AUDIT OF CASH AND CASH EQUIVALENTS

Problem#4.

You are conducting an audit of Prom Company for the year ended December
31, 2019. The internal control procedures surrounding cash transactions were
not adequate. The bookkeeper-cashier handles cash receipts, maintains
accounting records, and prepares the monthly bank reconciliations.

The bookkeeper-cashier prepared the following reconciliation at the end of

the year:

Balance per bank statement   P 375, 000

Deposit in transit P 162, 250  
Note collected by bank 18, 000 180, 250
Total   555, 250
Less: Outstanding checks   (235, 750)
Balance per general ledger   P 319, 500

In the process of your audit, you gathered the following:

a. At December 31, 2019, the bank statement and general ledger showed
balances of P375,000 and P319,500 respectively.
b. The cutoff bank statement showed a bank charge on January 2, 2020 for
P50,000 representing correction of an erroneous bank credit.
c. Included in the list of outstanding checks were the following:
- A check payable to a supplier dated December 29, 2019 in the
amount of P14,500 released on January 5, 2020.
- A check representing advance payment to a supplier in the amount of
P38,000, the date of which is January 4, 2020 and released in
December 2019.
d. On December 31, 2019, the company received and recorded customer's
postdated check amounting to P35,000.

The adjusted deposit in transit as of December 31, 2019 is

A. P210,250
B. P127,250
C. P175,250
D. P145,000

Audit of Cash | jipb162021