursements per books during December P66,164.00
2-25. (Lira Company)
Deposits in transit, August 31 P 9,500
Add cash receipts per general ledger 30,500
Less deposits per bank (30,200)
Deposits in transit, September 30 P 9,800
Outstanding checks, September 30 P 2,000
Add checks cleared by bank during September 23,600 Less cash disbursements per general ledger (24,000)
Outstanding checks, August 31 P 1,600
2-26. (Euro Company)
Petty Cash Fund
Currency and coins P 1,490
Replenishment check 1,830 P 3,320
Cash on hand
Reported amount P 19,700
Less: Customer’s NSF check returned (5,000)
Customer’s post dated check (1,500) 13,200 Cash in Metrobank
Reported amount P110,200
Add: Undelivered check #1214 2,500
Post dated check #1219 4,300 117,000 Cash in Allied Bank
General account P162,000
Less credit balance in Payroll account (4,000) 158,000
Employee advances of P880 is reported as a receivable; unreplenished petty cash vouchers are expenses; and currency in an enveloped marked collections for charity is a non-company fund. Postal money orders of P1,800 is a proper inclusion to cash. The savings account deposit in Security Bank is reported as a non-current asset since it is intended for a non-current purpose.
MULTIPLE CHOICE QUESTIONS Theory MC1 A MC11 D MC21 B MC2 C MC12 D MC22 A MC3 D MC13 D MC23 A MC4 D MC14 C MC24 B MC5 D MC15 D MC25 D MC6 D MC16 A MC26 B MC7 A MC17 C MC27 D MC8 A MC18 C MC28 D MC9 A MC19 C MC10 C MC20 B Problems MC29 C Cash in banks P2,250,000 Cash on hand 125,000 Total cash P2,375,000 MC30 D Checkbook balance P50,000
Check payable to Bataan properly dated but not included in
checkbook balance 20,000
Correct cash balance P70,000
MC31 C Correct cash balance in Equitable-PCIBank P320,000
Currency and coins in petty cash fund 580
Cash balance, April 30 P320,580
MC32 B Cash balance per ledger P682,250
Notes receivable in the possession of a collecting agency (25,000) Post-dated check included in the undeposited receipts (10,500)
Bond sinking fund cash (127,500)
IOUs signed by employees (4,950)
Paid vouchers not yet recorded (6,450)
Correct cash on hand and in banks P507,850
OR
Petty cash fund P 3,600
Checking account in Metrobank 336,750
Undeposited receipts (178,000 – 10,500) 167,500
Correct cash on hand and in banks P507,850
MC33 D Replenishment entry is
Expenses 950
Cash short or over 50
Cash in bank 1,000
MC34 B Currencies P3,800
Coins 1,200
Company check payable representing salary (accommodation check
to petty cash custodian 12,500
MC35 C Cash in the fund P 440
Miscellaneous expenses 3,640
Total P4,080
Amount of fund established 4,000
Cash overage P 80
MC36 B Total bills and coins P1,825
Certified check of general manager 1,500
Replenishment check 5,150
Correct amount of petty cash fund P8,475
MC37 A Amount of petty cash fund established P10,000
Total amount in the drawer
Correct petty cash fund P8,475
Petty cash vouchers not yet replenished 1,430 9,905
Amount of cash shortage P 95
The unused postage stamps of P120 is part of the P280 postage stamps purchased. This means that P120 will be reported as part of prepaid expenses, whereas P160 will be reported as an operating expense.
MC38 D Corrected bank statement balance (50,000 + 20,000 – 15,000) P55,000 Correct balance per books before considering interest on note
(43,000 – 6,000 + 15,000) 52,000
Interest on the note collected by the bank P 3,000
MC39 B Balance per bank statement P180,500
Deposit in transit 32,500
Outstanding checks (27,500)
Correct cash balance P185,500
MC40 B Balance per books P677,600
Bank service charges (580)
Check for P8,900 paid by bank but erroneously recorded
in the books as P9,800 900
Correct cash in bank balance P677,920
OR
Balance per bank statement P653,230
Outstanding checks (98,760)
Deposit in transit 123,450
Correct cash in bank balance P677,920
MC41 B Petty cash fund (10,000 – 4,500) P 5,500
Currency and coins counted (undeposited collections) 95,000
Correct cash on hand balance P100,500
MC42 B Deposit in transit, beginning P17,000
Receipts reflected in the books 490,000
Deposits reflected per bank (476,000)
Deposit in transit, ending P31,000
MC43 A Outstanding checks, beginning P39,000
Checks issued (per books) 490,000
Checks cleared by bank (617,000 – 15,000) (602,000)
Outstanding checks, ending P47,000
MC44 C Pre-adjustment cash balance per books P768,370
Net credit adjustment per books (132,274)
Outstanding checks 20,750
MC45 B Unadjusted cash balance per books P450,000
Collection by bank 9,400
Customer’s NSF check returned by bank (3,200)
Customer’s check for P4,500 erroneously recorded as P5,400 (900) Check written for P790 erroneously recorded as P970 180
Correct cash balance P455,480
MC46 B Cash balance, beginning P62,000
Collections from sales (67,000 + 798,000 – 91,000) 774,000 Payments to creditors (78,000 + 583,000 – 86,000) (580,000)
Cash operating expenses (107,000)
Cash balance, ending P149,000
MC47 D Petty cash fund P1,500
Customer’s certified check 5,000
Unrestricted demand deposits 486,000
Undelivered checks written and recorded 12,000
Total cash P504,500
MC48 D Cash account balance P96,000
Post-dated customer’s check included in the cash receipts (4,000) Undelivered check included in the cash disbursements 7,000
Correct cash balance P99,000
MC49 C Balance, end, per bank (650,000 + 1,300,000 – 1,100,000) P850,000
Deposit in transit, June 30 150,000
Outstanding checks, June 30 (84,000)
Check deposit omitted by bank 7,500
Correct cash balance P923,500
OR
Balance per books, June 30 P794,800
Note collected by bank 180,000
Service charge (6,000)
NSF check returned (48,000)
Customer’s check for P37,400 recorded as P34,700 2,700
Correct cash balance P923,500
MC50 D June receipts reported per books P1,154,800
Note collected by bank 180,000
Customer’s check for P37,400 recorded as P34,700 2,700
Corrected June receipts P1,337,500
MC51 B June disbursements reported per books P1,123,500
May service charge (4,500)
June service charge 6,000
May NSF check returned (56,000)
June NSF check returned 48,000
Corrected June disbursements P1,117,000
MC52 D Cash in bank balance, beginning P70,000
Establishment of petty cash fund (2,000)
Collection of trade accounts receivable 290,000
Collection of subscriptions receivable 50,000
Purchase of delivery equipment (50,000)
Payment of accounts payable (280,000)
Bank loan obtained 80,000
Payment of bank loan (35,000)
Payment of operating expenses (90,000 – 1,500 – 5,000) (83,500)
MC53 B Outstanding checks, end P25,000
Checks cleared 224,200
Outstanding checks, beginning (78,200)
Checks issued/Disbursements per books P171,000
MC54 A December deposits per bank P261,000
Deposit in transit, beginning (41,500)
Erroneous bank charge in November cleared (credited) in December (15,000)
Cash receipts per books P204,500
MC55 D Balance per bank, December 31 P217,200
Outstanding checks (25,000)
Cash balance per books, December 31 P192,200
MC56 C Correct cash balance (45,000 + 10,000 + 8,000) P63,000 Balance per bank before outstanding checks
(34,000 – 300 – 3,200 – 3,600 + 2,700) 29,600
