All about Cash 2019

Name:
Section:
Score:
SOLUTION:
Problems
Book balance 17,194 Bank Balance 31,948
1. The following data pertaining to the cash transactions and bank account of Add: Add:
Mandirigma Company for the month of May are available to you: Proceeds of a bank loan 5,700 Deposit in transit 4,880
Proceeds from a customer note 8,100 Stolen check 800
Cash balance, per records, May 31 P17,194 Less: Less:
Cash balance, per bank statement, 5/31 31,948 Bank service charge 109 Outstanding checks 6,728
Bank service charge for May 109 Debit memo 125 Bank error (Check No. 2772) 900
Debit memo for the cost of printed checks NSF check 760
delivered by the bank 125
Adjusted balance 30,000 Adjusted balance 30,000
Outstanding checks, May 31 6,728
Deposit of May 30 not recorded by bank
until June 1 4,880
Proceeds of a bank loan of May 30, net of
interest of P300 5,700
Proceeds from a customer's promissory
note, including interest of P100 8,100
Check No. 2772 issued to a supplier
entered in the accounting records at
P2,100 but deducted in the bank
statement at an erroneous amount of 1,200
Stolen check lacking an authorized
signature, deducted from Mandirigma's
account by the bank in error 800
Customer's check returned by the bank
marked NSF; no entry has been made
in the accounting records to record the
returned check 760

What is the correct cash balance at May 31? P30,000

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2. The following data pertain to Lincoln Corporation on December 31, 2019: 3. Shine Company reported an imprest petty cash fund of P50,000 with the following
details:
Current account at Metrobank P1,800,000 Currencies 20,000
Current account at Allied Bank (100,000)
Payroll account 500,000 Coins 2,000
Foreign bank account (in equivalent pesos) 800,000 Petty cash vouchers:
Savings deposit in a closed bank 150,000
Gasoline payments 3,000
Postage stamps 1,000
Employee’s post dated check 4,000 Medical supplies 1,000
IOU from employees 10,000 Repairs of office equipment 1,500
Credit memo from a vendor for a purchase return 20,000
Loans to employees 3,500
Traveler’s check 50,000
Money order 30,000 A check drawn by the entity payable to the order
Petty cash fund (P4,000 in currency and expense receipts for of Juan de la Cruz, petty cash custodian,
P6,000) 10,000
Pension fund 2,000,000 representing replenishment 15,000
DAIF check of customer 15,000 An employee check returned by the bank for
Customer’s check dated 1/1/20 80,000
insufficiency of fund 3,000
Time deposit – 30 days 200,000
Money market placement (due 6/30/20) 500,000 A sheet of paper with names of several employees
Treasury bills, due 4/31/20 (purchased 12/31/19) 200,000 together with contribution for a birthday gift of
Treasury bills, due 1/31/20 (purchased 2/1/19) 300,000
a co-employee. Attached to the sheet of paper is
The cash and cash equivalents as of December 31, 2019 is P3,384,000 a currency of 5,000

What amount of petty cash fund should be reported in the statement of financial
position? P37,000

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4. The information below is from the books of the Seminole Corporation on June 30: Book balance 1,405,000
Balance per bank statement P11,164 Add: Deposit in transit 750,000
Receipts recorded but not yet deposited Collection of note 2,500,000
in the bank 1,340 Interest on note 150,000 3,400,000
Bank charges not recorded 16 Total   4,805,000
Note collected by bank and not Less: Carefree Company deposited credited
recorded on books 1,120
to our account 1,100,000
Outstanding checks 1,100
NSF checks - not recorded on books nor
redeposited 160 Bank service charge 45,000 1,145,000
Adjusted book balance   3,660,000
Assuming no errors were made, compute the cash balance per books on June 30
before any reconciliation adjustments. P10,460 Bank balance 5,630,000
Add: Error by depositor on recording check 45,000
SOLUTION: Total 5,675,000
Bank balance 11,164 Book balance 10,460 Less: Preauthorized payments for water
Add: Add: bills 205,000
Deposit in transit 1,340 Note collected by bank 1,120 NSF customer check 220,000
Less: Less: Outstanding checks 1,650,000 2,075,000
Outstanding checks 1,100 Bank service charge 16 3,600,000
NSF checks 160
Adjusted balance 11,404 Adjusted balance 11,404 The check erroneously recorded by the depositor was made for the proper amount of
P249,000 in payment of account. However, it was entered in the cash payments journal as
P294,000.
SOLUTION:
Book balance 1,405,000 Bank balance 5,630,000 The entity authorized the bank to automatically pay its water bills as submitted directly to
Add: Add: the bank.
Collection of note 2,500,000 Deposit in transit 750,000
Interest on note 150,000
What amount should be reported as cash in bank on March 31? P3,630,000
Error by depositor 45,000
Less: Less:
Bank service charge 45,000 Error in credit to our account 1,100,000
Preauthorized payments 205,000 Outstanding checks 1,650,000
NSF check 220,000
Adjusted balance 3,630,000 Adjusted balance 3,630,000

5. Careless Company prepared the following bank reconciliation on March 31:

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Use the following information for the next two questions.

