ACCTG 211: Intermediate Accounting I

Practice Set 1
Cash and Cash Equivalents; Bank Reconciliation

1. Pygmalion Company had the following account balances on December 31, 2011:

Cash in bank – current account 5,000,000

Cash in bank – payroll account 1,000,000
Cash on hand 500,000
Cash in bank – restricted account for building
construction expected to be disbursed in 2012 3,000,000
Time deposit, purchased December 15, 2011
and due March 15, 2012 2,000,000

The cash on hand includes a P200,000 check payable to Pygmalion, dated January 15, 2012. What total
amount should be reported as Cash and cash equivalents on December 31, 2011?

2. On December 31, 2011, the cash account of Roel Company showed the following details:

Undeposited collections 60,000

Cash in bank – PCIB checking account 500,000
Cash in bank – PNB (overdraft) (50,000)
Undeposited NSF check received from
customer, dated December 1, 2011 15,000
Undeposited check from a customer, dated
January 15, 2012 25,000
Cash in bank – PCIB (fund for payroll) 150,000
Cash in bank – PCIB (saving deposit) 100,000
Cash in bank – PCIB (money market instrument,
90 days) 2,000,000
100,000Cash in foreign bank (restricted) 100,000
IOUs fro30,000m officers 30,000
Sinking fund cash000 450,000
Listed shares held as trading investment 120,000

On December 31, 2011, what total amount should be reported as Cash and cash equivalents?

3. Everlast Company reported the following information as of the end of the current year:

(a) Investment securities of P1,000,000. These securities are share investments in entities that are traded
in the Philippine Stock Exchange. As a result, the shares are very actively traded in the market.
(b) Investment securities of P2,000,000. These securities are government treasury bills. The treasury
bills have a 10-year term and purchased on December 31 at which time they have two months to go
until they mature.
(c) Cash of P3,400,000 in the form of coin, currency, savings account, and checking account.
(d) Investment securities of P1,500,000. These securities are commercial papers. The term of the papers
is nine months and they were purchased on December 31 at which time they had three months to go
until they mature.

What total amount should be reported as Cash and cash equivalents at year-end?
 4. Burr Company had the following account balances on December 31, 2011:

Cash in bank 2,250,000

Cash on hand 125,000
Cash restricted for addition to plant (expected to
be disbursed in 2012) 1,600,000

Cash in bank includes P600,000 of compensating balance against short-term borrowing arrangement. The
compensating balance is not legally restricted as to withdrawal by Burr.

In the December 31, 20011 statement of financial position, what total cash should be reported under current
assets?

5. Campbell Company had the following account balances on December 31, 2011:

Petty cash fund 50,000

Cash in bank – current account 4,000,000
Cash in bank – sinking fund 2,000,000
Cash on hand 500,000
Cash in bank – restricted account for plant
addition, expected to be disbursed in 2012 1,500,000
Treasury bills 1,000,000

The petty cash fund includes unreplenished December 2011 petty cash expense vouchers of P10,000 and
employee IOU of P5,000. The cash on hand includes a P100,000 check oayable to Campbell dated January
15, 2012. In exchange for a guaranteed line of credit, Campbell has agreed to maintain a minimum balance
of P200,000 in its unrestricted bank account. The sinking fund is set aside to settle a bond payable that is
due on June 30, 2012.

What total amount should be reported as Cash and cash equivalents on December 31, 2011?

6. In preparing the august 31, 2011 bank reconciliation Apex Company provided the following
information:

Balance per bank statement 1,805,000

Deposit in transit 325,000
Return of customer’s check for insufficient fund 60,000
Outstanding checks 275,000
Bank service charge for August 10,000

On August 31, 2011, what is the adjusted cash in bank?

7. In an audit of Mindanao Company on December 31, 2011, the following data are gathered:

Balance per book 1,000,000

Bank charges 3,000
Outstanding checks 235,000
Deposit in transit 300,000
Customer note collected by bank 375,000
Interest on customer note 15,000
Customer check returned NSF 62,000
Depositor’s note charged to account 250,000

What is the adjusted cash in bank in December 31, 2011?

 8. Core Company provided the following data for the purpose of reconciling the cash balance per book
with the balance per bank statement on December 31, 2011:

Balance per bank statement 2,000,00

Outstanding check (including certified check of P100,000) 500,000
Deposit in transit 200,000
December NSF checks (of which P50,000 had been redeposited and
cleared by December 27) 150,000
Erroneous credit to Core’s account, representing proceeds of loan
granted to another company 300,000
Proceeds of note collected for Core, net of service charge of P20,000 750,000

What is the cash in bank to be reported in the December 31, 2011 statement of financial position?

9. Aries Company keeps all its cash in a checking account. An examination of the entity’s accounting
records and bank statement for the month ended June 30, 2011 revealed the following information:

(a) The cash balance per book on June 30 is P8,500,000.

(b) A deposit of P1,00,000 that was placed in the bank’s night depository on June 30 does not appear on
the bank statement.
(c) The ban statement shows on June 30, the bank note collected for Aries and credited the proceeds of
P950,000 to the entity’s account.
(d) Checks outstanding on June 30 amount to P300,000.
(e) Aries discovered that a check written in June for P200,00 in payment of an account payable had been
recorded in the entity’s records as P20,000.
(f) Included with the June bank statement was NSF check for P250,000 that Aries has received from a
customer on June 26.
(g) The bank statement shows a P20,000 service charge for June.

What is the cash in bank to be reported in the statement of financial position on June 30, 2011?

10. On March 31, 2011, Able Company received its bank statement. However, the closing balance of the
account was unreadable. Attempts to contact the bank after hours did not secure the desired
information. The following data are available in preparing a bank reconciliation.

February 28 book balance 1,460,000

Note collected by bank 100,000
Interest earned on note 10,000
NSF check of customer 130,000
Bank service charge on NSF check 2,000
Other bank service charges 3,000
Outstanding checks 202,000
Deposit of February 28 placed in night depositary 85,000
Check issued by Axle Company charged to Able’s account 20,000

What is the cash balance per bank statement?

 11. Stellar Company’s bank statement for the month of December included the following information:

Ending balance, December 31 2,800,000

Bank service charge for December 12,000
Interest paid by bank to Stellar for December 10,000

In comparing the bank statement to its own cash records, Stellar Company found the following:

Deposits made but not yet recorded by the bank 350,000

Checks written and mailed but not yet recorded
by the bank 650,000

In addition, Stellar Company discovered that it had drawn and erroneously recorded a check for P46,000 that
should have been recorded for P64,000.

What is the cash balance per ledger on December 31?

12. The cash account in the ledger of Kate Company shows a balance of P1,652,000 at December 31.
The bank statement, however, shows a balance of P2,090,000 at the same time. The only reconciling
items consist of a bank service charge of P2,000, a large number of outstanding checks totaling
P590,000, and a deposit in transit.

What is the deposit in transit in the December 31, bank reconciliation?

*** END OF PRACTICE SET ***