HOLY CROSS COLLEGE

Intermediate Accounting 1
Cash & Cash Equivalents, Bank Reconciliation & Proof of Cash

Name: ____________________________Section: ___________ Score: ________

Instructions: Press the letter of the best answer on the ZIPGRADE answer sheet

Numbers 1– 3 are based on the following data:

Bib Company is making four-column bank reconciliation at June 30 from the

following data. The amounts per bank statement were: balance, May 31, P650,000;
June receipts, P1,300,000; June disbursement, P1,100,000. The amounts per books
were: balance, May 31, P763,500; June receipts, P1,154,800; June disbursements,
P1,123,500; balance, June 30, P794,800.
May 31 June 30

Deposits in transit 120,000 150,000

Outstanding checks 67,000 84,000

The bank overlooked a check for P7,500 when

recording a deposit on June 10

Note collected by bank, recorded after

Receiving the bank statement 180,000

Service charge, recorded after receiving the

bank statement 4,500 6,000

NSF checks, recorded after receiving the bank

statement 56,000 48,000

Bib recorded a P37,400 check received from a

customer in June as P34,700

1.The corrected cash balance on June 30 is

a. P 908,500
b. P 916,000
c. P 923,500
d. P1,007,500

2. The corrected June receipts is

a. P1,157,500
b. P1,330,000
c. P1,334,800
d. P1,337,500

3. The corrected June disbursements is

a. P1,083,000
b. P1,117,000
c. P1,125,000
d. P1,130,000

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 4. Determine if the following statements are true or false.
Statement 1 - Certificates of deposit are usually classified as cash on the
statement of financial position.
Statement 2 - Savings accounts are usually classified as cash on the statement of
financial position.
a. Both statements are true.
b. Both statements are false.
c. The 1st statement is true, the 2nd statement is false.
d. The 1st statement is false, the 2nd statement is true

5. Garnet Company is preparing its March 31 bank reconciliation. The following data
are available:
Per bank Per books
a. March data:

Balance, February 28 P 741,400 P 719,400

March deposits reflected 476,000 490,000

March checks reflected (617,000)* (610,000)

Note collected (including P2,000 interest) 202,000

Service charge (1,200)

Balance, March 31 801,200 599,400

b. From the February bank reconciliation:
Deposit in transit, P17,000
Outstanding checks, P39,000
Erroneously includes a check drawn by Garment
* Company for P15,000.
The deposit in transit at March 31 is
a. P45,000
b. P31,000
c. P14,000
d. P 3,000

6. Use the same data in #5, What is the amount of outstanding checks at
March 31 of Garnet Company?
a. P47,000
b. P15,000
c. P 8,000
d. P 7,000

7. Statement 1 - Companies include postdated checks and petty cash funds as

cash.
Statement 2 - Cash equivalents are investments with original maturities of six
months or less.

a. Both statements are true.

b. Both statements are false.
c. The 1st statement is true, the 2nd statement is false.
d. The 1st statement is false, the 2nd statement is true

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 8. The cashier misplaced all the bank statements for the past year. You
reviewed the accounting records and discovered that the following journal entry was
made to reconcile the June 30, 2015 bank records and accounting records:
Accounts receivable 152,024
Miscellaneous expense 1,250

Notes receivable 20,000

Interest revenue 1,000

Cash 132,274

Pre-adjusted cash balance in the accounting records was P768,370, outstanding

checks were P20,750 and no other adjustment were required. What is the bank
statement balance at June 30, 2015?
a. P615,346
b. P636,096
c. P656,846
d. P768,370

9. Statement 1 - Short-term, highly liquid investments may be included with cash on

the statement of financial position.
Statement 1 -Bank overdrafts are always included as part of cash in the
statement of financial position.
.
a. Both statements are true.
b. Both statements are false.
c. The 1st statement is true, the 2nd statement is false.
d. The 1st statement is false, the 2nd statement is true

10. Which of the following is not considered cash for financial reporting purposes?
a. Postdated checks and I.O.U.'s
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Petty cash funds and change funds

11. Which of the following is considered cash?

a. Certificates of deposit (CDs)
b. Money market savings certificates
c. Money orders
d. Postdated checks

12. Travel advances should be reported as

a. supplies.
b. cash because they represent the equivalent of money.
c. investments.
d. none of these.

13. Which of the following is not a basic characteristic of a system of cash control?
a. Use of a voucher system
b. Combined responsibility for handling and recording cash
c. Daily deposit of all cash received
d. Internal audits at irregular intervals

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14. Which of the following items should not be included in the Cash caption on
the statement of financial position
a. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand

15. All of the following may be included under the heading of "cash" except
a. currency.
b. money market funds.
c. checking account balance.
d. savings account balance.

16. What is a compensating balance?

a. Savings account balances.
b. Margin accounts held with brokers.
c. Temporary investments serving as collateral for outstanding loans.
d. Minimum deposits required to be maintained in connection with a borrowing
arrangement.

17. Under which section of the statement of financial position is "cash restricted for
plant expansion" reported?
a. Current assets.
b Non-current assets.
c. Current liabilities.
d. Equity.

18. A cash equivalent is a short-term, highly liquid investment that is readily convertible
into known amounts of cash and
a. is acceptable as a means to pay current liabilities.
b. has a current market value that is greater than its original cost
c. bears an interest rate that is at least equal to the prime rate of interest at the
date of liquidation.
d. is so near its maturity that it presents insignificant risk of changes in interest rates.

19. Which of the following is an appropriate reconciling item to the balance per
bank in a bank reconciliation?
a. Bank service charge. c. Deposit in transit.
b. Bank interest. d. Chargeback for NSF check.

20. A Cash Over and Short account

a. is not generally accepted.
b. is debited when the petty cash fund proves out over.
c. is debited when the petty cash fund proves out short.
d. is a contra account to Cash.

21. The journal entries for a bank reconciliation

a. are taken from the "balance per bank" section only.
b. may include a debit to Office Expense for bank service charges.
c. may include a credit to Accounts Receivable for an NSF check.
d. may include a debit to Accounts Payable for an NSF check.

22. Seldom does the balance of the cash in bank account in the depositor’s books
agree with balance appearing in the statement at a particular date because of
a. Bank secrecy requirements.
b. Negligence by the bookkeeper.
c. A tax avoidance scheme.
d. Time-lapse differences.

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23. A petty cash system is designed to
a. Cash checks for employees
b. Handle cash sales
c. Account for all small cash receipts and disbursements
d. Pay small miscellaneous expenses

24. In most situations, the petty cash fund is reimbursed just prior to the year end and
an adjusting entry is made to avoid
a. The overstatement of cash and the understatement of expenses.
b. The understatement of cash and the overstatement of expenses.
c. The misstatement of revenues.
d. The understatement of cash with the appropriate statement of expenses.

25. The amount reported as “cash” on a company’s statement of financial position

normally should exclude
a. Petty cash fund
b. Post-dated checks issued by the company
c. Post-dated checks payable to the company
d. Undelivered checks to the payee written and signed by the company

26. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Bank service charge
c. Deposit in transit
d. A customer’s note collected by bank on behalf of the depositor

27. In preparing a monthly bank reconciliation, which of the following items would be
added to the balance reported on the bank statement to arrive at a correct cash
balance?
a. Outstanding checks
b. Bank service charge
c. Deposit in transit
d. A customer’s note collected by bank on behalf of the depositor

28. Travel advances should be reported as

a. Supplies
b. Cash because they represent the equivalent of money
c. Investments
d. Prepaid expense

29. A bank overdraft should be

a. Reported as a deduction from the current asset section
b. Reported as a deduction from cash
c. Netted against cash and a net cash amount reported
d. Reported as a current liability, when there is no valid basis for offsetting against
another bank account

30 Bank reconciliations are normally prepared on a monthly basis to identify

adjustments needed in the depositor’s records and to identify bank errors. Adjustment
should be recorded for
a. Bank errors, outstanding checks, and deposits in transit.
b. All items except bank errors, outstanding checks, and deposits in transit.
c. Book errors, bank errors, deposit in transit, and outstanding checks.
d. Outstanding checks and deposit in transit.

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31. Deposits held as compensating balances
a. Usually do not earn interest.
b. If legally restricted and held against long term credit may be included among
current assets.
c. If legally restricted and held against long term credit may be included in the
cash balance but is reported among current assets.
d. If legally restricted and held against short term credit should not be included in
the cash balance but is reported among current assets.

32. A bank may return a check to the maker for all of the following reasons except
a. The amount of the check is too small
b. The signature is missing
c. The check has been altered
d. The maker’s account has been closed.

33. Which of the following is considered cash?

a. 30-day certificate of deposit
b. Customer’s post dated checks
c. Money market checking accounts
d. 6-month money market savings certificate

34. The following are the cash balance of LMN Inc. at December 31, 2021:
Undeposited collections P 40,200
Current account – unrestricted 620,000
Disbursement checks written and recorded in December
2021 but are to be released to the payees in 2022 130,000
Unrestricted time deposits (expected use in 2022) 2,000,000

LMN Inc. has agreed to maintain a P200,000 compensating balance in its unrestricted
current account in accordance with the loan that is long term. How much should the
company report as “Cash and Cash equivalents” in its December 31, 2021 statement of
financial position?
a. P2, 590,200
b P 590,200
c. P2,790,200
d. P 790,200

35. Which of the following items should be included in the cash balance at December
31, 2021?
I. Check payable to the company, dated January 2, 2022, in payment of a sale
made in December 2021
II. A check payable to a vendor, dated and recorded in the company’s books on
December 31, 2021 but not released until January 4, 2022.

a. I only c. Both I and II

b. II only d. Neither I nor II

36. When preparing a bank reconciliation, bank credits are

a. added to the bank statement balance.
b. deducted from the bank statement balance.
c. added to the balance per books.
d. deducted from the balance per books.

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37. The petty cash fund of a company at the end of the fiscal year ended June 30,
2021 is composed of the following:
Currencies P 3,800
Coins 1,200
Paid vouchers:
Office supplies 1,750
Postage stamps 2,000
Loans to employees 6,000
Check drawn by the manager 2,750
Check drawn by the company, payable to the order of the petty
cash custodian, representing her salary 12,500

The amount of petty cash fund that should be shown on the balance sheet on June 30,
2021 is –
a. P 5,000
b. P20,250
c. P17,500
d. P30,000

38. Bataan Company’s check book balance at December 31, 2019 was P50,000. In
addition, Bataan held the following items in the safe on that date.
Check payable to Bataan, dated December 31, 2019 in payment of a sale made
in December 31, 2019 not included in December 31, check book balance
P20,000
Check payable to Bataan, deposited December 15, but returned by bank on
December 30, marked “NSF.” The deposit and the return were both
reflected in the checkbook. P 5,000
Check drawn on Bataan Company’s account, payable to a vendor, dated
December 30, but not yet mailed to payee as of December 31, 2019.
The check is not yet recorded. P 3,000

The amount to be shown as Cash on the company’s balance sheet at December 31,
2019 is –
a. P73,000
b. P68,000
c. P65,000
d. P70,000

39. The Petty cash fund is established in the amount of P5,000 and contains P4,000 in
cash and P950 in receipts for disbursements when it is replenished. The journal entry to
record replenishment should include credit / s to the following account / s.
a. petty cash P750
b. petty cash P1,000
c. cash in bank, P950; cash over or short P50
d. cash in bank P1,000

40. Eternity company reported a balance of P43,000 in its Cash account at the end
of the month. There were P20,000 deposits in transit and P15,000 of outstanding checks.
The bank statement showed a balance of P50,000, service charges of P6,000 and the
proceeds of note collected by the bank for the company. The note has a face value of
P15,000. The interest on the note collected by the bank was
a. 12,000
b. 9,000
c. 6,000
d. 3,000

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41. Diamond Company had the following account balances at December 31, 2021:
Cash in banks P2,250,000
Cash on hand 125,000
Cash legally restricted for additions to plant 1,600,000

Cash in bank include P600,000 of compensating balances against short term borrowing
arrangements. The compensating balances are legally restricted as to withdrawal. In
the current assets section of the company’s December 31, 2021 balance sheet, total
cash should be reports at
a. P1,775,000
b. P2,375,000
c. P2,250,000
d. P3,975,000

42. Upon examination of the petty cash fund of Maverick Company on

January 3, 2020, the following items were found:
Total bills and coins 1,825
Certified check of general manager dated
December 15, 2020 1,500
Petty cash voucher (PCVs) not yet replenished
PCV #7163 Postage stamps 280
PCV #7164 Supplies 650
PCV #7164 IOU of employee 500
Company check representing replenishment of petty cash
fund 5,150
Unused postage stamps 120
An envelope containing contributions of employees for the
death of a
fellow employee 3,000

The petty cash fund was established for an amount of P10,000. What is the correct
amount of petty cash fund that should be shown on the statement of financial
position at December 31, 2020?
a. 9,905 c. 8,475
b. 6,975 d. 1,825

43. Using the same data in #42; what is the amount of cash shortage or overage?
a. 95 shortage
b. 25 overage
c. 215 shortage
d. Cannot be determined

