Mindanao State University

College of Business Administration and Accountancy

DEPARTMENT OF ACCOUNTANCY
Marawi City

CASH AND CASH EQUIVALENTS

Practical Accounting 1 Pre-review Program

PROBLEM 1: The following pertains to Washington Corporation on Subscription receivable 60,000 50,000
December 31, 2011: Delivery equipment 50,000
Current account at Metro Bank P1,800,000 Accounts payable 280,000 430,000
Current account at Allied Bank (100,000) Bank loan 35,000 80,000
Payroll account 500,000 Accrued expenses 1,500
Foreign bank account (equivalent pesos) 800,000 Subscribed share capital 60,000
Savings deposit in a closed bank 150,000 Unissued share capital 130,000
Postage stamps 1,000 Authorized share capital 200,000
Employee’s postdated check 4,000 Sales 450,000
IOU from employees 10,000 Purchases 430,000
Credit memo from a vendor for a purchase return 20,000 Expenses 90,000
Traveler’s check 50,000 Expenses include depreciation of P5,000 and accrued expense of
Money order 30,000 P1,500.
Petty cash fund (P4,000 in currency and expense
6. The cash in bank balance at December 31, 2011 was:
receipts for P6,000) 10,000
Pension fund 2,000,000 PROBLEM 6: An office supplies enterprise, operating on a calendar
DAIF check of customer 15,000 year basis, has the following data in its accounting records:
Customer’s check dated 1/1/2012 80,000 1/1/11 12/31/11
Time deposit – 30 days 200,000 Cash P 47,000
Money market placement due on 6/30/2012 500,000 Inventory 101,000 P 93,000
Treasury bills due on 3/31/2012 and purchased Accounts receivable 82,000 116,000
12/31/2011 200,000 Accounts payable 68,000 63,000
Treasury bills due on 1/31/2012 and purchased Sales 1,150,000
2/1/2011 300,000 Cost of goods sold 900,000
1. The total cash of Washington Company on December 31, 2011 is: Operating expenses 200,000
2. The total cash and cash equivalents of Washington Company on 7. What is the expected cash balance for December 31?
December 31, 2011 is:
PROBLEM 7: The petty cash fund of Jackson Company, which has an
PROBLEM 2: The cash balance of Adams Company on December 31, imprest balance of P50,000, on December 31, 2011 is composed of the
2012 comprises the following: following:
Cash on hand P 100,000 Coins and currencies P 14,000
Cash in bank – BPI (savings deposit) 200,000 Petty cash vouchers:
Cash in bank – BPI (current account) (80,000) Gasoline payments 3,000
Cash in bank – PNB(deposit in escrow) 100,000 Supplies 1,000
Cash in bank – PNB (current account) (20,000) Cash advances to employees 2,000
Cash in bank – BDO (current account) 300,000 Employee’s check returned by bank marked NSF 5,000
Cash in bank – BDO (savings deposit) (30,000) Check drawn by Jackson payable to the order of
Additional information on some balances above follows: the petty cash custodian representing her salary 20,000
A. Cash on hand includes undeposited collections of P20,000. A sheet of paper with names of employees
B. The cash in bank – BPI (savings deposit) includes a P50,000 together with the contribution for a birthday
compensating balance which is not unrestricted. gift of a co-employee in the amount of 8,000
C. The cash in bank – BDO (current account) is set aside for the Personal check drawn by the petty cash custodian 1,500
purchase of equipment expected to be made on March 31, 8. What is the correct amount of petty cash on December 31, 2011?
2013.
3. Compute for the amount of cash to be reported in the financial PROBLEM 8: On December 31, 2011, the cash account of Van Buren
statements on December 31, 2012. Company has a debit balance of P3,500,000. An analysis of the cash
account shows the following details:
PROBLEM 3: On December 31, 2011, Jefferson Company had the Undeposited collections P 60,000
following cash balances: Cash in bank – PCIB checking account 500,000
Cash in bank P15,000,000 Cash in bank – PNB (overdraft) (50,000
Petty cash fund 50,000 Undeposited check from a customer dated
Time deposit 5,000,000 1/15/2012 25,000
Saving deposit 2,000,000 Cash in bank – PCIB (fund for payroll) 150,000
Cash in bank includes P500,000 of compensating balance against short- Undeposited NSF check received from customer
term borrowing arrangement at December 31, 2011. The compensating dated 12/1/2011 15,000
balance is legally restricted as to withdrawal by Jefferson. A check of Cash in bank – PCIB (saving deposit) 100,000
P300,000 dated January 15, 2012 in payment of accounts payable was Cash in bank – PCIB (money market placement,
recorded and mailed on December 31, 2011. 90 days) 2,000,000
4. What amount should be reported as “cash and cash equivalents” Cash in foreign bank (restricted) 100,000
on December 31, 2011? IOUs from officers 30,000
Sinking fund cash 450,000
PROBLEM 4: On January 1, 2011, Madison Company borrows Listed stock held as temporary investment 120,000
P2,000,000 from National Bank at 12% annual interest. In addition, 9. The total cash and cash equivalents on Van Buren’s December
Madison is required to keep a compensatory balance of P200,000 on 31, 2011 statement of financial position should be:
deposit at National Bank which will earn 4%.
5. The effective interest that Madison pays on its P2,000,000 loan is: PROBLEM 9: Tyler Corporation’s checkbook balance on December
31, 2011 was P800,000. In addition, Tyler held the following items in
PROBLEM 5: Cash in bank balance of Monroe Company on January its safe on December 31:
1, 2011 was P70,000 representing 35% paid up capital of its authorized Check payable to Tyler Corporation dated
share capital of P200,000. During the year, you ascertained the 1/2/2012 not included in the 12/31 checkbook
following postings to some accounts: balance P 200,000
Debit Credit Check payable to Tyler Corporation deposited 40,000
Petty cash fund P 2,000 12/20 and included in 12/31 checkbook balance
Accounts receivable 450,000 P 290,000 but returned by the bank on 12/30 stamped

