MOCK QUIZ FOR CA5105 - INTERMEDIATE ACCOUNTING

CASH AND CASH EQUIVALENTS

NAME: SCORE:
BLOCK: DATE:

CONCEPTUAL (2 PTS. EACH, 40%) COMPUTATIONAL (3 PTS. EACH, 60%)

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“Success is no accident. It is hard work, perseverance, learning, studying, sacrifice and most of
all, love of what you are doing or learning to do.” – Pele

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 MOCK QUIZ FOR CA5105 – INTERMEDIATE ACCOUNTING
Cash and Cash Equivalents

I. CONCEPTUAL
A. TRUE OR FALSE. Write T if the statement is true and F if it is false.

1. When replenishing the petty cash fund under the imprest fund system, the Petty Cash
Fund account is debited.

2. A commercial paper acquired on September 31, 2018 and maturing two months after the
end of 2018 is considered a cash equivalent.

3. If cash is set aside for the purpose of acquiring office equipment, it is no longer part of
the Cash and Cash Equivalents line item.

4. A proof of cash is a type of bank reconciliation which has four columns, giving it the
alternative name four-column bank reconciliation.

5. An overdraft occurs when checks are drawn for more than what is available in the current
account.

6. Personal checks, manager’s checks, and certificates of deposit are all examples of cash
items.

7. When following an imprest fund system, all daily receipts should be deposited so as to
avoid the collection of big amounts of money within the vicinity of the establishment.

8. When a company incurs an overdraft in a bank account at Bank A, the company can offset
this at its bank account at Bank B provided that this account has a positive balance.

9. Deposits in transit are deducted from the cash balance per bank statement to arrive at
the correct adjusted cash balance.

10. When the bank makes an error, the company has to make the proper correcting entry in
its books to correct the error made by the bank.

11. The Cash Short or Over account is debited whenever a cash short occurs.

12. Similarly, the Cash Short or Over account is credited whenever a cash over occurs.

13. If the company agrees to maintain a compensating balance with a bank as a collateral for
a loan and this amount is restricted as to withdrawal, the company can still recognize this
balance as part of cash.

14. If a company issues a postdated check to a supplier and at year end, this check is still
postdated, the company needs to revert it back to cash and continue recognizing a
liability.

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 15. Debit memos are deducted from the cash balance per books to arrive at the correct
adjusted cash balance.

B. MULTIPLE CHOICE. Choose the letter of the correct answer.

16. Q-Tee A Co. originally established a petty cash fund with an imprest balance of P6,000.
There were petty cash vouchers worth P3,200 at year-end. The journal entry to adjust the
petty cash fund at year-end is:
a. Dr. Petty Cash Fund 3,200; Cr. Cash in Bank 3,200
b. Dr. Various Expenses 3,200; Cr. Petty Cash Fund 3,200
c. Dr. Various Expenses 3,200; Cr. Cash in Bank 3,200
d. No journal entry is made to adjust the petty cash fund.

17. This form of preparing the bank reconciliation intends to bring the cash balance per books
and per bank statement to a single adjusted cash balance.
a. Bank balance reconciled with book balance
b. Book balance reconciled with bank balance
c. Both bank and book balances reconciled to a correct balance
d. All of the above

18. The following items should be classified as receivables except:

a. Postage stamps
b. Cash in closed banks
c. IOUs given by employees
d. Postdated checks

19. The following items should be classified as cash except:

a. Petty Cash Fund
b. Bond Sinking Fund
c. Change Fund
d. Traveler’s Checks

20. The following items should be added to the cash balance per the company’s accounting
records to arrive at the correct cash balance except:
a. Interest earned
b. Undeposited collections
c. Notes collected on behalf of the company
d. Proceeds of a loan

II. COMPUTATIONAL
A. PROBLEM SOLVING. Supply the answer.

PROBLEM A
The following information was made available by 7 Rings Co. at December 31, 2018:
• Cash in bank, P 2,263,780
• Petty cash fund (includes coins and currencies worth P 1,340;
paid vouchers worth P 2,500; IOUs for P1,540), P 6,000
• Treasury bills acquired on November 1, 2018
and maturing on January 31, 2019, P 420,000
• Customer check dated January 05, 2019 included in
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 cash in bank balance, P 52,000

The company also maintains P 300,000 in the bank as compensating balance which is not legally
restricted as to withdrawal. This amount is included in the cash in bank balance above.

REQUIRED:
1. What is the correct amount of Cash and Cash Equivalents?
2. What is the correct Petty Cash Fund balance?

PROBLEM B
All Too Well Co. reported a cash balance of P 820,000 on December 31, 2018. The following were
found to compose this amount:
• Cash in bank, current account, P 520,000
• Cash on hand, P 23,050
• NSF check returned by bank, P 45,600
• Advances to employees, P 31,350
• Cash in savings account set aside to pay a short-term
liability, P 200,000

REQUIRED:
3. What is the correct amount of cash?
4. Assuming instead that the cash in savings account was set aside to pay a long-term
liability, what is the correct amount of cash?

