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CHAPTER 2 CASH AND CASH EQUIVALENTS PROBLEMS 2-1 (Money Company) Checking account in Metrobank Savings account at Far

East Bank Petty cash fund (1,500 250) Cash on hand (undeposited sales receipts) Cash in foreign bank (in equivalent pesos) Customers check on hand: Travelers check Managers check Total amount of cash Alternative computation: Reported total Less Sinking fund cash Short term treasury bills Unreplenished petty cash expenses Correct cash balance P330,820 ( 35,000) ( 52,000) ( 250) P243,570 P105,200 30,800 1,250 4,200 65,000 14,000 23,120 P243,570

The outstanding checks of P15,200 was simply 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) Reported checkbook balance Adjustments: Customers post dated check included in the balance Customers check returned by bank marked DAIF Company check recorded but not yet mailed Cash reported on December 31, 2009 balance sheet 2-3 (Grain Company) Balance per general ledger Non-cash items: Customers NSF checks IOUs Postage stamps Cash in sinking fund Customers post dated checks Travel advances Correct cash balance P180,000 ( 65,000) ( 20,000) 15,000 P110,000 P 2,205,600 ( 20,000) ( 1,200) ( 600) ( 500,000) ( 5,400) ( 4,000) P1,674,400

NSF checks, IOUs and customers post dated checks are reported as receivables while postage stamps and travel advances are prepaid expenses. Meanwhile, cash in sinking fund is reported as a noncurrent financial asset.

Chapter 2 Cash and Cash Equivalents

2-4

(Rod Company) Petty cash (10,000 1,250) Cash on hand (625,000 2,500) Cash in bank- General (750,000 + 12,500) Cash in bank, Payroll (320,000 + 10,000) Total P 8,750 622,500 762,500 330,000 P1,723,750

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 P900,000 Customers 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 (see above correction) 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 non-cash and non-cash equivalents shall be presented as Expenses in the statement of comprehensive income (P150 cash shortage in petty cash fund + expense receipts of P5,000) Current assets: Trading securities or FVPL (certificates of deposit) Accounts receivable (customers postdated check) Non-current assets: Cash fund for retirement of bonds payable Current liabilities Accounts payable (PDC issued to supplier) Salaries payable (unissued check to employee)

5,150

2,000,000 320,000 1,500,000 300,000 50,000

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(Jessie Company) Nov. 20 Nov. 20 to Dec. 15 Dec. 16 Petty cash fund Cash in bank No entry Transportation expense Representation expense Freight-in Repairs expense Cash in bank No entry Transportation expense Supplies expense Petty cash fund Petty cash fund Transportation expense Supplies expense No entry Transportation expense (340 + 120) Supplies expense (1,400 + 1,300) Representation expense Cash in bank Petty cash fund Cash in bank 460 2,700 1,800 4,960 3,000 3,000 340 1,400 1,740 1,740 340 1,400 1,500 1,200 1,300 920 4,920 5,000 5,000

Dec. 16 31 Dec. 31

Jan. 1

Jan. 1-8 Jan. 9

Jan. 9 2-7.

(Coral Company) (a) Petty cash fund Amount of cash on hand Total petty cash vouchers: Office supplies Postage Representation Transportation Miscellaneous Shortage in the petty cash fund Office supplies expense Postage expense Representation expense Transportation expense Miscellaneous expense Cash short and over Petty cash fund P5,000.00 P 670.40 P 341,60 780.00 1,000.00 1,321.40 837.60

4,280.60 341.60 780.00 1,000.00 1,321.40 837.60 49.00

4,951.00 P 49.00

(b)

4,329.60 8,000 8,000

2-8

(Prada Company) 1. May 2 Petty cash fund Cash in bank 2. May 2-20 No entry

Chapter 2 Cash and Cash Equivalents

3. 4.

5. 6.

No entry May 20 Freight-in Freight-out Supplies expense Cash in bank No entry May 31 Freight in Transportation expense Employee benefit expense Advances to employees (IOU of 500 + short of 130) Petty cash fund (8,000 5,700) Per count Bills and coins Paid petty cash vouchers (1,200 + 150 + 320 + 500) Total Petty cash fund, imprest balance Cash shortage P5,700 2,170 P7,870 8,000 P 130

2,500 3,000 800 6,300 1,200 150 320 630 2,300

2-9.

(Canon Company) (a) Bills and coins PCVs dated July 2012 (undisbursed as of June 30) Adjusted balance of PCF Per count Bills and coins PCVs dated June PCVs dated July IOUs PDC drawn by Juvy Victoria Total Petty cash fund, per ledger Cash shortage Miscellaneous expenses Receivable from employees (IOU + PDC) Cash short/over Petty cash fund 2,450 800 3,250 2,450 3,300 800 1,400 2,000 9,950 10,000 50 3,300 3,400 50 6,750

(b)

(c)

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(Giordano Corporation) Giordano Corporation Bank Reconciliation December 31, 2012 Balance per bank statement Add: Cash on hand for undeposited receipts Deposit in transit Total Deduct: Outstanding checks Adjusted balance P199,925 P13,025 35,000 48,025 P252,950 204,055 P 43,895 P(32,560) 252,500 P219,940

Balance per books Add: Note receivable collected by bank, incl interest of P2,500 Total Deduct: Customers NSF check returned by bank P42,040 Customers check for P29,040 erroneously recorded as P94,020 64,980 Cash sales missing 64,025 Petty cash fund 5,000 Adjusted balance (b) Adjusting entries: Cash Notes Receivable Interest Income Accounts Receivable (42,040 + 64,980) Loss from Theft Petty cash fund Cash Miscellaneous Expenses Petty Cash Fund 252,500

176,045 P 43,895

250,000 2,500 107,020 64,025 5,000 176,045 1,800 1,800 P47,095 Per Bank
P31,948 (6,728) 4,880 5,700 8,100 (900) 800 _______ P30,000 (760) P30,000

Total Cash on the statement of financial position Petty cash fund of P3,200 + Cash in bank of P43,895 2-11 (Pound Company)
Balances before adjustments Bank service charge Debit memo for printed checks Outstanding checks Deposit of July 31 not yet recorded by bank Proceeds of a bank loan, net of P300 interest Proceeds from customers note, including P100 interest Check #1210 for P2,100 erroneously deducted by bank as P1,200 Stolen check lacking authorized signature deducted by bank in error Customers NSF check returned by bank Correct cash balance

Per Books
P17,194 ( 109) ( 125)

Chapter 2 Cash and Cash Equivalents

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(Bench Company)
Balances before adjustments Outstanding checks Receipts of 12/31/12 deposited on 1/2/13 Service charges for December Proceeds of bank loan omitted from company records Deposit of 12/23/12 omitted from bank statement Check of Rome Products Co. charged by bank for lack of counter signature Bank error for a deposit of P31,824 recorded as P31,814 Check of Birch Company erroneously charged by bank Proceeds of note collected by bank Erroneous debit by bank for bank loan paid by company Bank error for a deposit of P48,071 recorded as P48,171 Deposit of Birch Company erroneously credited by bank Adjusted cash balance Per Bank P892,346.30 (333,788.20) 53,172.00 28,924.10 (8,737.40) 10.00 26,900.00 20,350.00 50,000.00 ( 100.00 (18,192.00) P699,272.20 __________ P699,272.20 Per Books P590,884.60 ( 225.00) 97,000.00

2-13

(Amethyst Corporation) Balance per bank statement Deposit in transit, April 30 Outstanding checks, April 30 Erroneous charge by bank NSF checks not yet redeposited (3,435 1,835) Proceeds of note collected by bank Bank service charge Unadjusted book balance for cash, April 30, 2012 P169,263 18,200 ( 59,435) 2,200 1,600 ( 7,548) 180 P124,460

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(Silver Company) Balance per bank statement Deposits in transit Outstanding checks (67,500 9,000) Erroneous credit by bank Check of Silver Lining charged by bank to Silver Co.s account Correct cash balance P380,750 52,000 (58,500) ( 4,000) 12,000 P382,250 P115,963.70 246,475.00 (334,709.10) ( 92.00) P 27,637.60 P15,341.40 9,000.00 ( 2,703.80) 21,637.60 P 6,000.00

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Cash balance per books, March 1 Cash receipts during March Cash disbursements during March Bank service charge for March Cash balance per books at March 31 Cash balance per bank statement Deposit in transit Outstanding checks Cash balance reflected per bank Suspected cash shortage (undeposited collections) (Fernando Company) Check book balance Add check drawn payable to a vendor but not yet mailed Correct cash balance at December 31, 2012

2-15

P300,000 12,000 P312,000

Chapter 2 Cash and Cash Equivalents

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(Pearl Corporation) Balance per bank statement Add receipts of 12/31/12 not yet deposited Balance per bank statement before outstanding checks Balance per books P387,000 Bank service charge for December ( 1,000) Paid check for P40,000 recorded as P4,000 ( 36,000) Customers check returned by bank marked DAIF ( 22,000) Outstanding checks at December 31, 2012 P400,000 100,000 P500,000