Prepared by: Mohammad Muariff S. Balang, CPA, Second Semester, AY 2013-2014 Page|1 of 3
 DAIF. The check was redeposited 1/2/2012 loan principal on deposit in a current account at the bank. Pierce, Inc.
and cleared 1/7/2012. currently maintains a balance of P20,000 in its current account. The
Check drawn on Tyler Corporation’s account current account earns interest of 2% per annum. The interest rate on the
payable to a vendor dated and recorded 12/31 loan is 12% per annum.
but not mailed until 1/15/2012 100,000 15. What is the effective interest rate on the loan?
10. The proper amount to be shown as cash on Tyler’s statement of
PROBLEM 15: You were provided the following cash related items by
financial position at December 31, 2011 is:
Buchanan Company on December 31, 2012:
PROBLEM 10: Harrison Company’s ledger showed a balance in its A. Commercial savings account of P600,000 and commercial
cash account at December 31, 2011 of P341,125 which was determined checking account of P900,000 are held at Primary Bank.
to consist of the following: B. Money market fund held at Tertiary Bank that permits
Petty cash fund P 1,800 Buchanan Company to write checks in this balance,
Cash in Allied Bank per bank statement with a P5,000,000.
check for P3,000 still outstanding 168,375 C. Travel advances of P180,000 for executive travel for the next
Notes receivable in the possession of a collecting quarter to be paid through salary deduction.
agency 12,500 D. A separate cash fund of P1,500,000 was set aside for the
Undeposited receipts, including postdated check retirement of short-term liabilities.
for P5,250 and traveler’s check for P5,000 89,000 E. Petty cash fund of P10,000 which includes a check in the
Bond sinking fund – cash 63,750 name of the petty cash custodian for P3,000.
IOUs signed by employees 2,475
Paid vouchers not yet recorded 3,225 16. What is the correct amount of cash and cash equivalent balance
11. At what amount should “cash on hand and in bank” be reported to be reported by Buchanan Company in its statement of
on Harrison’s balance sheet? financial position on December 31, 2012?

