Intermediate Accounting 1

Cash and Cash Equivalents

Problem 1. Cotton Company’s chechbook balance at December 31, 2019 was P180,000. In addition,
Cotton held the following items in its safe on that date.

• Check payable to Cotton amounting to P65,000 dated january 2, 2020 in payment of a sale made
in December 31, 2019, was included in December 31 checkbook balance.

• Check payable to Cotton was deposited on December 15, but returned by the bank on December
29 stamped “DAIF”. No entry has yet been made to record the return of this P20,000 check.

• Check drawn on Cotton’s account, payable to a vendor, was dated and returned on December 28.
This check amounting to P15,000, however, was not yet mailed to the payee as of December 31,
2019.

Required:
(a) What is the correct amount shown as cash on Cotton Company’s December 31, 2019 statement
of financial position?
(b) Prepare adjusting entries to bring the Cash account to its correct balance.

Problem 2. Grain Company’s general ledger showed a balance of P2,205,600 in its “Cash” account on
December 31, 2019. Included in this balance are the following items:

1. DAIF checks from customers returned by bank. P20,000

2. Savings account with BDO, earmarked for an
office equipment due for delivery in January 2020. 750,000
3. IOUs from employees. 5,200
4. Undeposited checks from customers. 10,000
5. Undeposited bills and coins received from Customers. 30,500
6. Cash in sinking fund. 500,000
7. Customers’ checks dated January 2020. 25,400
8. Travel advances. 8,000
9. Traveler’s checks. 18,000

Required:
(a) Determine the total amount that should be included in cash balance at December 31, 2019.
(b) Prepare entries to remove non-cash items from the entity’s Cash account.

Problem 3. Tranvia Company had the following balances on December 31, 2019:

Cash in checking account. 350,000

Cash in money market account. 750,000
Treasury bill, purchased November 1, 2019 maturing January 31, 2020. 3,500,000
Time deposit purchased December 1, 2019 maturing March 31, 2020. 4,000,000

What amount should be reported as cash and cash equivalents on December 31, 2019?

Problem 4. Pygmalion Company had the following balances on December 31, 2019:

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 disbursed in 2020 3,000,000
Time deposit, purchased December 15, 2019 and
due March 15, 2020 2,000,000

The cash on hand included a P200,000 check payable to Pygmalion, dated January 15, 2020.

What total amount should be reported as cash and cash equivalents on December 31, 2019?

Problem 5. Thor Company Provided the following data on December 31, 2019:

1. Checkbook balance 4,000,000

2. Bank statement balance 5,000,000
3. Check drawn on Thor’s account, payable to supplier,
dated and recorded on December 31,2019
but not mailed until January 15, 2020 500,000
4. Sinking fund cash 2,000,000

On December 31, 2019, what amount should be reported as “cash” under current assets?

Problem 6. At year-end, Myra Company reported cash and cash equivalents which comprised the
following:

Cash on hand 500,000

Demand deposit 4,000,000
Certificate of deposit 2,000,000
Postdated customer check 300,000
Petty cash fund 50,000
Traveler’s check 200,000
Manager’s check 100,000
Money order 150,000

What total amount should be reported as “cash” at year-end?

Problem 7. Everlast Company reported the following information at year-end:
• Share investments of P1,000,000 that are very actively traded in the stock market.

• Government treasury bills of P2,000,000 with a 10-year term but purchased on December 31 at
which time they had two months to go until maturity.

• Cash of P3,400,000 in the term of coin, currency, saving account and checking account.

• Commercial papers of P1,500,000 with term of nine months but purchased on December 31 at
which time they had three months to go until maturity.

1. What total amount should be reported as cash?

2. What total amount should be reported as cash equivalents?

Problem 8. Burr Company had the following account balances at year-end:

Cash in bank 2,250,000

Cash on hand 125,000
Cash restricted for addition to plant and expected to be disbursed next year 1,600,000

Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement.

The compensating balance is not legally restricted as to withdrawal.

What total amount of cash should be reported under current assets at year-end?

Problem 9. On December 31, 2019, West Company had the following cash balances:

Cash in bank – current account 1,800,000

Petty cash fund – al funds were reimbursed at year-end 50,000
Time deposit due to February 1, 2020 250,000
Time deposit in bank closed by BSP 1,000,000

Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement on
December 31, 2019. The compensating balance is legally restricted as to withdrawal.

On December 31, 2019, what total amount should be reported as cash and cash equivalents?

Problem 10. Ral Company reported the checkbook balance on December 31, 2019 at P5,000,000 and held
the following items on same date:

Check payable to Ral, dated January 2, 2020 in of a sale made in December 2019,
not included in December 31 checkbook balance. 2,000,000
Check payable to Ral, deposited December 15 and included in December 31
checkbook balance, but returned by bank on December 30 stamped
“NSF”. The check was redeposited on January 2, 2020 and cleared on
January 9, 2020. 500,000
Check drawn on Ral’s account, payable to a vendor, dated but not mailed
until January 10, 2020. 300,000
Certificate of time deposit 1,000,000

What amount should be reported as cash on December 31, 2019?

