ST.

VINCENT COLLEGE OF CABUYAO

Brgy. Mamatid, City of Cabuyao
Laguna 4025
Problem 40
Computation of Cash Shortage

Your client, a successful small business, has never given much attention to a sound internal
control. In its employ is Alex Coopit, the company’s cashier bookkeeper. Alex handles cash receipts,
makes small disbursements from the cash receipts, maintains accounting records, and prepares the
monthly bank reconciliation.

The bank statement for the month ended March 31, 2019, shows a cash balance of P590,000. The
following checks are outstanding on March 31:

No. 7163 P8,623

No. 7284 7,320
No. 7285 10,612
No. 8722 6,322
No. 8724 12,280
No. 8733 6,200

The company’s general ledger shows a cash balance of P696,499 on March 31, 2019.

Realizing that being the cashier-accountant of the company he can easily misappropriate collections
and conceal it, Alex removed all cash on hand in excess of P127,301, and then prepared the following
reconciliation in an effort to conceal this theft.

BANK RECONCILIATION
Balance per accounting records P696,999
Add: Outstanding checks
No. 8722 6,322
No. 8724 12,280
No. 8733 6,200 20,802
Total 717,301
Deduct: Cash on hand 127,301
Balance per bank statement, March 31 590,000

1. How much was taken by the cashier-accountant?

a. 30,555
b. 157,856
c. 4,000
d. 26,555

2. What is the amount of cash that should be on hand at April 1, 2019?

a. 127,301
b. 131,301
c. 157,856
d. 30,555

Problem 37
Computation of Cash Shortage

In connection with the audit of financial statements of JEM Company for the year ended October 31,
2020, you conducted a surprise count of undeposited receipts on October 31, 2020. It was witnessed
by the company’s cashier whose accountability on October 31 was determined to be P80,000. Your
count revealed the following:

Currency and coins P48,840

Unused postage stamps 440

Checks:
Date Payee Maker
1-22 Cash Cashier 4,000
10-19 Jem Company DWU Inc. 9,400
10-28 Jem Company PSU Co. 7,840
10-31 CCP Co. Jem Company 3,600
Office supplies paid out receipts 6,400
Total per count 80,520

1. What is the cash shortage on October 31, 2020?

a. 7,080
b. 3,480
c. 3,080
d. 7,600

Problem 35
Computation of Cash Shortage

The LEINOR Company does not have adequate controls over its cash transactions. During an audit,
you found the following data concerning its cash position at December 31, 2020.
1. On the company’s records the cash balance is P173,500.
2. A credit of P2,500 for a note collected by the bank does not appear on the company’s records.
3. The bank statement balance is P135,000.
4. Outstanding checks are as follows:
Number Amount
1428 P5,200
1431 3,600
1445 4,080
1446 3,460

The cashier made the following reconciliation:

Balance per bank statement P135,000
Deduct: Outstanding Checks:
No. 1431 3,600
No. 1445 4,080
No. 1446 3,460 10,140
124,860
Add: Undeposited collection (per count) 46,140
Collected note 2,500 48,640
Cash per books, December 31, 2020 173,500

1. What is the total cash shortage?

a. 11,200
b. 8,700
c. 5,000
d. 6,000

Problem 32
Computation of Cash Shortage

The JUNNEL Company had weak internal controls over its cash transactions. Facts about its cash
position at November 30, 2020 were as follows:
The cash books showed a balance of P94,508, which included undeposited receipts. A credit of P500
on the bank’s records did not appear on the books of the company. The balance per bank statement
was P77,750. Outstanding checks were no. 8420 for P581, no. 8422 for P750, no. 8430 for P1,266,
no. 8621 for P954, no. 8623 for P 1,034 and no. 8632 for P726.
The cashier stole all undeposited receipts in excess of P18,972 and prepared the following
reconciliation:

Balance per book, Nov. 30, 2020 P94,508

Add: Outstanding checks
8621 P954
8623 1,034
8632 726 2,214
96,722
Less: Undeposited receipts 18,972
Balance per bank, Nov. 30, 2020 77,750
Less Unrecorded receipts 500
True cash, Nov. 30, 2020 77,250

1. What is the correct amount of cash that should be on hand for deposit on November 30, 2020?

a. 23,069
 b. 18,972
c. 22,569
d. 22,069

2. How much was the cash stolen by the cashier?

a. 3,597
b. 3,097
c. 4,097
d. 0

Problem 8
Petty Cash Fund; Bank Reconciliation

Tanya Velasco is reviewing the cash accounting for ABX Inc. Tanya’s review will focus on the petty
cash fund account and the bank reconciliation for the month ended May 31, 2020. She has collected
the following information from ABX’s bookkeeper for this task.

Petty Cash Fund

1. The petty cash fund was established on May 2, 2020, in the amount of P10,000.
2. Expenditures from the fund by the custodian as of May 31, 2020, were evidenced by approved
petty cash vouchers for the following:
Various office supplies P3,920
IOUs from employees 1,200
Shipping charges 2,298
Miscellaneous expense 1,526

On May 31, 2020, the petty cash fund was replenished and increased to P12,000; currency and coins
in the fund at that time totaled P756.

Bank Reconciliation

Disbursements Receipts Balance

Balance May 1, 2020 350,760
Deposits 1,120,000
Note payment direct from
Customers (interest of P1,200) 37,200
Checks cleared during May 1,246,000
Bank service charge 1,080
Balance May 31, 2020 260,880

ABX’s Inc. Cash Account

Balance, May 1, 2020 P354,000

Deposits during May 2020 1,240,000
Checks written during May 2020 1,273,400

Deposit in transit are determined to be P120,000, and checks outstanding at May 31, 2020 totaled
P34,000. Cash on hand (besides petty cash) at May 31, 2020, is P9,840.

1. What is the amount of petty cash shortage?

a. 2,300
b. 11,244
c. 300
d. 0

2. The journal entry to record the replenishment of and increase in the petty fund includes a
credit to?
a. Cash of P10,944
b. Cash of P11,244
c. Petty cash fund of P10,944
d. Petty cash fund of P11,244

3. What amount of cash should be reported in the May 31, 2020 statement of financial position?
a. 368,720
b. 356,720
c. 368,420
d. 358,880
Problem 10
Bank Reconciliation

The bank statement for the current account of IAN Co. showed a December 31, 2020, balance of
P585,284. Information that might be useful in preparing a bank reconciliation is as follows:

a. Outstanding checks were P52,810.

b. The December 31, 2020 cash receipts of P23,000 were not deposited in the bank until January
2, 2021.
c. One check written in payment of rent P8,940 was correctly recorded by the bank but was
recorded by IAN Co. as a P9,840 disbursements.
d. In accordance with prior authorization, the bank withdrew P18,000 directly from the current
account as payment on a mortgage note payable. The interest portion of that payment was P14,000.
IAN Co. has made no entry to record the automatic payment.
e. Bank service charges of P740 were listed on the bank statement.
f. A deposit of P35,000 was recorded by the bank on December 12, but it did not belong to IAN
Co.
g. The bank statement includes a charge of P3,400 for a not-sufficient-fund check. The company
will seek payment from the customer.
h. IAN Co. maintains an P8,000 petty cash fund that was appropriately reimbursed at the end of
December.
i. According to instructions of IAN Co. On December 30, the bank withdrew P40,000 from the
account and purchased Treasury bills for IAN Co. The company recorded the transactions in its
books on December 31, 2020 when it received notice from the bank. Half of the treasury bills
mature in three months and the other half in six months.

1. What is the bank balance per books on December 31, 2020?

a. 549,714
b. 543,514
c. 534,914
d. 541,714

2. What is the adjusted cash in bank balance on December 31, 2020?

a. 520,474
b. 527,274
c. 518,674
d. 520,154

3. What amount would IAN Co. report as cash and cash equivalents in the current asset section
of the December 31, 2020, statement of financial position?
a. 928,474
b. 728,474
c. 720,474
d. 735,274

Problem 15
Petty cash Fund; Bank Reconciliation

Your audit of the cash account of JUNE Corp. disclosed the following information:

1. Cash in bank balance per books, Dec. 31, 2020 P35,000

2. Bank statement balance, Dec. 31, 2020 60,000
3. Note collected by bank in December (principal plus
Interest of P800, less collection fee of P200) 27,600
4. Debit memo for a checkbook ???
5. Deposit in transit, Dec. 31, 2020 15,200
6. Transposition error made by the bank
In recording deposit of December 28:
Correct amount P45,000
Recorded as 54,000 9,000
7. Erroneous bank debit 26,700

8. Included in the cash in bank account is petty cash fund

Of P10,000. Your count on December 31, 2020, revealed the ff. fund items:
 Currency and coins P3,000
Supplies 2,400
Transportation 100
IOUs 4,000 9,500
9. Erroneous bank credits 11,000
10. Outstanding checks (including a certified check of P10,000) 39,400

1. What is the principal amount of the note collected by the bank in December?
a. 27,600
b. 26,800
c. 28,200
d. 27,000

2. What is the adjusted cash in bank balance at December 31, 2020?

a. 52,500
b. 52,700
c. 53,000
d. 51,900

3. The cost of checkbook is

a. 600
b. 300
c. 0
d. 100

4. What is the amount of petty cash shortage at December 31, 2020/

a. 400
b. 500
c. 100
d. 0

5. What is the adjusted petty cash balance?

a. 9,500
b. 3,500
c. 3,000
d. 10,000

Problem 1
Cash and Cash Equivalents

In connection with your audit of the financial statements of ONOR Company for the year ended
December 31, 2020, you gathered the following information.

1. The company maintains its current account with Tsunami Bank. The bank statement on December
31, 2020 showed a balance of P638,340.

Your audit of the company’s account with Tsunami bank disclosed the following:

 A check for P22,500 received from customer whose account is current had been deposited and
then returned by the bank on December 28, 2020. No entry was made for the return of this
check. The customer replaced the check on January 15, 2021.
 A check for P5,720 was cleared by the bank as P7,520. The bank made the correction on January
2, 2021.
 A check for P3,500 representing payment of an employee advance was received and deposited on
December 27, 2020, but was not recorded until January 3, 2021.
 Post-dated checks totaling P67,300 were included in the deposits in transit. These represents
collections of current accounts receivable from customers. The checks were actually deposited
on January 5, 2021.
 Various debit memos for drafts purchased for payment of importation of equipment totaling
P230,000 were not yet recorded. These purchases were previously set up as accounts payable.
Said equipment arrived in December 2020.
 Interest earned on the bank balance for the 4th quarter of 2020, amounting to P1,950 was not
recorded.
 Bank service charges totaling P1,260 were not recorded.
 Deposit in transit and outstanding checks at December 31, 2020 totaled P136,250 and P276,380,
respectively.
2. Various expenses from the company’s imprest petty cash fund dated December 2020 totaled
P16,250, while those dated January 2021 amounted to P5,903. Another disbursement from the
fund dated December 2020 was a cash advance to an employee amounting to P3,500. A replenishment
of the petty cash fund was made on January 8, 2021.

3. The company’s trial balance on December 31, 2020 includes the following accounts:

Cash in bank-Tsunami bank P748,320

Cash in bank-Earthquake Bank (restricted
Account for plant expansion, expected to
Be disbursed in 2021) 700,000
Petty cash fund 30,000
Time deposit, placed December 20, 2020
And due March 20,2021 1,000,000
Money market Placement-Prudential Bank 4,000,000

1. What is the adjusted petty cash fund balance on December 31, 2020?
a. 4,347
b. 10,250
c. 30,000
d. 24,097

2. The petty cash shortage on December 31, 2020?

a. 0
b. 5,903
c. 3,500
d. 4,347

3. What is the adjusted Cash in Bank-Tsunami bank balance on December 31, 2020?
a. 500,000
b. 748,320
c. 432,710
d. 429,710

4. The entry to adjust the Cash in bank – Tsunami bank account should include a debit to
a. Accounts receivable for P89,800
b. Accounts receivable for P86,300
c. Accounts payable for P228,200
d. Interest expense for P1,950

5. The December 31, 2020 statement of financial position should show “Cash and Cash Equivalents”
at
a. 6,142,960
b. 5,439,360
c. 4,442,960
d. 5,442,960