Audit of Cash and Cash Equivalents

1. You were able to gather the following from the December 31, 2020
trial balance of Anna Corporation in connection with your audit of
the company:

Cash on hand P 372,000

Petty cash fund 10,000
BPI current account 950,000
Security Bank current account #1 1.280,000
Security Bank current account #2 (40,000)
PNB savings account 500,000
PNB time deposit 300,000

Cash on hand includes the following items:

a. Customer's check for P60,000 returned by bank on December 26,
2020 due to insufficient fund but subsequently redeposited and
cleared by bank on January 8, 2021.
b. Customer's check for P30,000 dated January 2, 2021, received
December 29, 2020.
c. Postal money orders received from customers, P36,000.

The petty cash fund consisted of the following items as of

December 31, 2020:

Currency and coins P 2,100

Employees' vales 1,600
Currency in an envelope marked "collection for
charity" with names attached 1,200
Unreplenished petty cash vouchers 800
Check drawn by Anna Corporation, payable to the
petty cashier 4,600
Total P10,300
 Included among the checks drawn by Anna Corporation against the
BPI current account and recorded in December 2020 are the following:

a. Check written and dated December 29, 2020 and delivered to

payee on January 2, 2021, P50,000.
b. Check written on December 27, 2020, dated January 2, 2021,
delivered to payee on December 29, 2020, P86,000.

The credit balance in the Security Bank current account #2 represents

checks drawn in excess of the deposit balance. These checks were
still outstanding as of December 31, 2020.

The savings account deposit in PNB has been set aside by the board
of directors for acquisitions of new equipment. This account is
expected to be disbursed in the next 3 months from the balance
sheet date.

Required:
Based on the above and the result of your audit, compute the
adjusted balances of the following:

a. Cash on hand
b. Petty cash fund
c. BPI current account
d. Cash and cash equivalents

2. Dakak Corporation was organized on February 1, 2020 and started its

operation soon thereafter. The company cashier who also acted 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 October 15, when you started the examination of the accounts,
you find the cash on hand to be P4,497.50. 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 P23,037. Verification
revealed that a check issued for P1,620.50 is not yet paid by the bank.
Dakak Corporation sells at 40% above cost.

Your examination of the available records disclosed the following

information:

Capital stock issued at par for cash 280,000.00

Real estate purchased and paid in full 175,000.00
Mortgage liability secured by real estate 70,000.00
Furniture and fixtures (gross) bought, on which
there is still a balance unpaid of P5,250 25,375.00
Outstanding notes due to bank 28,000.00
Total amount owed to creditors on open account 40,498.50
Total sales 282,632.00
Total amount still due from customers 74,707.50
Inventory of merchandise on October 15 at cost 82,180.00
Expenses paid excluding purchases 53,161.50

Required:
Based on the above and the result of your audit, compute for the
following as of October 15, 2020:

a. Payments for purchases

b. Collection from sales
c. Cash accountability
d. Cash accounted
e. Cash shortage, if any
3. On May 1, Siargao, Inc. has a balance of P2,000 in First Bank. On
June 1, the bank statement showed an overdraft of P1,810.
Outstanding checks on May 1 totaled P920 and on June 1, P206.
The proceeds of a 6% , P1,800, 90 day note receivable was
discounted at 6% eleven days after the day of the note. Undeposited
cash on May 31 was P802. Total checks drawn during the month of
May amounted to P11,634 (all payments by checks).

Required:
a. Compute the total bank deposits in May.
b. Calculate the total cash receipts per books in May.
c. Compute the correct cash balance on June 1.

4. You obtained the following information on the current account of

Puerto Galera Company during your examination of its financial
statements for the year ended December 31, 2021.

The bank statement on November 30, 2021 showed a balance of

P306,000. Among the bank credits in November was customer's
note for P100,000 collected for the account of the company which
the company recognized in December among its receipts. Included
in the bank debits were cost of checkbooks amounting to P1,200
and a P40,000 check which was charged by the bank in error
against Puerto Galera Company account. Also in November, you
ascertained that there were deposits in transit amounting to P80,000
and outstanding checks totaling P170,000.

The bank statement for the month of December showed total

credits of P416,000 and total charges of P204,000. The company's
books for December showed total debits of P735,600, total credits
of P407,200 and a balance of P485,600. Bank debit memos for
December were: No. 1201 for service charges , P1,600 and No. 1223
on a customer's returned check marked "Refer to Drawer" for
P24,000.

On December 31, 2021, the company placed with the bank a

customer's promissory note with the face value of P120,000 for
collection. The company treated this note as part of its receipts
although the bank was able to collect the note only in January, 2022.

A check for P3,960 was recorded in the company cash payment

books in December as P39,600.

Required:
Based on the application of the necessary audit procedures and
appreciation of the data above, you are to provide the answers to
the following:

a. How much is the undeposited collections as of December 31,

2021?
b. How much is the outstanding checks as of December 31, 2021?
c. How much is the adjusted cash balance as of November 30,
2021?
d. How much is the adjusted bank receipts for December?
e. How much is the adjusted book disbursements for December?
f. How much is the adjusted cash balance as of December 31,
2021?
ANSWERS
Cash
on hand PCF BPI C & CE
Unadjusted balances 372,000 10,000 950,000 3,372,000
Customer's NSF check (60,000) (60,000)
Customer's PD check (30,000) (30,000)
Employees' vales (1,600) (1,600)
Unreplenished PCVs (800) (800)
Shortage (900) (900)
Undelivered check 50,000 50,000
Postdated check 86,000 86,000
Restricted for new equipment (500,000)

282,000 6,700 1,086,000 2,914,700