Problem 11. Timex Company reported petty cash fund which comprised the following:

Coins and currency 3,300

Paid vouchers:
Transportation 600
Gasoline 400
Office supplies 500
Postage stamps 300
Due from employees 1,200 3,000
Manager’s check returned by bank
marked “NSF” 1,000
Check drawn by the entity to the
order of petty cash custodian 2,700

What is the correct amount of petty cash fund for statement presentation purposes?

Problem 12. Liwanag Company reported an imprest petty cash fund of P50,000 with the following details:

Currencies 20,000
Coins 2,000
Petty cash vouchers:
Gasoline payments for delivery equipment 3,000
Medical supplies for employees 1,000
Repairs of office equipment 1,500
Loans to employees 3,500
A check Drawn by the entity payable to the order of Grace
de la Cruz, petty cash custodian, representing her salary 15,000
An employee check returned by the bank for insufficiency of fund 3,000
A sheet of paper with names of several employees together
with contribution for a birthday gift of a co-employee.
Attached to the sheet of paper is a currency of 5,000

What amount of petty cash fund should be reported in the statement of financial position?
Chapter 14. Campbell Company had the following account balance on December 31, 2019:

Petty cash fund 50,000

Cash in bank – current account 4,000,000
Cash in bank – payroll account 1,200,000
Cash in bank – sinking fund 2,000,000
Cash on hand 500,000
Cash in bank – restricted account
for plant addition and expected
to be disbursed in 2020 1,500,000
Treasury bills 1,000,000

The petty cash fund included unreplenished December 2019 petty cash expense vouchers P5,000 and
employee IOU P5,000.

The cash on hand included a P1,000,000 customer check payable to campbell dated January 15, 2020.

In Exchange for a guaranteed line of credit, the entity has agreed to maintain a minimum balance of
P200,000 in the unrestricted current bank account.
The sinking fund is set aside to settle a bond payable that is due on December 31, 2020.

What total amount should be reported as cash and cash equivalents on December 3, 2019?

Problem 15. Yasmin Company provided the following information on December 31, 2019:

Petty cash fund 50,000

Current account – First Bank 4,000,000
Current account – Second Bank (overdraft) (250,000)
Money market placement – Third Bank 1,000,000
Time deposit – Fourth Bank 2,000,000

• A check for P100,000 was drawn against First Bank current account dated and recorded December
29, 2019 but delivered to payee on January 15, 2020.

• The Fourth Bank time deposit is set aside for land acquisition in early January 2020.

What total amount should be reported as cash and cash equivalents on December 31, 2019?

Problem 16. On December 31, 2019, Erika Company reported cash amount balance per ledger of
P9,500,000 which included the following:

Cash in bank – demand deposit 3,000,000

time deposit – 30 days 500,000
NSF check of customer 200,000
Money market placement due on June 30, 2020 2,000,000
Saving deposit 1,000,000
IOU from an employee 300,000
Pension fund 1,500,000
Customer check dated January 31, 2020 600,000
Customer check outstanding for 18 months 400,000
9,500,000

• Check of P100,000 in payment of account payable was dated and recorded on December 31, 2019
but mailed to creditors on January 15, 2020.

• Check of P300,000 dated January 31, 2020 in payment of accounts payable was recorded and
mailed December 31, 2019.

• The cash receipt journal was held open until January 15, 2020, during which time P200,000 was
collected and recorded on December 31, 2019.

What total amount should be reported as cash and cash equivalents on December 31, 2019?

Problem 17. On December 31, 2019, Roma Company reported cash of P9,950,000 which comprised the
following:

Undeposited collections 600,000

Cash in bank – BDO checking account 4,000,000
Undeposited NSF check received from customer,
dated December 1, 2019 150,000
Undeposited check from a customer, dated
January 15, 2020 250,000
Cash in bank – BDO fund for payroll 1,000,000
Cash in bank – BDO money market instrument, 90 days 2,000,000
Cash in foreign bank restricted 1,500,000
Cash in bank – BDO value added tax account 450,000
Total 9,950,000

On December 31, 2019, what total amount should be reported as cash and cash equivalents?

Problem 18. Love Company reported the following information in relation to cash on December 31, 2019:

• Checkbook balance, P4,000,000

• Undeposited collections, P400,000.

• A customer check amounting to P200,000 dated January 2, 2020 was included in the
December 31, 2019 checkbook balance.

• Another customer check for P500,000 deposited on December 22, 2019 was included in
the checkbook balance but returned by the bank for insufficiency of fund.

This check was redeposited payable on December 26, 2019 and cleared two days later.

• A P400,000 check payable to supplier dated and recorded on December 30, 2019 was
mailed on January 16, 2020.

• A petty cash fund of P50,000 comprised the following on December 31, 2019:

Coins and curriences 5,000

Petty cash vouchers 40,000
Refundable deposit for returnable containers 5,000
50,000

• A check of P400,000 was drawn on December 31, 2019 payable to Petty Cash.

1. What is the adjusted cash in bank on December 31, 2019?

2. What total amount should be reported as cash on December 31, 2019?