Problem 1

The senior auditor instructed you to prepare a four column proof of cash receipts and disbursements
for the month of August 2008.

The bank reconciliation prepared by Albarando Company at July 31 is reproduced below (All book
disbursements were recorded in August)

Bank Balance 52,000 Book Balance 40,000

Add: Proceeds of note receivable
Add: Deposit in transit, July 31 900 by bank in July 8,000
Deposit made in bank
on
July 31 not recorded on
books until August 1,000
Total 52,900 Total 49,000
Less: Outstanding checks Less: Service Charge 100
No. 436 200
No. 450 1,800
No. 451 1,400
No. 454 600 4,000 ______
Adjusted balance 48,900 Adjusted balance 48,900

Upon inquiry about the client’s August 31 bank reconciliation, you were informed hat it has been lost
and that no client is too busy at this time to prepare another. Your senior auditor told 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.

The August bank statement is reproduced below:

Davao Bank
Account name: Albarando Company
Date Debits Credits
July 31
August 1 1,800 900
August 8 1,400
August 9 600 10,000
August 12 140 EC 140 EC
August 15 1,000
August 20 700 14,000
August 27 1,440
August 29 100 EC 100 EC
August 31 440 SV
August 31 300 DM
August 31 1,820
SV – Service Charges; DM – Debit Memos; EC – Error Corrected; CM – Credit Memo

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

No. 450 1,800 No. 455 1,000 No. 458 1,440

451 1,400 456 700 459 1,820
454 600

The checks register revealed that the last check issued on August was no. 460 for P1,000 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 September
1.
The debit memo on August 12 and August 31 were customer DAIF checks returned by the bank. The
check on August 12 was immediately redeposited without entry. The check returned on August 31
was redeposited by the client in the bank on September 1 without entry.

Questions: Based on the application of the necessary audit procedures and appropriation of the above
daa, you are to provide the answer to the following:

1. How much is the unadjusted book receipts for August?

a. P 25,140 b. 42,400 c. P 35,540 d. P 43,360
2. How much is the unadjusted book disbursements for August?
a. P 8,460 b. P 9,740 c. P 8,760 d. P 8,360

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

a. P 33,640 b. P 33,450 c. P 34,400 d. P 33,400

4. How much is the adjusted book disbursement for August?

a. P 9,100 b. P 8,900 c. P 9,200 d. P 9,340

5. How much is the adjusted cash balance as of August 31, 2004?

a. P 73,940 b. P 73,060 c. P 73,400 d. P 73,200