In preparing the bank reconciliation for the month of December, Case Company provided
Divine Company prepared the following bank reconciliation on December 31: the following data:
Balance per bank statement 3,800,000
Balance per bank statement 2,800,000 Deposit in transit 520,000
Add: Deposit in transit 195,000 Amount erroneously credited by bank to Case's
Checkbook printing charge 5,000 account 40,000
Error made by Divine in recording Bank service charge for December 5,000
check issued in December 35,000 NSF check 50,000
NSF check 110,000 345,000 Outstanding checks 675,000
Total   3,145,000
Less: Outstanding check 100,000 8. What is the adjusted cash in bank? P3,605,000
Note collected by bank including
P15,000 interest 215,000 315,000 9. What is the unadjusted cash in bank balance per book? P3,660,000
Balance per book   2,830,000
SOLUTION:
Book balance 3,660,000 Bank balance 3,800,000
The entity had cash on hand P500,000 and petty cash fund P50,000 on December 31.
Less: Add:
Bank service charge 5,000 Deposit in transit 520,000
6. What amount should be reported as cash in bank at year-end? P2,895,000
NSF check 50,000 Less:
Error in credit to our account 40,000
7. What total amount of cash should be reported at year-end? P3,445,000
Outstanding checks 675,000
SOLUTION: Adjusted balance 3,605,000 Adjusted balance 3,605,000
Book balance 2,830,000 Bank balance 2,800,000
Add: Add:
Collection of note 215,000 Deposit in transit 195,000
Less: Less:
Checkbook printing charge 5,000 Error in credit to our account
Error by Divine 35,000 Outstanding checks 100,000
NSF check 110,000
Adjusted balance 2,895,000 Adjusted balance 2,895,000

Cash in bank 2,895,000

Cash on hand 500,000
Petty cash fund 50,000
Total cash 3,445,000

Use the following information for the next two questions.

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Earth Company provided the following data for the purpose of reconciling the cash balance
per book with the balance per bank statement on December 31: Use the following information for the next three questions.
Balance per book 850,000
Balance per bank statement 2,000,000 Palawan Company kept all cash in a checking account. An examination of the bank
Outstanding checks, including certified check of P100,000 500,000 statement for the month of December revealed a bank statement balance of P8,470,000.
Deposit in transit 200,000
December NSF checks (of which P50,000 had been A deposit of P950,000 placed in the bank’s night depository on December 29 does not
redeposited and cleared on December 27) 150,000 appear on the bank statement. Checks outstanding on December 31 amount to P270,000.
Erroneous credit to Earth Company's account,
representing The bank statement showed that on December 25 the bank collected a note for Palawan
proceeds of loan granted to another company 300,000 Company and credited the proceeds of P935,000 to the entity’s account which included
Proceeds of note collected by bank for Earth, net of service P35,000 interest.
charge of P20,000 750,000
Palawan Company discovered that a check written in December for P183,000 in payment
of an account had been recorded as P138,000.
10. What amount should be reported as cash in bank at year-end? P1,500,000
Included with the December 31 bank statement was an NSF check for P250,000 that
SOLUTION:
Palawan Company had received from a customer on December 20.
Book balance 850,000 Bank balance 2,000,000
Add: Add:
The bank statement showed a P15,000 service charge for December.
Collection of note 750,000 Deposit in transit 200,000
Less: Less: 11. What is the adjusted cash in bank on December 31? P9,150,000
NSF check 100,000 Error in credit to our account 300,000 12. What is the unadjusted balance per book on December 31? P8,525,000
Outstanding checks 400,000 13. Provide the adjusting entry for the NSF check.
A/R 250,000
Adjusted balance 1,500,000 Adjusted balance 1,500,000 Cash 250,000

SOLUTION:
Book balance 8,525,000 Bank balance 8,470,000
Add: Add:
Collection of note 935,000 Deposit in transit 950,000
Less: Less:
Bank service charge 15,000 Outstanding checks 270,000
Error in recording 45,000
NSF check 250,000
Adjusted balance 9,150,000 Adjusted balance 9,150,000

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THEORIES a. Savings account balances.

