Problem A

In the course of your audit of the LPN Corporation, its controller is attempting to determine the amount
of cash to be reported on its December 31, 20x8 statement of financial position. The following
information is provided:

1. Commercial savings account of P1,200,000 and a commercial checking account balance of

P1,800,000 are held at BPI.
2. Travel advances of P360,000 for executive travel for the first quarter of the next year (employee
to reimburse through salary deduction).
3. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a long-term
debt.
4. Petty cash fund of P10,000.
5. An I.O.U. from a company officer in the amount of P40,000.
6. A bank overdraft of P250,000 has occurred at one of the banks the company uses to deposit its
cash receipts. At the present time, the company has no deposits at this bank.
7. The company has two certificates of deposit, each totaling P1,000,000. These certificates of
deposit have maturity of 120 days.
8. LPN has received a check dated January 2, 20x9 in the amount of P150,000.
9. LPN has agreed to maintain a cash balance of P200,000 at all times at BPI to ensure future
credit availability.
10. Currency and coin on hand amounted to P15,000.

Required: Based on the above and the result of your audit, how much will be reported as cash and cash
equivalents at Dec. 31, 20x8? (3 pts.) __________________

Problem B
The books of ANI’s Service, Inc. disclosed a cash balance of P687,570 on Dec. 31, 20x9. The bank
statement as of Dec. 31 showed a balance of P547,800. Additional information that might be useful in
reconciling the two balances follows:
a. Check #07480 for P30,000 was originally recorded on the books as P45,000.
b. A customer’s note dated Sept. 25 was discounted on Oct. 12. The note was dishonored on Dec.
29 (maturity date). The bank charged ANI’s account for P142,650, including a protest fee of
P2,650.
c. The deposit of Dec. 24 was recorded on the books as P28,950, but it was actually a deposit of
P27,000.
d. Outstanding checks totaled P98,850 as of December 31.
e. There were bank service charges for December of P2,100 not yet recorded on the books.
f. ANI’s account had been charged on December 26 for a customer’s NSF check for P12,960.
g. ANI properly deposited P6,000 on December 3 that was not recorded by the bank.
h. Receipts of December 31 for P134,250 were recorded by the bank on January 2.
i. A bank memo stated that a customer’s note for P45,000 and interest of P1,650 had been
collected on Dec. 27, and the bank charged a P360 collection fee.

Required: Based on the above and the result of your audit, what is the adjusted cash in bank balance on
Dec. 31, 20x9? (3 pts.) ______________
Problem C

The accountant for the MLP Company assembled the following data:

June 30 July 31
Cash account balance 15,822 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer’s check deposited July 10, returned by
bank on July 16 marked NSF, and deposited
immediately; no entry made on books for return
or redeposit 8,250
Collection by bank of company’s notes receivable 71,815 80,900

The bank statements and the company’s cash records show these totals:
Disbursements in July per bank statement 218,373
Cash receipts in July per MLP’s books 236,452

Required: Based on the application of the necessary audit procedures and appreciation of the above
data, you are to provide the answers to the following: (2 pts. each)
1. How much is the adjusted cash balance as of June 30? ____________
2. How much is the adjusted bank receipts for July? ___________
3. How much is the adjusted book disbursements for July? ___________
4. How much is the adjusted cash balance as of July 31? ___________
5. How much is the cash shortage or cash overage as of July 31? ___________

Problem D
The FIST Corporation was organized on Jan. 15, 20x9 and started operation soon thereafter. The
company cashier who acted also as the bookkeeper had kept the accounting records very haphazardly.
The manager suspects him of defalcation and engaged you to audit his account to find out the extent of
the fraud, if there is any.

On November 15, when you started the examination of the accounts, you find the cash on hand to be
P25,700. From inquiry at the bank, it was ascertained that the balance of the company’s bank deposit
in current account on the same date was P131,640. Verification revealed that the check issued for
P9,260 is not yet paid by the bank. The corporation sells at 40% above cost.