328,000 P172,000

Proof: Balance per bank Balance 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) Customers check returned by bank ( 22,000) Outstanding checks at December 31 (see above) (172,000) Correct cash balance P328,000 P328,000 2-17 (ABC Services, Inc.) ABC Services, Inc. Four-Column Reconciliation November 30-December 31, 2012
Nov. 30 P294,771.00 21,270.00 (40,525.00) __________ P275,516.00 P270,311.00 (295.00) 5,500.00 (5,500.00) 4,925.00 5,000.00 __________ P275,516.00 ____________ P1,077,275.00 5,947.00 5,000.00 _____(900.00) P1,205,446.50 ____________ P1,077,275.00 P1,072,850.00 December Receipts P1,065,620.00 (21,270.00) 32,925.00 (40,525.00) 35,191.50 _____(625.00) P1,205,446.50 P1,195,536.50 (295.00) 158.00 December Disbursements P1,211,405.00 Dec. 31 P148,986.00 32,925.00 (35,191.50) _____625.00 P147,344.50 P147,624.50 (158.00) 4,925.00 (5,947.00) _____900.00 P147,344.50

Balances per bank statement Receipts not yet deposited November 30 December 31 Outstanding checks November 30 December 31 Erroneous charge by bank Correct balances Balances per books Bank service charges November 30 December 31 Interest credit by bank November 30 December 31 Uncollectible customers check NSF returned and redeposited in Dec. Check #137412 for P2,300 recorded as P3,200 in error Correct balances

Chapter 2 Cash and Cash Equivalents

2-18. (Bruins Company) Bruins Company Proof of Cash March 31 April 30, 2012
March 31 P2,203,500 (275,000) 125,000 (125,000) 670,000 (20,000) P5,776,500 April Receipts P5,567,000 17,000 (45,000) P4,617,750 April Disbursements P4,619,800 (1,800) 2,450 188,000 (2,700) P2,053,500 4,500 P5,776,500 P4,617,750 April Receipts P5,251,500 April Disbursements P4,357,750 (275,000) 580,000 April 30 P3,097,250 (580,000) 670,000 (20,000) 45,000 P3,212,250 April 30 P3,002,500 17,000 (2,450) 188,000 2,700 4,500 P3,212,250

Balances per bank statement Outstanding checks: March 31 April 30 Deposits in transit March 31 April 30 Erroneous bank credit Undeposited receipts Erroneous bank debit memo Adjusted balances Balances per books Note collected by bank in April Bank service charges March April Companys note discounted with the bank 200,000 (200,000 x 12%x 6/12) Overstatement in book disbursements Understatement of April receipts Adjusted balances

P2,053,500 March 31 P2,055,300 (1,800)

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(Lily Company) a. August deposits per bank statement Deposit in transit at August 31 Deposit in transit at July 31 Note collected by bank in behalf of Lily Company Cash receipts per books during August b. August disbursements per bank statement Outstanding checks at August 31 Outstanding checks at July 31 Erroneous bank credit in July corrected in August NSF check Service charge by bank Cash disbursements per books during August Balance per books at July 31 Cash receipts per books (see a) Cash disbursements per books (see b) Unadjusted cash balance per books at August 31

P275,000 35,000 ( 40,000) ( 50,000) P220,000 P220,000 25,000 ( 60,000) ( 10,000) ( 35,000) ( 1,500) P138,500 P150,000 220,000 ( 138,500) P231,500

c.

Chapter 2 Cash and Cash Equivalents

or Unadjusted bank statement balance at August 31 (180,000 + 275,000 220,000) Outstanding checks, August 31 Deposits in transit, August 31 NSF check Bank service charges Note collected by bank Unadjusted cash balance per ledger at August 31 d. Unadjusted bank statement balance Outstanding checks Deposits in transit Correct cash balance at August 31 or Unadjusted cash balance per books NSF check Bank service charges Note collected by bank Correct cash balance at August 31 2-20 (Leo Company) a. Outstanding checks, July 31, 2012 Disbursements per books during August Checks cleared during August Outstanding checks, August 31, 2012 b. Deposits in transit, August 31, 2012 Deposits per bank records during August Cash receipts per books during August Deposits in transit, July 31, 2012 P

P235,000 ( 25,000) 35,000 35,000 1,500 ( 50,000) P231,500 P235,000 ( 25,000) 35,000 P245,000 P231,500 ( 35,000) ( 1,500) 50,000 P245,000 6,400 349,000 ( 344,000) P 11,400 P 40,000 320,000 ( 350,000) P 10,000 P 30,000 P90,000 ( 1,000) P80,000 ( 500) (10,000) 89,000 P119,000

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(VAB, Inc.) Outstanding checks at April 30 Add cash disbursements per books: Total credits in all journals during May Less Service charge in April recorded in May Total Less checks cleared during May: Checks and charges by bank in May Less: May service charge NSF check returned as a bank charge in May Outstanding checks at May 31 (Lorna Cruz Hearing Aid) Deposits in transit at July 31 Receipts per books (27,000 3,120) Deposits per bank (30,600 6,300) Deposits in transit at August 31