b. Margin accounts held with brokers.
c. Temporary investments serving as collateral for outstanding loans.
27. Which of the following is not considered cash for financial reporting purposes?
d. Minimum deposits required to be maintained in connection with a
a. Petty cash funds and change funds
borrowing arrangement.
b. Money orders, certified checks, and personal checks
35. Under which section of the statement of financial position is "cash restricted for
c. Coin, currency, and available funds
plant expansion" reported?
d. Postdated checks and I.O.U.'s
a. Current assets.
28. Which of the following is considered cash?
b. Non-current assets.
a. Certificates of deposit (CDs)
c. Current liabilities.
b. Money orders
d. Equity.
c. Money market savings certificates
36. A cash equivalent is a short-term, highly liquid investment that is readily
d. Postdated checks
convertible into known amounts of cash and
29. Travel advances should be reported as
a. is acceptable as a means to pay current liabilities.
a. supplies.
b. has a current market value that is greater than its original cost
b. cash because they represent the equivalent of money.
c. bears an interest rate that is at least equal to the prime rate of interest at
c. investments.
the date of liquidation.
d. none of these.
d. is so near its maturity that it presents insignificant risk of changes in
30. Which of the following items should not be included in the Cash caption on the
interest rates.
statement of financial position
37. Bank overdrafts generally should be
a. Coins and currency in the cash register
a. reported as a deduction from the current asset section.
b. Checks from other parties presently in the cash register
b. reported as a deduction from cash.
c. Amounts on deposit in checking account at the bank
c. netted against cash and a net cash amount reported.
d. Postage stamps on hand
d. reported as a current liability.
31. All of the following may be included under the heading of "cash" except
38. Deposits held as compensating balances
a. currency.
a. usually do not earn interest.
b. money market funds.
b. if legally restricted and held against short-term credit may be included as
c. checking account balance.
cash.
d. savings account balance.
c. if legally restricted and held against long-term credit may be included
32. In which account are post-dated checks received classified?
among current assets.
a. Receivables.
d. none of these.
b. Prepaid expenses.
39. Which of the following is an appropriate reconciling item to the balance per bank in
c. Cash.
a bank reconciliation?
d. Payables.
a. Bank service charge.
33. In which account are postage stamps classified?
b. Deposit in transit.
a. Cash.
c. Bank interest.
b. Office supplies.
d. Chargeback for NSF check.
c. Receivables.
d. Inventory.

40. Which of the following is not true?

34. What is a compensating balance?

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a. The imprest petty cash system in effect adheres to the rule of
disbursement by check.
b. Entries are made to the Petty Cash account only to increase or decrease
the size of the fund or to adjust the balance if not replenished at year-end.
c. The Petty Cash account is debited when the fund is replenished.
d. All of these are not true.
41. A Cash Over and Short account
a. is not generally accepted.
b. is debited when the petty cash fund proves out over.
c. is debited when the petty cash fund proves out short.
d. is a contra account to Cash.
42. The journal entries for a bank reconciliation
a. are taken from the "balance per bank" section only.
b. may include a debit to Office Expense for bank service charges.
c. may include a credit to Accounts Receivable for an NSF check.
d. may include a debit to Accounts Payable for an NSF check.
43. When preparing a bank reconciliation, bank credits are
a. added to the bank statement balance.
b. deducted from the bank statement balance.
c. added to the balance per books.
d. deducted from the balance per books.
44. If the balance shown in the bank statement is less than the correct cash balance
and neither the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Outstanding checks
c. Deposit in transit
d. Bank charges not yet recorded by the entity
45. If the cash balance shown in the accounting records is less than the correct cash
balance and neither the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Deposits in transit
c. Outstanding checks
d. Bank charges not yet recorded by the entity
46. Bank reconciliations are normally prepared on a monthly basis to identify
adjustments needed in the depositor’s records and to identify bank errors.
Adjustments on the part of the depositor should be recorded for
a. Bank errors, outstanding checks and deposits in transit
b. All items except bank errors, outstanding checks and deposits in transit
c. Book errors, bank errors, deposits in transit and outstanding checks
d. Outstanding checks and deposits and transit
47. Bank statements provide information about all of the following, except
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All about Cash 2019
a. Checks cleared during the period
b. NSF checks
c. Bank charges for the period
d. Errors made by the depositor
48. Whichstatement in relation to a certified check is false?
a. A certified check is a liability of the bank certifying it
b. A certified check will be accepted by many persons who would not
otherwise accept a personal check
c. A certified check is one drawn by a bank upon itself
d. A certified check should not be included in the outstanding checks
49. Which statement in relation to bank reconciliation is true?
a. Bank service charge will cause the cash balance per ledger to be higher
than that reported by the bank, all other things being equal
b. Credit memos will cause the cash balance per ledger to be higher than that
reported by the bank, all other things being equal.
c. Outstanding checks will cause the cash balance per ledger to be greater
than the balance reported by the bank, all other things being equal.
d. The cash amount reported in the statement of financial position must be
the balance reported in the bank statement.
50. Which of the following must be deducted from the bank statement balance in
preparing a bank reconciliation which ends with adjusted cash balance?
a. Deposit in transit
b. Outstanding check
c. Reduction of loan charged to the account of the depositor
d. Certified check