PROBLEM 1

BANK RECONCILIATION: UNADUSTED TO ADJUSTED BALANCES

In auditing the HECTOR COMPANY, you obtained the bank statement canceled checks, and
other memoranda which relate to the company's bank account for December 2014. In
reconciling the bank balance with that shown on the company’s books, you observed the facts
set forth below:

(1) Balance per bank statement, 12/31/14 P 41,174

(2) Balance per books, 12/31/14 19,289
(3) Outstanding checks, 12/31/14 63,000
(4) Receipts of 12/31/14, deposited 1/2/15 6,260
(5) Service charge for November, per bank memo 12/15/14 1,000
(6) Proceeds of bank loan, 12/15/14, discounted for 3 months
at 18% per annum, omitted from company books 47,750
(7) Deposit of 12/22/14, omitted from bank statement 9,170
(8) Check of Milano Company, returned on 12/21/14, for absence of
counter-signature on 1/3/15, no entry on the books having been
made for the return or redeposit. 77,320
(9) Error on bank statement in entering deposit of 12/18/14
Correct amount P 1,600
Entered in statement 160 1,440
(10) Check No. 021261 of Yek Company, charged by bank in
error to company's account. 13,600
(11) Proceeds of note of Harthur Co., collected by bank, 12/10/14, plus
not entered in cash book (principal amount of P25,000 plus interest
of P1,125, less collection fee) 25,625
(12) Erroneous debit memo of 12/28/14, to charge company's account
with settlement of bank loan which was paid by check no. 112170
on same date. 5,000
(13) Error on bank statement in entering deposit of 12/4/14:
Entered as P 14, 200.62

Correct Amount 12,400.62 1,800

(14) Deposit of Bunso Co. of 12/02/14, credited in error to
this company. 3,500
 1. What is the principal amount of the loan obtained from bank in December?
2. What amount of prepaid interest should be shown on Hector’s December 31, 2014
statement of financial position?
3. The amount of collection fee is?
4. What is the adjusted Cash in bank balance as of December 31, 2014?
5. The cash in bank per ledger as of December 31, 2014, should be increased (decreased)
by?

PROBLEM 2
BANK RECONCILIATION: UNADJUSTED TO ADJUSTED BALANCES

FERMIN COMPANY’s check register shows the following entries for the month of December:

Date Checks Deposits Balance

2014
Dec.
1 Beginning Balance P 89,300
5 Deposit P 65,000 154,300
7 Check #14344 P 32,500 120,800
11 Check #14345 14,000 106,800
26 Deposit 49,000 155,800
29 Check #14346 8,600 147,200

Fermin’s bank reconciliation for November revealed one outstanding check (No. 14343) for
P12,000 (written on November 28), and one deposit in transit for P 5,550 (made on November
29).
The following is from Fermin’s bank statement for December 2014:

Date Checks Deposits Balance

2014
Dec. 1 Beginning Balance P 95,750
1 Deposit P 5,550 101,300
4 Check No. 14344 P 32,500 68,800
5 Deposit 56,000 124,800
14 Check No. 14345 14,000 110,800
15 Loan Proceeds 500,000 610,800
20 NSF Check 7,600 603,200
29 Service charge 1,000 602,200
31 Interest 3,600 605,800

Assume that all errors were committed by Fermin Company, not the bank.
Based on the preceding information, determine the following:
1. Adjusted cash balance on November 30
2. Outstanding checks on December 31
3. Deposit in transit on December 31
4. Total bank receipts in December
5. Adjusted cash balance on December 31