69,500 P 49,500

2-22

P 4,500 23,880 (24,300) P 4,080

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Chapter 2 Cash and Cash Equivalents

Proof: Reported Deposits in transit, July 31 Note collected by bank in August Note collected by bank in July recorded by the company in August Deposits in transit at August 31 (see above) Correct totals 2-23 (Real Gem Company) Outstanding checks, 12/31/12 Add checks cleared by bank during December Bank disbursements during December Outstanding checks, 11/30/12 Erroneous bank credit in November cleared in December Cash disbursements per books during December

August Receipts Per bank Per books P30,600 P27,000 ( 4,500) 6,300 ( 3,120) 4,080 P30,180 P30,180 P37,855.00 P62,277.00 ( 24,750.00) ( 9,218.00) 28,309.00 P66,164.00 P 9,500 30,500 (30,200) P 9,800 P 2,000 23,600 (24,000) P 1,600

2-24. (Lira Company) Deposits in transit, August 31 Add cash receipts per general ledger Less deposits per bank Deposits in transit, September 30 Outstanding checks, September 30 Add checks cleared by bank during September Less cash disbursements per general ledger Outstanding checks, August 31 2-25 (Euro Company) Petty Cash Fund Currency and coins Replenishment check Cash on hand Reported amount Less: Customers NSF check returned Customers post dated check Cash in Metrobank Reported amount Add: Undelivered check #1214 Post dated check #1219 Cash in Allied Bank General account Less credit balance in Payroll account Correct cash balance

P 1,490 1,830 P 19,700 ( 5,000) ( 1,500) P110,200 2,500 4,300 P162,000 ( 4,000)

P 3,320

13,200

117,000 158,000 P291,520

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.

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Chapter 2 Cash and Cash Equivalents

MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9

B D A A D C D D B

MC10 MC11 MC12 MC13 MC14 MC15 MC16 MC17 MC18

C B A C C B D B B

MC19 MC20 MC21 MC22 MC23 MC24 MC25 MC26

D D C D D B C A

Problems MC27 C MC28 D MC29 C MC30 D MC31 B MC32 C MC33 B MC34 A MC35 D MC36 MC37 MC38 MC39 MC40 MC41 MC42 MC43 MC44 B A B B B A C B B

2,250,000 + 125,000 = 2,375,000 50,000 + 20,000 = 70,000 320,000 + 580 = 320,580 Dr. Expenses-950; Dr. Cash Short and Over-50; Cr. Cash in Bank-1,000 3,800 + 12,00 + 12,500 = 17,500 1,825 + 1,500 + 5,150 = 8,475 (Note: certified check dated Dec. 15, 2012). 10,000 (1,825 + 1,500 + 280 + 650 + 500 + 5,150) = 95 50,000 + 20,000 15,000 = 55,000; 43,000 6,000 + 15,000 = 52,000 55,000 52,000 = 3,000 180,500 + 32,500 27,500 = 185,500 682,250 6,000 25,000 10,500 127,500 4,950 6,450 = 501,850 or 3,600 + (336,750-6,000) + (178,000-10,500) = 501,850 677,600 580 + 900 = 677,920 or 653,230 98,760 + 123,450 = 677,920 95,000 + (10,000 4,500) = 100,500 17,000 + 490,000 476,000 = 31,000 39,000 + 610,000 (617,000 15,000) = 47,000 768,370 132,274 + 20,750 = 656,846 450,000 + 9,400 3,200 - 900 + 180 = 455,480 67,000 + 798,000 91,000 = 774,000 collections from sales; 583,000+78,00086,000 + 53,000 48,000 = 580,000 payments to trade creditors; 62,000 + 774,000 580,000 107,000 =149,000 1,500 + 5,000 + 486,000 + 12,000 = 504,500 96,000 4,000 + 7,000 = 99,000 650,000+1,300,0001,100,000 = 850,000 + 150,00084,000+7,500 = 923,500 1,154,800 + 180,000 + 2,700 = 1,337,500 1,123,500 4,500 + 6,000 56,000 + 48,000 = 1,117,000 70,000 2,000 + 290,000 + 50,000 50,000 280,000 + 80,000 35,000 83,500 = 39,500 25,000 + 224,200 78,200 = 171,000 261,000 41,500 15,000 = 204,500 217,200 25,000 192,200 (45,000 + 10,000 + 8,000) (34,000 300 3,200 3,600 + 2,700) = 33,400

MC45 MC46 MC47 MC48 MC49 MC50 MC51 MC52 MC53 MC54

D D C D B D B A D C

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