QUIZ # 4

CASH & INVENTORY

PROBLEM 1

BIRD COMPANY is a manufacturer of small tools. The following information was

obtained from the company’s accounting records for the year ended December 31,
2019:

Inventory at December 31, 2019 (based on physical

count in Bird’s warehouse at cost on December 31, P1,870,000
2019.)
Account payable at December 31, 2019 1,415,000
Net Sales (sales less sales returns) 9,693,400

Your audit reveals the following information:

1. The physical count included tools billed to a customer FOB shipping point on
December 31, 2019. These tools cost P64,000 and were billed at P78,500.
They were in the shipping area waiting to be picked up by the customer.
2. Goods shipped FOB shipping point by a vendor were in transit on December
31, 2019. These goods with invoice cost of P93,000 were shipped on
December 29, 2019.
3. Work in process inventory costing P27,000 was sent to a job contractor for
further processing.
4. Not included in the physical count were goods returned by customers on
December 31, 2019. These goods costing P49,000 were inspected and
returned to inventory on January 7, 2020. Credit memos for P67,800 were
issued to the customers at that date.
5. In transit to a customer on December 31, 2019, were tools costing P17,000
shipped FOB shipping point on December 26, 2019. A sales invoice for
P29,400 was issued on January 3, 2020, when Bird Company was notified by
the customer that the tools had been received.
6. At exactly 5:00 pm on December 31, 2019, goods costing P31,200 were
received from a vendor. These were recorded on a receiving report dated
January 2, 2020. The related invoice was recorded on December 31, 2019,
but the goods were not included in the physical count.
7. Included in the physical count were goods received from a vendor on
December 27, 2019. However, the related invoice for P36,000 was not
recorded because the accounting department’s copy of the receiving report
was lost.
8. A monthly freight bill for P32,000 was received on January 3, 2020. It
specifically related to merchandise bought in December 2019, one-half of
which was still in the inventory at December 31, 2019. The freight was not
included in either the inventory or in accounts payable at December 31,
2019.

Required:
 1. Bird’s December 31, 2019 inventory should be increased by
_______________
2. Bird’s accounts payable balance at December 31, 2019 should be increased
by ______________
3. The amount of net sales to be reported on Bird’s income statement for the
year ended December 31, 2019 should be __________________
4. Bird’s statement of financial position at December 31, 2019 should report
accounts payable of _________________
5. The amount of inventory to be reported on Bird’s December 31, 2019
statement of financial position should be ______________

PROBLEM 2
The following items are found in the cash account of Ivie Company at December 31,
2019. The company’s controller asks your opinion whether the items listed below
should be considered as part of cash account and come up with adjusting entry to
adjust the cash account.

1. Customers’ check dated December 25, 2019, P25,000.

2. Company’s check (P30,000) dated December 26, 2019 which was drawn in
payment for merchandise purchased on that date but not delivered until
January 3, 2020. This check was deducted in the cash balance.
3. A check worth P196,000 from customer who paid the account net of the 2%
discount. The company records the transaction as credit to Accounts
Receivable for the proceeds.
4. Cash in closed bank (Urban Bank), P95,000.
5. Redemption fund, P100,000
6. Sinking fund, P100,000. This will be used on March 1, 2020 to redeem the
bonds payable.
7. Metro Bank Checking Account No. 0004568, P210,000.
8. RCBC Checking Account No. 0002347, P115,000.
9. Overdraft in PNB Checking Account No. 00011256, P50,000.
10. Company’s check dated January 3, 2020 in payment of account, P50,000.
This was recorded in the company’s disbursement ledger at December 31,
2019.
11. Overdraft in RCBC Checking Account No. 0056791, P15,000.
12. Postage stamps, P2,000.
13. 90-day Treasury Bills (purchase on November 1, 2019), P100,000
14. Treasury Bills that matures on February 1, 2020, P50,000.
15. Change fund, P10,000.
16. Customers’ certified check, P20,000.
17. Company’s certified check, P50,000. (This was included in the cash
disbursement for December).

REQUIRED:
1. The entry to correct/adjust item number 3 is:
2. The entry to correct/adjust item number 10 is:
3. The entry to correct/adjust item number 17 is:
4. The entry to correct/adjust item number 16 is:
5. IVIE COMPANY’S adjusted cash and cash equivalents balance at December 31, 2019
is: