Question 1: Solution

Question
1
Rommel Company keeps all its cash in a checking account. An examination of the company’s
accounting records and bank statement for the month ended June 30, 2013 revealed the
following information:
The cash balance per book on June 30 is P8,500,000.

A deposit of P1,000,000 that was placed in the bank’s night depository on June
30does not appear on the bank statement.
The bank statement shows on June 30, the bank collected note for Rommel and
credited the proceeds of P950,000 to the Company’s account.
Checks outstanding on June 30 amount to P300,000.
Rommel discovered that a check written in June for P200,000 in payment of an
account payable, had been recorded in the Company’s records as P20,000.
Included with the June bank statement was NSF check for P250,000 that Rommel
had received from a customer on June 26.
The bank statement shows a P20,000 service charge for June.
The cash in bank to be shown in the statement of financial position on June 30, 2013 is
9,000,000
8,300,000
9,360,000
9,180,000
SOLUTION:
Balance per book 8,500,000
Note collected by bank 950,000
Book error (200,000 - (180,000)
20,000)
NSF check (250,000)
Service charge (20,000)
Adjusted book balance 9,000,000
Practical Accounting 1 Cash and Cash Equivalents (Difficult)
Question 2
Roger Company had the following bank reconciliation on June 30, 2013:
Balance per bank statement, June 3,000,000

30
Deposit in transit 400,000
Outstanding check (900,000)
Balance per book, June 30 2,500,000
The bank statement for the month of July showed the following:
Deposits (including P200,000 note collected for Roger) 9,000,000

Disbursements (including P140,000 NSF check and 7,000,000
P10,000 service charge)
All reconciling items on June 30 cleared through the bank in July. The outstanding checks
totaled P600,000 and the deposit in transit amounted to P1,000,000 on July 31.
What is the cash balance per book on July 31?
5,400,000
5,350,000
5,550,000
4,500,000
SOLUTION:
Balance per bank-June 30 3,000,000
July bank deposits 9,000,000
July bank disbursements (7,000,000)
Balance per bank - July 31 5,000,000
July deposit in transit 1,000,000
July outstanding checks (600,000)
Adjusted bank balance 5,400,000
Balance per book (squeeze) 5,350,000
Note collected by bank in 200,000
July
NSF check in July (140,000)
Service charge in July (10,000)
Question 3
Kenny Company had the following bank reconciliation on June 30, 2013:
Balance per bank statement, June 3,000,000
30
Deposits (including P200,000 note collected for Kenny) 9,000,000

Disbursements (including P140,000 NSF check and 7,000,000
P10,000 service charge)
What is the amount of cash receipts per book in July?
9,400,000
9,600,000
8,600,000
9,800,000
SOLUTION:
Deposits per bank statement for 9,000,000
July
Note collected by bank (200,000)
Deposit in transit-June 30 (400,000)
Deposit in transit-July 31 1,000,000
Cash receipts per book for July 9,400,000
Question 4
Kareen Company had the following bank reconciliation on June 30, 2010:
Balance per bank statement, June 30 3,000,000

Deposits (including P200,000 note collected for Kareen) 9,000,000
Disbursements (including P140,000 NSF check and
P10,000 service charge) 7,000,000
What is the amount of cash disbursements per book in July?
6,550,000
6,700,000
7,300,000
6,850,000
SOLUTION:
Disbursements per bank statement for 7,000,000
July
NSF check in July (140,000)
Service charge in July (10,000)
Outstanding checks-June 30 (900,000)
Outstanding checks-July 31 600,000
Cash disbursements per book for July 6,550,000
Question 5
Reconciliation of Jam Company’s bank account at May 31 is:
Balance per bank 2,100,000

statement
Deposits outstanding 300,000
Checks outstanding (30,000)
Correct cash balance 2,370,000

Bank service charge (2,000)
Correct cash balance 2,370,000
June data are as follows:
Bank Book
Checks recorded 2,300,000 2,360,000
Deposits recorded 1,620,000 1,800,000
Collection by bank (P400,000 note plus 420,000
interest)
NSF check returned with the June 30 10,000
statement
Balances 1,830,000 1,810,000
The check outstanding on June 30 amounted to
30,000
90,000
60,000
SOLUTION:
Check outstanding - May 31 30,000
Checks recorded in June 2,360,000
Total 2,390,000
Checks recorded by bank in June (2,300,000)
Check outstanding - June 30 90,000
Question 6
Cash data related to Ron Company for the month of January of the current year are shown
below:
Balance per book, January 31 3,130,000

Balance per bank statement, January 31 3,500,000
Collections on January 31 but undeposited 550,000
NSF check received from a customer returned by the bank
on February 5 with the January bank statement 50,000
Checks outstanding on January 31 650,000
Bank debit memo for safety deposit box rental not recorded
by the depositor 5,000
A creditor’s check for P30,000 was incorrectly recorded in
the depositor’s book as 300,000
A customer’s check for P200,000 was recorded by the
depositor as 20,000
The depositor neglected to make an entry in its books for a
check drawn in payment of an accounts payable 125,000
What is the adjusted cash in bank on January 31?
3,130,000
3,500,000
3,400,000
2,950,000
SOLUTION:
Overstatement of creditor’s check 270,000
Understatement of customer’s check 180,000
NSF check (50,000)
Bank debit memo for safety deposit (5,000)
box
Unrecorded check (125,000)