Your examination of the available records disclosed the following information:

Share capital issued at par for cash P 1,600,000
Real estate purchased and paid in full 1,000,000
Mortgage liability secured by real estate 400,000
Furniture and fixtures (gross) bought on which there is still
balance unpaid of P30,000 145,000
Outstanding notes due to bank 160,000
Total amount owed to creditors on open account 231,420
Total sales 1,615,040
Total amount still due from customers 426,900
Inventory of merchandise on November 15 at cost 469,600
Expenses paid excluding purchases 303,780

Required: Compute the following as of November 15, 20x9: (2 pts. each)

1. Collections from sales ____________
2. Payments for purchases ____________
3. Total cash disbursement _____________
4. Unadjusted cash balance _____________
5. Cash shortage or overage _____________
Problem E

The following data pertain to the cash transactions and bank account of Pretty Company for May:

Cash balance per accounting record 1,719,000

Cash balance per bank statement 3,195,000
Bank service charge 10,000
Debit memo for the cost of printed checks delivered by the bank;
the charge has not been recorded in the accounting record 12,000
Outstanding checks 685,000
Deposit of May 30 not recorded by bank until June 1 500,000
Proceeds of a bank loan on May 30, not recorded in the accounting
record, net of interest of P30,000 570,000
Proceeds from a customer’s promissory note, principal amount P800,000
collected by the bank not taken up in the accounting record with interest 810,000
Check no. 1086 issued to a supplier entered in the accounting record as P210,000
but deducted in the bank statement at an erroneous amount of 120,000
Stolen check lacking an authorized signature deducted from Pretty’s account
by the bank in error 80,000
Customer’s check returned by the bank marked NSF, indicating that the
customer’s balance was not adequate to cover the check; no entry has
been made in the accounting record to record the returned check 77,000

Required: Compute the adjusted cash in bank balance at May 31. (3 pts.) ____________

Problem F
Your audit senior instructed you to prepare a four-column proof of cash receipts and disbursements for
the month of December 20x9.

The bank reconciliation prepared by Guadalupe Company at November 30 is reproduced below:

Unadjusted bank balance 96,800

Add: Deposit in transit 18,000
Total 114,800
Less: Outstanding checks - # 276 2,400
# 282 7,200
# 284 4,800
# 285 1,600 16,000
Adjusted balance 98,800
=====
Unadjusted book balance 58,640
Add: CM – note collected 40,320
Total 98,960
Less: DM - bank charges 160
Adjusted balance 98,800
 =====

The December bank statement, which has a beginning balance of P96,800, is reproduced below:
China Bank
Account Name: Guadalupe Company

Date Debits Credits

Dec. 1 18,000
Dec. 2 7,200 40,000
Dec. 4 24,000
Dec. 6 48,000
Dec. 8 400,000 CM 83
Dec. 10 40,000 DM 97
Dec. 11 56,000
Dec. 16 20,000
Dec. 18 64,000
Dec. 21 72,400
Dec. 28 36,000 80,000
Dec. 31 4,000 DM 98 64,000 CM 84
Totals 131,200 842,400
====== ======

DM97 – Customer’s DAIF check CM83 – Note collected by the bank

DM98 – Service charges CM84 – Account collected by the bank

The company’s cash receipts and cash disbursements journals for the month of December 20x9 are
provided below:

Cash Receipts Journal Cash Disbursements Journal

Date O.R. No. Amount Date Check # Amount
Dec. 1 415 P40,000 Dec. 1 286 P16,000
5 416 48,000 3 287 24,000
10 417 56,000 10 288 32,000
17 418 64,000 14 289 20,000
20 419 72,000 20 290 28,000
27 420 80,000 23 291 36,000
31 421 88,800 26 292 40,000
28 293 44,000
31 294 48,000
The company’s Cash in Bank ledger appears below:

Cash in Bank
________________________________________________________________________________
Balance 58,640 Dec. 31 Cash disbursement Journal 304,000
Dec. 1 General Journal 40,320
Dec. 10 General Journal (CM 83) 400,000
Dec. 31 Cash Receipts Journal 440,800

Required: (2 pts. each)

1. How much is the outstanding checks as of Dec. 31? ___________
2. How much is the DIT for December? ____________
4. How much is the adjusted cash balance as of December 31? __________
5. How much is the cash shortage or overage as of Dec. 31? __________