CHAPTER 2

CASH AND CASH EQUIVALENTS

PROBLEMS

2-1. (Money Company)

Checking account in Metrobank P105,200

Savings account at Far East Bank 30,800

Petty cash fund (1,500 – 250) 1,250

Cash on hand (undeposited sales receipts) 4,200

Cash in foreign bank (in equivalent pesos) 65,000

Customers’ check on hand:

Traveler’s check 14,000

Manager’s check 23,120

Total amount of cash P243,570

Alternative computation:

Reported total P330,820

Less Sinking fund cash ( 35,000)

Short term treasury bills ( 52,000)

Unreplenished petty cash expenses ( 250)

Correct cash balance P243,570

The outstanding checks of P15,200 was 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 P180,000

Adjustments:

Customer’s post dated check included in the balance ( 65,000)

Customer’s check returned by bank marked DAIF ( 20,000)

Company check recorded but not yet mailed 15,000

Cash reported on December 31, 2013 statement of financial position P110,000

2-3. (Grain Company)

Balance per general ledger P2,205,600

Non-cash items:

Customer’s NSF checks P 20,000

IOUs 1,200

Postage stamps 600

Cash in sinking fund 500,000

Customers’ post dated checks 5,400

Travel advances 4,000 531,200

Correct cash balance 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.

2-4. (Rod Company)

Petty cash (10,000 – 1,250) P 8,750

Cash on hand (625,000 – 2,500) 622,500

Cash in bank- General (750,000 + 12,500) 762,500

Cash in bank, Payroll (320,000 + 10,000) 330,000

Total 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 P 900,000

Customer’s 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 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 items not included in cash and cash equivalents shall be presented as follows:

Expenses in the statement of comprehensive income (P150

cash shortage in petty cash fund + expense receipts of P5,000) P 5,150

Current assets:

Certificates of deposit (with term of 120 days) 2,000,000

Accounts receivable (customer’s postdated check) 320,000

 Non-current assets:

Cash fund for retirement of bonds payable 1,500,000

Current liabilities

Accounts payable (PDC issued to supplier) 300,000

Salaries payable (unissued check to employee) 50,000

2-6. (Jessie Company)

Nov. 20 Petty cash fund 5,000

Cash in bank 5,000

Nov. 20 to No entry

Dec. 15

Dec. 16 Transportation expense 1,500

Representation expense 1,200

Freight-in 1,300

Repairs expense 920

Cash in bank 4,920

Dec. 16 –31 No entry

Dec. 31 Transportation expense 340

Supplies expense 1,400

Petty cash fund 1,740

Jan. 1 Petty cash fund 1,740

Transportation expense 340

Supplies expense 1,400

Jan. 1-8 No entry

Jan. 9 Transportation expense (340 + 120) 460

Supplies expense (1,400 + 1,300) 2,700

Representation expense 1,800

Cash in bank 4,960

9 Petty cash fund 3,000

Cash in bank 3,000

2-7. (Coral Company)

(a) Petty cash fund P5,000.00

Amount of cash on hand P 670.40

Total petty cash vouchers:

Office supplies P 341,60

Postage 780.00

Representation 1,000.00

Transportation 1,321.40

Miscellaneous 837.60 4,280.60 4,951.00

Shortage in the petty cash fund P 49.00

(b) Office supplies expense 341.60

Postage expense 780.00

Representation expense 1,000.00

 Transportation expense 1,321.40

Miscellaneous expense 837.60

Cash short and over 49.00

Petty cash fund 4,329.60

2-8. (Prada Company)

1. May 2 Petty cash fund 8,000

Cash in bank 8,000

2. May 2-20 No entry

3. No entry

4. May 20 Freight-in 2,500

Freight-out 3,000

Supplies expense 800

Cash in bank 6,300

5. No entry

6. May 31 Freight in 1,200

Transportation expense 150

Employee benefit expense 320

Advances to employees (IOU of 500 + short of 130) 630

Petty cash fund (8,000 – 5,700) 2,300

Per count

Bills and coins P5,700

Paid petty cash vouchers

(1,200 + 150 + 320 + 500) 2,170

Total P7,870

Petty cash fund, imprest balance 8,000

Cash shortage P 130

2-9. (Canon Company)

(a) Bills and coins 2,450

PCVs dated July 2013 (undisbursed as of June 30) 800

Adjusted balance of petty cash fund 3,250

(b) Per count

Bills and coins P 2,450

PCVs dated June 3,300

PCVs dated July 800

IOUs 1,400

PDC drawn by Juvy Victoria 2,000

Total P 9,950

Petty cash fund, per ledger 10,000

Cash shortage P 50

(c) Miscellaneous expenses 3,300

Receivable from employees (IOU + PDC) 3,400

Cash short/over 50

Petty cash fund 6,750

2-10. (Giordano Corporation)

Giordano Corporation

Bank Reconciliation

December 31, 2013

Balance per bank statement P199,925

 Add: Cash on hand for undeposited receipts P13,025

Deposit in transit 35,000 48,025

Total P252,950

Deduct: Outstanding checks 204,055

Adjusted balance P 43,895

Balance per books P(32,560)

Add: Note receivable collected by bank, incl interest of P2,500 252,500

Total P219,940

Deduct: Customer’s NSF check returned by bank P42,040

Customer’s check for P29,040 erroneously

recorded as P94,020 64,980

Cash sales missing 64,025

Petty cash fund 5,000 176,045

Adjusted balance P 43,895

(b) Adjusting entries:

Cash in bank 252,500

Notes Receivable 250,000

Interest Revenue 2,500

Accounts Receivable (42,040 + 64,980) 107,020

Loss from Theft 64,025

Petty Cash Fund 5,000

Cash in bank 176,045

Miscellaneous Expenses 1,800

Petty Cash Fund 1,800

 Total Cash on the statement of financial position

Petty cash fund of P3,200 + Cash in bank of P43,895 P47,095

2-11. (Pound Company)

(a) Per Bank Per Books

Balances before adjustments P31,948 P17,194

Bank service charge ( 109)

Debit memo for printed checks ( 125)

Outstanding checks (6,728)

Deposit of July 31 not yet recorded by bank 4,880

Proceeds of a bank loan, net of P300 interest 5,700

Proceeds from customer’s note, including P100 interest 8,100

Check #1210 for P2,100 erroneously deducted by bank as P1,200 (900)

Stolen check lacking authorized signature deducted by bank in error 800

Customer’s NSF check returned by bank _______ (760)

Correct cash balance P30,000 P30,000

(b) Adjusting entry at July 31, 2013 (compound form)

Miscellaneous Expenses (109 + 125) 234

 Accounts Receivable 760

Interest Expense 300

Cash in Bank 12,806

Bank Loan 6,000

Notes Receivable 8,000

Interest Revenue 100

2-12. (Bench Company)

Per Bank Per Books

Balances before adjustments P892,346.30 P590,884.60

Outstanding checks (333,788.20)

Receipts of 12/31/13 deposited on 1/2/14 53,172.00

Service charges for December ( 225.00)

Proceeds of bank loan omitted from company records 97,000.00

Deposit of 12/23/13 omitted from bank statement 28,924.10

Check of Rome Products charged for lack of counter signature (8,737.40)

Bank error for a deposit of P31,824 recorded as P31,814 10.00

Check of Birch Company erroneously charged by bank 26,900.00

Proceeds of note collected by bank 20,350.00

Erroneous debit by bank for bank loan paid by company 50,000.00

Bank error for a deposit of P48,071 recorded as P48,171 ( 100.00

Deposit of Birch Company erroneously credited by bank (18,192.00) __________

Adjusted cash balance P699,272.20 P699,272.20

2-13. (Amethyst Corporation)

Balance per bank statement P169,263

Deposit in transit, April 30 18,200

 Outstanding checks, April 30 ( 59,435)

Erroneous charge by bank 2,200

NSF checks not yet redeposited (3,435 – 1,835) 1,600

Proceeds of note collected by bank ( 7,548)

Bank service charge 180

Unadjusted book balance for cash, April 30, 2013 P124,460

2-14. (Silver Company)

Balance per bank statement P380,750

Deposits in transit 52,000

Outstanding checks (67,500 – 9,000) (58,500)

Erroneous credit by bank ( 4,000)

Check of Silver Lining charged by bank to Silver Co.’s account 12,000

Correct cash balance P382,250

2-15. Cash balance per books, March 1 P115,963.70

Cash receipts during March 246,475.00

Cash disbursements during March (334,709.10)

Bank service charge for March (92.00)

Cash balance per books at March 31 P 27,637.60

Cash balance per bank statement P15,341.40

Deposit in transit 9,000.00

Outstanding checks (2,703.80)

Cash balance reflected per bank 21,637.60

Suspected cash shortage (undeposited collections) P 6,000.00

2-16. (Pearl Corporation)

Balance per bank statement P400,000

 Add receipts of 12/31/13 not yet deposited 100,000

Balance per bank statement before outstanding checks P500,000

Balance per books P387,000

Bank service charge for December ( 1,000)

Paid check for P40,000 recorded as P4,000 ( 36,000)

Customer’s check returned by bank marked DAIF ( 22,000) 328,000

Outstanding checks at December 31, 2013 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)

Customer’s 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, 2013

Nov. 30 December Receipts December Disbursements

Dec. 31

Balances per bank statement P294,771.00 P1,065,620.00 P1,211,405.00 P148,986.00

Receipts not yet deposited

November 30 21,270.00 (21,270.00)

December 31 32,925.00 32,925.00

Outstanding checks

November 30 (40,525.00) (40,525.00)