Uneposited collections 550,000
Checks outstanding (650,000)
Question 7
Philip Company had the following account balances on December 31, 2013
Cash in bank-current account 5,000,000

Cash in bank-payroll account 1,000,000
Cash on hand 500,000
Cash in bank-restricted account for building construction
expected to be finished in 2013 3,000,000
Time deposit purchased on December 15, 2013 and due
on March 15, 2014 2,000,000
The cash on hand includes a P200,000 check payable to Philip, dated January 15, 2014. What
amount should be reported as cash and cash equivalents on December 31, 2013.
6,300,000
8,300,000
6,500,000
8,700,000
SOLUTION:
Cash in bank-current account 5,000,000
Cash in bank - payroll account 1,000,000
Cash on hand (500,000 - 300,000
200,000)
Time deposit 2,000,000
8,300,000
The cash in bank set aside for payroll is included in cash because it is for the payment of
current liability.
Question 8
Daina Company provided the following information with respect to its cash and cash equivalents
on December 31, 2013:
Checking account at First Bank (200,000)

Checking account at Second Bank 3,500,000
Treasury bonds 1,000,000
Payroll account 500,000
Value added tax account 400,000
Foreign bank account - restricted 2,000,000
Postage stamps 50,000
Employee’s postdated check 300,000
IOU from president’s brother 750,000
Credit memo from a vendor for a purchase 80,000
return
Traveler’s check 300,000
NSF check 150,000
Petty cash (P20,000 in currency and expense
receipts for P30,000) 50,000
Money order 180,000
What amount should be reported as unrestricted cash on December 31, 2013:
5,900,000
4,600,000
4,900,000
6,900,000
SOLUTION:
Checking account at Second 3,500,000
Bank
value added tax account 400,000
Traveler’s check 300,000
Petty cash fund 20,000
Money order 180,000
4,900,000
Question 9
The following data pertain to the cash transactions and bank account of James Company for
May of the current year:
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 12,000
record
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 notes, principal
amount of 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
James’s account by 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
The adjusted cash in bank is
3,000,000
2,910,000
3,080,000
2,990,000
SOLUTION:
Service charge (10,000)
Debit memo for printed checks (12,000)
Proceeds of bank loan 570,000
Proceeds of customer’s note 810,000
NSF check (77,000)

Outstanding checks (685,000)
Bank error in recording check (90,000)
Stolen check deducted by bank in 80,000
error
Question 10
Michael Company reported the following information as of the end ofthe current year.
Investment securities of P1,000,000. These securities are share investments in

entities that are traded in the Philippine Stock Exchange. As a result, the shares
are very actively traded in the market.
Investment securities of P2,000,000. These securities are government treasury
bills. The treasury bills have a 10-year term and purchased on December 31 at
which time they had two months to go until they mature.
Cash of P3,400,000 in the form of coin, currency, saving account and checking
account.
Investment securities of P 1,500,000. These securities are commercial papers.
The term of the papers is nine months and they were purchased on December
31 at which time they had three months to go until they mature.
How much should be reported as cash and cash equivalents at the endof the current year?
5,400,000
6,400,000
6,900,000
7,900,000
SOLUTION:
Government treasury bills 2,000,000
Cash 3,400,000
Commercial papers 1,500,000
Total cash and cash equivalents 6,900,000
The share investments cannot qualify as cash equivalents because although they are very
actively traded they do not have a maturity. The commercial papers are actually money market
placements. Since the remaining term is three months from the date of acquisition, the
commercial papers are considered cash equivalents
Question 11
Jason Company provided the following information with respect to its cash and cash equivalents
on December 31, 2009.
Checking account at First Bank ( 200,000)

