PROBLEMS 1-1

On December 31,2020, Albania Company provided the following data:

Cash in Bank 3,000,000

Time deposit-30 days 1,000,000

Money market placement due on June 30,2021 2,000,000

Saving deposit in closed bank 100,000

Sinking fund for bond payable due on June 30,2022 1,500,000

Petty cash fund 20,000

*The cash in bank included customer check of P200,000 outstanding for 18 months (stale check)

*Check of P250,000 in payment of accounts payable was dated and recorded on December 31,2020
but mailed to creditors on January 15,2021 (undelivered check)

*Check of P 100,000 dated January 31,2021 in payment of accounts payable was recorded and mailed
December 31,2020 (post-dated creditor check)

*The reporting period is the calendar year

*The cash receipts journal was held open until January 15,2021 during which time an amount of
P450,000 was collected and recorded on December 31,2020.

REQUIRED:

1. Prepare the adjusting entries on December 31,2020

2. Compute the total amount of cash and cash equivalents that should be reported on December
31,2020.
3. Explain the presentation o the items included from cash and cash equivalent.

Answers:

1. Adjusting Entries

a. Accounts Receivable 200,000

Cash in Bank 200,000

b. Cash in Bank 250,000

Accounts Payable 250,000

c. Cash in Bank 100,000

 Accounts Payable 100,000

d. Accounts Receivable 450,000

Cash in Bank 450,000

2. Total amount of cash and cash equivalent on December 31, 2019.

Cash in Bank ₱ 3,000,000

Stale Customer Check (200,000)
Undelivered creditor’s check 250,000
Post-dated creditor’s check 100,000
2020 collection recorded in 2019 (450,000)
Total ₱ 2,700,000
Time Deposit- 30 days 1,000,000
Petty Cash Fund 20,000
Cash and Cash Equivalent ₱ 3,720,000

3. Presentation of items excluded

EXCLUDED ITEMS CLASSIFICATION

Money market placement

due on June 30, 2020 Short term investments

Saving deposit in closed bank Other Non-Current Asset

Sinking fund for bond payable

due June 30,2021 Long term investment