ap-5907q_cash.pdf

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AP-5907Q

CPA REVIEW SCHOOL OF THE PHILIPPINES

M a n i l a M a n i l a

AUDITING PROBLEMS AUDITING PROBLEMS AUDIT OF CASH - QUIZZERS

AUDIT OF CASH - QUIZZERS PROBLEM NO. 1

PROBLEM NO. 1

In connection with your examination, the

In connection with your examination, the Pound CompanyPound Company presented to you the following presented to you the following information regarding its Cash in Bank account for the month of December, 2005:

information regarding its Cash in Bank account for the month of December, 2005: a)

a) Balances per bank Balances per bank statements: November statements: November 30, P107,800, 30, P107,800, and December and December 31,31, P115,200.

P115,200. b)

b) Balances of cash in Balances of cash in bank account in company’bank account in company’s books: s books: November 30, P82,725, November 30, P82,725, andand December 31, P113,400.

December 31, P113,400. c)

c) Total receipts per booTotal receipts per books wks were P1,110,950 ere P1,110,950 of wof which P6,050 hich P6,050 was was paid in paid in cash tcash to ao a creditor on December 24.

creditor on December 24. d)

d) Total Total charges charges in in the the bank bank statement statement during during December December were were P1,094,850.P1,094,850. e)

e) Undeposited receipts Undeposited receipts were: were: November November 30, 30, P45,300 P45,300 and and December December 31, 31, P50,600.P50,600. f)

f) Outstanding Outstanding checks checks were: were: November November 30, 30, P13,375, P13,375, and and December December 31, 31, P9,650, P9,650, ofof which a check for P2,500 was certified by the bank on December 26.

which a check for P2,500 was certified by the bank on December 26. g)

g) NSF NSF checks checks returned, returned, recorded recorded as as reduction reduction of of cash cash receipts, receipts, were:were:



 Returned Returned by by bank bank on on December, December, recorded recorded also also in in December, December, P5,200.P5,200. 

 Returned Returned by by bank bank on on December December but but recorded recorded in in January, January, P4,300P4,300

h)

h) Collections by bank not Collections by bank not recorded by recorded by Company were Company were P60,750 in P60,750 in November andNovember and P58,200 in December.

P58,200 in December. i)

i) Bank service charges Bank service charges not entered not entered in company’s in company’s books were: books were: November 30, P3,75November 30, P3,7500 and December 31, P2,100.

and December 31, P2,100. j)

j) A check fA check for P4,75or P4,750 of Foun0 of Found Company d Company was charwas charged to Poged to Pound Comund Company in erpany in error.ror. k)

k) A A check check drawn drawn for for P4,200 P4,200 was was erroneously erroneously entered entered in in the the books books as as P2,400.P2,400.

QUESTIONS: QUESTIONS:

Based on the above and the result of your audit, answer the following: Based on the above and the result of your audit, answer the following: 1.

1. How How much much is is the the adjusted adjusted cash cash balance balance as as of of November 30, November 30, 2005?2005? a. P107,800

a. P107,800 b. P139,725b. P139,725 c. c. P75,875 P75,875 d. d. P137,225P137,225 2.

2. How How much much is is the the adjusted adjusted book book receipts receipts for for December, December, 2004?2004? a. P1,102,350

a. P1,102,350 b. P1,113,600b. P1,113,600 c. c. P1,056,950 P1,056,950 d. d. P1,108,400P1,108,400 3.

3. How How much much is is the the adjusted adjusted book book disbursements disbursements for for December, December, 2004?2004? a.

a. P1,084,725 P1,084,725 b. b. P1,078,675P1,078,675 c. P1,089,925c. P1,089,925 d. d. P1,084,725P1,084,725 4.

4. How How much much is is the the adjusted adjusted cash cash balance balance as as of of December December 31, 31, 2004?2004? a.

a. P158,650 P158,650 b. b. P153,900 P153,900 c. c. P165,200P165,200 d. P163,400d. P163,400

5.

5. How How much much is is the the cash cash shortage shortage of of December December 31, 31, 2004?2004? a.

a. P1,800 P1,800 b. b. P9,500 P9,500 c. c. P4,750P4,750 d. P0d. P0

AP-5907Q

PROBLEM NO. 2 PROBLEM NO. 2

Your audit senior instructed you to prepare a four column proof of cash receipts and Your audit senior instructed you to prepare a four column proof of cash receipts and disbursements for the month of August, 2005.

disbursements for the month of August, 2005. The bank reconciliation prepared by

The bank reconciliation prepared by Franc CompanyFranc Company at July 31 is reproduced below: (Allat July 31 is reproduced below: (All book adjustments were recorded in August).

book adjustments were recorded in August). Bank

Bank balance balance P52,000 P52,000 Book Book balance balance P40,000P40,000

Add depo

Add deposit in trasit in transit, July nsit, July 31 31 900900

Add: Add: Proceeds of note Proceeds of note receivable collected by receivable collected by bank

bank in in July July 8,0008,000 Deposit made in bank on

Deposit made in bank on July 31 not recorded in July 31 not recorded in books

books until until August August 1,0001,000 Total

Total 52,900 52,900 Total Total 49,00049,000

Less

Less outstanding outstanding checks: checks: Less Less bank bank service service charge charge 100100 No. No. 436 436 P200P200 450 1,800 450 1,800 451 1,400 451 1,400 454 454 600 600 4,000 4,000 .. Adjusted

Adjusted balance balance P48,900 P48,900 Adjusted bAdjusted balance alance P48,900P48,900 Upon inquiry about the client’s August 31 bank reconciliation, you were informed that it has Upon inquiry about the client’s August 31 bank reconciliation, you were informed that it has been lost and

been lost and that the client that the client is too busy is too busy at this time at this time to prepare another. to prepare another. Your senior toldYour senior told you to get the August bank statement and paid checks and to prepare the August 31 you to get the August bank statement and paid checks and to prepare the August 31 reconciliation so that you may complete the August proof of cash.

reconciliation so that you may complete the August proof of cash. The August bank statement is reproduced below:

The August bank statement is reproduced below: Kapuso Bank

Kapuso Bank Account N

Account Name: ame: Franc CFranc Companyompany Date

Date Debits Debits CreditsCredits July 31 July 31 August 1 August 1 1,800 1,800 900900 August 6 August 6 1,4001,400 August 9 August 9 600 600 10,00010,000 August 1 August 12 2 140140 DMDM ₁₄₀₁₄₀ August 1 August 15 5 1,0001,000 August 2 August 20 0 700 700 14,00014,000 August 2 August 27 7 1,4401,440 August 2 August 29 9 100100 ECEC ₁₀₀₁₀₀ ECEC August 3 August 31 1 440440 SVSV August 3 August 31 1 300300 DMDM 1,820 1,820 SV

SV _–_{– Service Charges;}_{Service Charges;} DM DM _–_{– Debit Memo;}_{Debit Memo;} EC EC _–_{– Error Corrected;}_{Error Corrected;} CM CM _–_{– Credit Memo}_{Credit Memo}

The paid checks accompanying this bank statement (all clearing in August) were (checks The paid checks accompanying this bank statement (all clearing in August) were (checks listed in order of payment by bank).

listed in order of payment by bank). No.

No. 450 450 P1,800 P1,800 No. No. 455 455 P1,000 P1,000 No. No. 458 458 P1,440P1,440 451

451 1,400 1,400 456 456 700 700 459 459 1,8201,820

454 600

The check register revealed that the last check issued in August was no. 460 for P1,000 The check register revealed that the last check issued in August was no. 460 for P1,000 and that check no. 457 was for P2,400.

and that check no. 457 was for P2,400.

Cash received for the period August 21 through 31 of P9,400 was deposited in the bank on Cash received for the period August 21 through 31 of P9,400 was deposited in the bank on September 1.

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AP-5907Q

The debit memo on August 12 and August 31 were customer NSF checks returned by the The debit memo on August 12 and August 31 were customer NSF checks returned by the bank.

bank. The The check check on on August 12 August 12 was was immediately redeposited immediately redeposited without entry. without entry. The The checkcheck returned on August 31 was redeposited by the client in the bank on September 1 without returned on August 31 was redeposited by the client in the bank on September 1 without entry.

entry.

Based on the application of the necessary audit procedures and appreciation of the above Based on the application of the necessary audit procedures and appreciation of the above data, you are to provide the answers to the following:

data, you are to provide the answers to the following: 1.

1. How How much much is is the the unadjusted unadjusted book book receipts receipts for for August?August? a. P25,140

a. P25,140 b. P42,400b. P42,400 c. c. P35,540 P35,540 d. d. P43,300P43,300 2.

2. How How much much is is the the unadjusted unadjusted book book disbursements disbursements for for August?August? a. P8,460

a. P8,460 b. b. P9,740 P9,740 c. c. P8,760 P8,760 d. d. P8,360P8,360 3.

3. How How much much is is the the adjusted adjusted book book receipts receipts for for August?August? a.

a. P33,640 P33,640 b. b. P33,450 P33,450 c. c. P34,400P34,400 d. P33,400d. P33,400

4.

4. How How much much is is the the adjusted adjusted book book disbursements disbursements for for August?August? a. P9,100

a. P9,100 b. b. P8,900 P8,900 c. c. P9,200 P9,200 d. d. P9,340P9,340 5.