Foreign bank account - restricted (in equivalent pesos) 2,000,000
Employee's postdated check 300,000
IOU from president's brother 750,000
Credit memo from a vendor for a purchase return 80,000
Traveler's check 300,000
Not-sufficient-fund check 150,000
Petty cash fund (P20,000 in currency and expense receipts for
P30,000) 50,000
Money order 180,000
What amount would be reported as unrestricted cash on December 31, 2009?
5,900,000
4,600,000
4,900,000
6,900,000
SOLUTION:
Money order 180,000
Total unrestricted cash 4,900,000
Question 12
The checkbook balance of JR Company on December 31, 2009was P4,000,000. Data about
certain cash items follow:
A customer check amounting to P200,000 dated January 2, 2010 was included in the December
31, 2009 checkbook balance.
Another customer check for P500,000 deposited on December 22, 2009 was included in its
checkbook balance but returned by the bank for insufficiency of fund. This check was
redeposited on December 26, 2009 and cleared two days later.
A P400,000 check payable to supplier dated and recorded on December 30, 2009 was mailed
on January 16, 2010.
A petty cash fund of P50,000 with the following summary on December 31, 2009:
Coins and currencies 5,000
Petty cash vouchers 43,000
Return value of 20 cases of soft
2,000
drinks
50,000
A check of P43,000 was drawn on December 31, 2009 payable to Petty Cash.
What is the "cash" balance on December 31, 2009?
4,248,000
4,200,000
4,205,000
3,748,000
SOLUTION:
Checkbook balance 4,000,000
Postdated customer check ( 200,000)
Undelivered check payable to
400,000
supplier
Adjusted cash in bank 4,200,000
Petty cash:
Coins and currencies 5,000
Replenishment check 43,000 48,000
Total 4,248,000
The return value of the soft drink bottles is shown as refundable deposit as a current asset. The
NSF check is redeposited and cleared before December 31, 2009. Thus, the same is not
deducted anymore from the checkbook balance
Question 13
On December 31, 2009, Ally Company's "cash account" balance per ledger of P3,600,000
includes the following:
Demand deposit 1,500,000

Time deposit - 30 days 500,000
NSF check of customer 20,000
Money market placement due on June 30, 1,000,000
2010
Saving deposit 50,000
IOU from an employee 30,000
Pension fund 400,000
Customer check dated January 31, 2010 60,000
Customer check outstanding for 18 months 30,000
3,600,000
Check of P 100,000 in payment of accounts payable was dated and recorded on December 31,
2009 but mailed to creditors on January 15, 2010.
Check of P50,000 dated January 31, 2010 in payment of accounts payable was recorded and
mailed December 31, 2009.
The entity uses the calendar year. The cash receipts journal was held open until January 15,
2010, during which time P200,000 was collected and recorded on December 31, 2009.
The "cash and cash equivalents" on December 31, 2009 should be
2,010,000
1,960,000
1,860,000
1,510,000
SOLUTION:
Demand deposit 1,450,000
Time deposit - 30 days 500,000
Saving deposit 50,000
Demand deposit per book 1,500,000
Undelivered check 100,000
Postdated check delivered 50,000
Window dressing of collection ( 200,000)
Adjusted balance 1,450,000
Question 14
The December 31, 2009 trial balance of Fernandez Company includes the following accounts:
Cash on hand 500,000
Security Bank current account 1,000,000
PNB Current account No. 1 400,000
PNB Current account No. 2 ( 50,000)
BSP treasury bill - 60 days 3,000,000
BPI time deposit - 30 days 2,000,000
The cash on hand includes a customer postdated check of P 1 00,000 and postal money order
of P40,000.
The petty cash fund includes unreplenished petty cash vouchers for P2,000 and an employee
check for P3,000 dated January 31, 2010.
A check for P200,000 was drawn against Security Bank account, dated January 15, 2010,
delivered to the payee and recorded December 31, 2009.
The BPI time deposit is set aside for acquisition of land to be used as a factory site.
The statement of financial position on December 31, 2009 shouldshow cash and cash
equivalents at
4,965,000
6,965,000
4,765,000
1,965,000
SOLUTION:
Cash on hand (500,000 - 100,000) 400,000
Petty cash fund (20,000 - 2,000 - 3,000) 15,000
Security Bank current account (1,000,000 +
1,200,000
200,000)
PNB current account No. 1 400,000
PNB current account No. 2 ( 50,000)
BSP treasury bill - 60 days 3,000,000
Question 15
Jason Company provided the following information with respect to its cash and cash equivalents
on December 31, 2009.
Checking account at First Bank ( 200,000)

Foreign bank account - restricted (in equivalent pesos) 2,000,000
Employee's postdated check 300,000
IOU from president's brother 750,000
Credit memo from a vendor for a purchase return 80,000
Not-sufficient-fund check 150,000
Petty cash fund (P20,000 in currency and expense receipts for
P30,000) 50,000
Money order 180,000
What amount would be reported as unrestricted cash on December 31, 2009?
5,900,000 4,600,000 6,900,000 4,900,000
SOLUTION:
Money order 180,000
Total unrestricted cash 4,900,000

Question 1: Solution

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Question

The cash balance per book on June 30 is P8,500,000.

Balance per bank statement, June 3,000,000

Deposits (including P200,000 note collected for Roger) 9,000,000

Deposits (including P200,000 note collected for Kenny) 9,000,000

Balance per bank statement, June 30 3,000,000

Balance per bank 2,100,000

Balance per book 2,372,000

Balance per book, January 31 3,130,000

Balance per bank 3,500,000

Cash in bank-current account 5,000,000

Checking account at First Bank (200,000)

Cash balance per accounting record 1,719,000

Balance per bank 3,195,000

Investment securities of P1,000,000. These securities are share investments in

Checking account at First Bank ( 200,000)

Demand deposit 1,500,000

Checking account at First Bank ( 200,000)

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