PROBLEM C
The following transactions happened for Kahit Di Mo Alam Co. in June 2018:

06/02 The company established an imprest petty cash fund with a balance of P 10,000.

06/03 – The petty cash custodian paid the following from the petty cash fund:
06/14 Office Supplies, P 2,620
Transportation, P 3,080
Representation, P 3,300

06/15 The petty cash custodian submitted the vouchers for replenishment. The petty
cash fund was replenished and increased to P 13,000.

06/16 – The petty cash custodian paid the following from the petty cash fund:
06/28 Office Supplies, P 2,150
Transportation, P 2,300
Representation, P 6,220

06/30 A petty cash found showed the it was composed of the following:
Paid petty cash vouchers:
Office Supplies, P 2,150
Transportation, P 2,300
Representation, P 6,220
Currencies and coins, P 2,000

No replenishment occurred on this date.

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The company’s fiscal year ends on June 30.

REQUIRED:
5. What is the correct balance of the Petty Cash Fund at year-end?
6. How much is the cash shortage or overage? Indicate if it is short or over.
7. What is the journal entry for the transactions from June 03 to June 14?
8. What is the adjusting journal entry at year-end?

PROBLEM D
Yes or Yes Co. established an imprest petty cash fund with a balance of P 12,000. A petty cash
count at year-end evinced the following:

Currencies and coins, P 3,250

Paid petty cash vouchers, P 2,350
IOUs from Employees, P 1,500
Envelope with “Valentine’s Day surprise” written
at the back, contains P 5,000 and is sealed
Check representing an employee’s salary, P 2,500

The petty cash fund was not replenished.

REQUIRED:
9. What is the correct balance of the Petty Cash Fund at year-end?
10. How much is the cash shortage or overage? Indicate if it is short or over.

PROBLEM E
Buwan Co. was preparing its monthly bank reconciliation statement. The bank statement it
received showed a cash balance of P 253,800. The cash balance according to the company’s
records was P 201,500.

The following information was revealed by the bank statement:

Note collected by bank in behalf of the

company, P 20,800
Interest earned by account, P 4,000
Proceeds of bank loan, P 49,000
Service charge, P 1,000

Deposits in transit and outstanding checks totaled P 42,000 and P 20,000, respectively. The bank
erroneously credited Araw Co.’s deposit to Buwan Co.’s account for P 1,500.

REQUIRED:
11. What is the adjusted cash balance?
12. Show the journal entry/entries for the book reconciling items.

PROBLEM F (Adapted from GAS Quiz Bee)

The following information is available for You Are The Reason Co.:

Cash in bank per books, P 310,500

Cash in bank per bank statement, P 253,000

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Bank charges, P 20,000
Outstanding checks, P 10,000
Deposits in transit, P 100,000
Bank credit memo, P 42,500

REQUIRED:
13. How much is the book error? Indicate whether it is an understatement or
overstatement.

PROBLEM G
The following data pertains to Kung Di Rin Lang Ikaw Co.:

Balances per bank statement

November 30 P 651,230
December 31 406,850
Balances per books
November 30 600,000
December 31 371,850
Receipts per bank statement 425,310
Disbursements per bank statement 669,690
Deposits in transit
November 30 20,000
December 31 50,000
Outstanding checks
November 30 71,230
December 31 20,500
Note collected by bank in December 25,400
Proceeds of bank loan in December 40,000

The company mistakenly recorded a check payable to a supplier for the incorrect amount of P
4,500 instead of the correct amount of P 5,400.
REQUIRED:
14. What is the amount of the adjusted receipts?
15. What is the amount of the adjusted disbursements?
16. What is the adjusted beginning cash balance?
17. What is the adjusted ending cash balance?
18. What is the amount of the unadjusted book receipts in December?
19. What is the amount of the unadjusted book disbursements in December?

PROBLEM H
Sa Ngalan ng Pag-ibig Co. reported a cash balance of P 9,050,000. The following were found to
constitute the balance:
• Cash set aside for plant expansion, P 5,500,000
• Cash in bank in AMV Bank, net of P 32,500 overdraft in
another bank, P 1,620,000
• Cash in bank in AB Bank, P 1,920,350
• Postdated customer checks, P 9,650

REQUIRED:
20. What is the correct amount of cash?

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 SUGGESTED ANSWER KEY
CONCEPTUAL
1. F 11. T
2. F 12. T
3. T 13. F
4. T 14. T
5. T 15. T
6. F 16. B
7. T 17. C
8. F 18. A
9. F 19. B
10. F 20. B
COMPUTATIONAL
1. 2,633,120 11. 274,300
2. 1,340 12.
Cash 72,800
Service Charge 1,000
Notes Receivable 20,800
Interest Revenue 4,000
Loan Payable 49,000
3. 743,050 13. 10,000 understatement
4. 543,050 14. 455,310
5. 2,000 15. 618,960
6. 330 shortage 16. 600,000
7. No entry 17. 436,350
8. 18. 389,910
Office Supplies Expense 2,150
Transportation Expense 2,300
Representation Expense 6,220
Cash Short or Over 330
Petty Cash Fund 11,000
9. 5,750 19. 618,060
10. 2,400 shortage 20. 3,572,850

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