5. How How much much is is the the adjusted adjusted cash cash balance balance as as of of August August 31, 31, 2005?2005? a. a. P73,940 P73,940 b. b. P73,060 P73,060 c. c. P73,400P73,400 d. P73,200d. P73,200 SUGGESTED ANSWERS: SUGGESTED ANSWERS: _{B, A, D, A, D}_{B, A, D, A, D} PROBLEM NO. 3 PROBLEM NO. 3

You were able to obtain the following information in connection with your audit of the Cash You were able to obtain the following information in connection with your audit of the Cash account of the

account of the Piso CompanyPiso Company as of December 31, 2005:as of December 31, 2005: November

November 30 30 December 31December 31 a.

a. Balances per Balances per bank bank P742,800 P742,800 P774,696P774,696 b.

b. Balances per Balances per books books 619,304 619,304 670,392670,392 c.

c. Outstanding checks Outstanding checks 254,096 254,096 300,184300,184 d.

d. The The bank bank statement statement for for the the month month of of December sDecember showed howed total total credits ocredits of f P5,401,800P5,401,800 while the cash receipts per books totaled P9,341,780.

while the cash receipts per books totaled P9,341,780. e.

e. NSF NSF checks checks are are recorded recorded as as a a reduction reduction of of cash cash receipts. receipts. NSF NSF checks checks which which areare later redeposited are

later redeposited are then recorded then recorded as regular as regular receipts. receipts. Data regarding Data regarding NSF checksNSF checks are as follows:

are as follows: 1.

1. Returned by the Returned by the bank in bank in Nov. and Nov. and recorded by recorded by the company in the company in Dec., P1,000.Dec., P1,000. 2.

2. Returned by the Returned by the bank in bank in Dec. and Dec. and recorded by the recorded by the company in Dec., P25,000.company in Dec., P25,000. 3.

3. Returned by the Returned by the bank in bank in Dec. and Dec. and recorded by the recorded by the company in Jan., company in Jan., P9,200.P9,200. f.

f. Check Check of of Sopi Sopi Company Company amounting to amounting to P9,292 P9,292 was was charged charged to to the the company company accountaccount by the bank in error on December 31.

by the bank in error on December 31. g.

g. A bank memo stated that the company’s account wa A bank memo stated that the company’s account was credited for the net proceeds ofs credited for the net proceeds of TM’s note for

TM’s note for P8,060. P8,060. This is not This is not yet recorded on yet recorded on the books.the books. h.

h. The The company company has has hypothecated its hypothecated its accounts receivable accounts receivable with with the bank the bank under under anan agreement whereby the bank lends the company 80% of the hypothecated accounts agreement whereby the bank lends the company 80% of the hypothecated accounts receivable.

receivable. The The company company performs accounting performs accounting and and collection of collection of the the accounts.accounts. Adjustmen

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AP-5907Q

i.

i. The The bank bank credits credits the the company company account account and and increases increases the the amount amount of of the the loan loan for for 80%80% of the

of the reported sales. reported sales. The loan The loan agreement states agreement states specifically that the specifically that the sales reportsales report must be accepted

must be accepted by the by the bank before the bank before the company is credited. company is credited. Sales reports areSales reports are forwarded by the company to

forwarded by the company to the bank on the the bank on the first day following the date of sale. first day following the date of sale. TheThe bank allocates each deposit 80% to the payment of the loan, and 20% to the bank allocates each deposit 80% to the payment of the loan, and 20% to the company account.

company account. Thus, only 80% Thus, only 80% of each day’s of each day’s sales and 20% of sales and 20% of each collectioneach collection deposits are entered

deposits are entered on the on the bank statement. bank statement. The company The company accountant records theaccountant records the hypothecation of new accounts receivable (80% of sales) as a debit to Cash and a hypothecation of new accounts receivable (80% of sales) as a debit to Cash and a credit to the bank l

credit to the bank loan as of toan as of the date of she date of sales. ales. One hundred percent of One hundred percent of the collectionthe collection on accounts receivable is recorded as a cash receipt; 80% of the collection is on accounts receivable is recorded as a cash receipt; 80% of the collection is recorded in the cash

recorded in the cash disbursements books as a disbursements books as a payment on the loan. payment on the loan. In connectionIn connection with the hypothecation, the following facts were determined:

with the hypothecation, the following facts were determined:



 Included in Included in the the undeposited collections undeposited collections is is cash cash from the from the hypothecation of hypothecation of accountsaccounts

receivable.

receivable. Sales were Sales were P162,000 on NP162,000 on November 30, and ovember 30, and P169,000 at DP169,000 at Decemberecember 31, the balance was made up of from collections of P128,440 which was entered 31, the balance was made up of from collections of P128,440 which was entered on the books in the manner indicated above.

on the books in the manner indicated above.



 Collections on Collections on accounts accounts receivable deposited receivable deposited in in December, other December, other than than deposits indeposits in

transit, totaled P4,800,000. transit, totaled P4,800,000. j.

j. Interest on Interest on the the bank bank loan loan for for the the month month of of December December charged charged by by the the bank bank but but notnot recorded in the books, amounted to P24,560.

recorded in the books, amounted to P24,560.

Based on the above and the result of your audit, answer the following: Based on the above and the result of your audit, answer the following: 1.

1. How How much much is is the the adjusted adjusted cash cash balance balance as as of of November November 30, 30, 2005?2005? a.

a. P618,304 P618,304 b. b. P514,624P514,624 c. P488,704c. P488,704 d. d. P359,104P359,104 2.

2. How How much much is is the the adjusted adjusted book book receipts receipts for for December, December, 2005?2005? a. P5,427,488

a. P5,427,488 b. P9,370,240b. P9,370,240 c. c. P9,505,440 P9,505,440 d. d. P9,350,260P9,350,260 3.

3. How How much much is is the the adjusted adjusted book book disbursements disbursements for for December, December, 2005?2005? a. P9,255,992

a. P9,255,992 b. P9,246,700b. P9,246,700 c. P9,349,452c. P9,349,452 d. d. P5,406,700P5,406,700 4.

4. How How much much is is the the adjusted adjusted cash cash balance balance as as of of December December 31, 31, 2005?2005? a. P509,492

a. P509,492 b. P612,244b. P612,244 c. c. 602,952 602,952 d. d. P636,804P636,804 5.

5. How How much much is is the the cash cash shortage shortage as as of of December December 31, 31, 2005?2005? a. a. P19,980 P19,980 b. b. P20,550 P20,550 c. c. P97,200P97,200 d. P0d. P0 SUGGESTED ANSWERS: SUGGESTED ANSWERS: _{C, B, B, B, D}_{C, B, B, B, D} PROBLEM NO. 4 PROBLEM NO. 4 The

The Rupiah CorporationRupiah Corporation was organized on January 15, 2005 and started operation soonwas organized on January 15, 2005 and started operation soon thereafter.

thereafter. The Company The Company cashier who cashier who acted also acted also as the as the bookkeeper had bookkeeper had kept thekept the accounting records

accounting records very very haphazardly. haphazardly. The The manager suspects manager suspects him of him of defalcation anddefalcation and engaged you to audit his account to find out the extent of the fraud, if there is any.

engaged you to audit his account to find out the extent of the fraud, if there is any.

On November 15, when you started the examination of the accounts, you find the cash on On November 15, when you started the examination of the accounts, you find the cash on hand to be

hand to be P25,700. P25,700. From inquiry at the bank, From inquiry at the bank, it was ascertained that the it was ascertained that the balance of thebalance of the Company’s bank deposit i

Company’s bank deposit in current account on n current account on the same date the same date was P131,640. was P131,640. VerificationVerification revealed that the check

revealed that the check issued for P9,260 is issued for P9,260 is not yet paid not yet paid by the bank. by the bank. The corporationThe corporation sells at 40% above cost.

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AP-5907Q

Your examination of the available records disclosed the following information: Your examination of the available records disclosed the following information:

Capital

Capital stock stock issued issued at at par par for for cash cash P1,600,000P1,600,000 Real

Real state state purchased purchased and and paid paid in in full full 1,000,0001,000,000 Mortgage

Mortgage liability liability secured secured by by real real state state 400,000400,000 Furniture and fixtures (gross) bought on which there

Furniture and fixtures (gross) bought on which there is

is still still balance balance unpaid unpaid of of P30,000 P30,000 145,000145,000 Outstanding

Outstanding notes notes due due to to bank bank 160,000160,000 Total

Total amount amount owed owed to to creditors creditors on on open open account account 231,420231,420 Total

Total sales sales 1,615,0401,615,040

Total

Total amount amount still still due due from from customers customers 426,900426,900 Inventory

Inventory of of merchandise merchandise on on November November 15 15 at at cost cost 469,600469,600 Expenses

Expenses paid paid excluding excluding purchases purchases 303,780303,780

Based on the above and the result of your audit, compute for the following as of November Based on the above and the result of your audit, compute for the following as of November 15, 2005:

15, 2005:

A B C D

1.

1. Collections Collections from from sales sales 1,615,040 1,615,040 2,041,940 2,041,940 1,153,6001,153,600 1,188,1401,188,140

2.

2. Payments Payments for for purchases purchases 1,207,204 1,207,204 922,180 922,180 1,854,6201,854,620 1,391,7801,391,780

3.

3. Total Total cash cash disbursements disbursements 3,273,400 3,273,400 2,625,9842,625,984 2,810,5602,810,560 2,340,9602,340,960 4.

4. Unadjusted Unadjusted cash cash balance balance 1,007,1801,007,180 537,580537,580 74,740 74,740 722,156722,156 5.

5. Cash Cash shortageshortage 389,500389,500 859,100 859,100 574,076 574,076 00