PROBLEM 11: The following items were included as cash in the PROBLEM 16: Lincoln Company reported the following information
books of Polk Company: regarding its cash and investment securities on December 31, 2012:
Checking account at Security Bank P (1,200) A. Investment securities of P1,000,000 are in the form of share
Checking account at BPI 5,335 investment in entities that are actively traded in the Philippine
Checking account at City Trust used for payment Stock Exchange.
of salaries 5,500 B. Investment securities of P1,500,000 are in the form of
Postage stamps 107 commercial papers and money market placements. These
Employee’s postdated check 2,300 securities had a 9-month term and were purchased 3 months
IOU from an employee 200 before maturity.
A check marked DAIF 1,250 C. Investment securities of P2,000,000 are in the form of
Postal money order 500 government treasury bills. These treasury bills have 120 day
Petty cash fund (P324 in expense receipts) 500 term and purchased when they had 60 days to go until they
Certificate of time deposit with BPI 5,000 mature.
A gold ring surrendered as security by a customer D. Cash on hand amounted to P10,000 while cash held by
who lost his wallet (at market value) 1,500 depository banks totals P100,000.
12. The correct amount that should be reported as cash is:
17. What is the correct amount of cash equivalent balance to be
PROBLEM 12: Taylor Corporation had the following transactions in reported by Lincoln Company in its statement of financial
its first year of operations: position on December 31, 2012?
Sales (90% collected in the first year) P 750,000
Disbursements for costs and expenses 600,000 PROBLEM 17: The books of Johnson Corporation show the following
Purchases of equipment for cash 200,000 balances at December 31, 2011:
Proceeds from issuance of ordinary shares 250,000 Cash on hand P 100,000
Payments on short-term borrowings 25,000 Cash in bank – current account 350,000
Proceeds from short-term borrowings 50,000 Cash in bank – peso savings deposit 2,000,000
Depreciation on equipment 40,000 Cash in bank – dollar deposit (unrestricted) $ 100,000
Disbursements for income taxes 45,000 Cash in bank – dollar deposit (restricted) 20,000
Bad debt write offs 30,000 Cash in money market account P 250,000
Six-month time deposit $ 60,000
13. What is the cash balance at December 31 of the first year?
Treasury bill, purchased on 12/1/2011 and
PROBLEM 13: On December 31, 2011, Fillmore Company’s “cash maturing on 2/28/2012 P 800,000
account” balance per ledger of P3,600,000 included the following: Treasury note 200,000
Demand deposit P 1,500,000 Treasury bond, purchased on 3/1/2011 and
Time deposit – 30 days 500,000 maturing on 2/28/2012 500,000
NSF check of customer 20,000 Redeemable preference shares with mandatory
Money market placement due on June 30, 2012 1,000,000 redemption date of 3/1/2012, purchased
Saving deposit in a closed bank 50,000 12/1/2011 370,000
IOU from an employee 30,000 Unused credit line 2,000,000
Pension fund 400,000 Treasury shares, purchased 12/1/2011, to be
Petty cash fund 10,000 reissued on 3/5/2012 50,000
Customer check dated January 31, 2012 60,000 Sinking fund 200,000
Customer check outstanding for 18 months 30,000 Additional information on some balances above follows:
Additional information follows: A. Cash on hand includes a P20,000 check payable to Johnson
 Check of P100,000 in payment of accounts payable was dated dated January 10, 2012.
and recorded on December 31, 2011 but mailed to creditors B. During December 2011, checks amounting to P60,000 and
on January 15, 2012. P40,000 were drawn against the current account in payment
 Check of P50,000 dated January 31, 2012 in payment of of accounts payable. The P60,000 check is dated January 15,
accounts payable was recorded and mailed December 31, 2012. The P40,000 check is dated December 31, 2011 but was
2011. delivered to the payee only on January 15, 2012.
 The entity uses the calendar year. The cash receipts journal C. The cash in bank – peso savings deposit includes a deposit in
was held open until January 15, 2012, during which time escrow in the amount of P340,000 and a compensating
P200,000 was collected and recorded on December 31, 2011. balance amounting to P250,000 which is legally restricted.
D. The cash in bank – dollar deposit (unrestricted) account
14. What is the total amount of “cash and cash equivalents” on includes interest of $2,000, net of tax, directly credited to
December 31, 2011? Johnson’s account. The weighted average exchange rate for
PROBLEM 14: Pierce, Inc. needs P2,000,000 to finance its extension 2011 is $1 is to P45 while the exchange rate as of December
program. Pierce, Inc. is negotiating a loan with Metropolis Bank which 31, 2011 is $1 is to P40.
requires the company to maintain a compensating balance of 10% of the

Prepared by: Mohammad Muariff S. Balang, CPA, Second Semester, AY 2013-2014 Page|2 of 3
 18. Compute for the amount of cash and cash equivalents to be A. Cash on hand includes the following:
reported in the financial statements for 2011.  Customer check of P40,000 returned by bank December
26, 2011 due to insufficient fund but subsequently
PROBLEM 18: On April 1, 2011, Grant Company established an redeposited and cleared by bank January 5, 2012.
imprest petty cash fund for P10,000 by writing a check drawn against  Customer check for P60,000 dated January 15, 2012
its general checking account. On April 30, 2011, the fund contained the received December 22, 2011.
following:  Postal money orders received from customers, P50,000.
Currency and coins P 3,000
B. The petty cash fund consists of the following items: currency
Receipts for office supplies already used 4,000
and coins, P1,000; employees’ vales, P3,000; currency in
Receipts for postage still unused 2,000
envelope marked “collection for Christmas party”, P2,000 and
Receipts for transportation 600
check drawn by Hayes payable to petty cashier, P14,000.
On April 30, 2011, the entity wrote a check to replenish the fund. C. Included among the checks drawn by Hayes against its
19. What entry was made to replenish the petty cash fund? current account and recorded in December 2011 are:
 Check written and dated December 22, 2011 and
PROBLEM 19: The cash account of Hayes Company on December 31, delivered to payee on January 5, 2012, P100,000.
2011 includes the following:  Check written December 26, 2011 and dated January
Cash on hand P 500,000 31, 2012 delivered to payee on December 26, 2011,
Petty cash fund 20,000 P150,000.
Cash in bank 2,000,000
20. How much is the adjusted cash of Hayes Company as of
Additional information on the items above follows:
December 31, 2011?

Prepared by: Mohammad Muariff S. Balang, CPA, Second Semester, AY 2013-2014 Page|3 of 3