44. The following account balances are shown in the accounting records of Opal
Company:
Jan. 1, Dec. 31,
2021 2021
Cash 62,000 ?
Accounts Receivable 67,000 91,000
Merchandise Inventory 86,000 78,000
Accounts Payable 53,000 48,000

Sales for 2021 amounted to P798,000 while Cost of Goods Sold was P583,000. Cash
operating expenses amounted to P107,000. All sales and purchases were made on
credit. Assuming that there were no other relevant transactions, what is the cash
balance at December 31, 2021.
a. P108,000 c. P149,000
b. P256,000 d. P305,000

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45 Gem Co. had the following cash balances at December 31, 2021:

Petty cash fund 1,500

Customer's certified check 5,000

Customer's NSF check 2,000

Customer's postdated check 4,000

Unrestricted demand deposits 486,000

Company checks written and deducted from the demand
deposits but not scheduled to be mailed until January 2, 2022 12,000

Time deposits restricted for use (expected use in 2022 300,000

In exchanged for a guaranteed line of credit, Gem has agreed to maintain a

minimum balance of P100,000, in its unrestricted demand deposit account. How
much should Gem report as “Cash” in its December 31, 2021 statement of financial
position?
a. P399,500
b. P404,500
c. P480,500
d. P504,500

46. The cash account of Island Corp. has a balance of P96,000 on December 31, 2021.
Your review of cash transactions recorded in December revealed the following:
• Cash receipts included customer’s check for P4,000 dated January 10, 2022.
• Cash disbursements included:
o Check of P10,000 payable to Ace Company. The check, dated
December 23, was delivered to Ace on December 24, but had not been
paid by the bank as of December 31.
o Check of P7,000 payable to King Co. The check was dated December
29 but still undelivered as of December 31.
What is the correct cash balance at December 31, 2021?
a. P75,000
b. P89,000
c. P97,000
d. P99,000

47. Cash on hand and in bank on the statement of financial position excludes
a. Checks drawn before the reporting date but held for later delivery to creditors.
b. Time deposits.
c. US dollars deposited in a foreign currency depository account.
d. Cash reserved for the acquisition of fixed assets.

48. Bank statements provide the following except

a. Checks cleared during the period
b. Errors made by the company
c. NSF checks
d. Bank charges for the period

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49. In reconciling the book and bank balances of Pearl Corporation, you discover
the following for the month of December 2021:

Balance per bank statement 45,000

Balance per books 34,000

Receipts of December 31, 2021 not deposited until
January 3, 2022 10,000
Bank service charges for December 300

• NSF check returned with the December bank statement, P3,200.

• A paid check for P4,000 was recorded in the cash register as P400.
• Customer’s check for P25,200 was recorded in the cash receipts journal as
P22,500.
• Charges by bank statement included a check of Pear Company erroneously
charged in the amount of P8,000.
Assuming no errors except as noted, the amount of outstanding checks is
a. P16,200
b. P29,600
c. P33,400
d. P63,000

50. Analiza Company had a petty cash fund which included the following details:
Coins & currencies 2,000
Paid Vouchers:
Transportation 600
Gasoline 400
Office supplies 500
Postage 300
Due from employees 1,200 3,000
Employee’s check 1,000
Check drawn by the company to the petty cashier 4,000

What amount of petty cash should be reported?

a. 10,000 c. 6,000
b. 7,000 d. 9,000

51. The valuation of cash shown on the balance sheet as of end of 2021 was
P28,750.95. your examination of cash showed the breakdown to be:
Cash in bank P25,420.50
Cash and currency in a cash box 1,280.45
Petty Cash fund including IOUs of employees totaling P245 500.00
Coupon bonds due December 31, 2021 1,250.00
Treasury bills 300.00
The correct amount of cash that should appear on the balance sheet is :
a. P26,955.95
b. P27,255.95
c. P27,500.95
d. P28,750.95

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Numbers 52-54 are based on the following data:

. The following bank reconciliation is presented for the Pony Co. for the month of
November 2021:

Balance per bank statement, 11/30/21 180,400

Add: Deposit in transit 41,500

Erroneous bank charge 15,000 56,500

Subtotal 236,900

Less: Outstanding checks 78,200

Balance per books, 11/30/21 158,700

Data for the month of December 2021 follow:

Per bank: December deposits/credits 261,000

December charges/debits 224,200

Balance, December 31, 2021 217,200

All items that were outstanding as of November 30 cleared through the bank in
December, including the bank charge. In addition, P25,000 in checks were
outstanding as of December 31, 2021.

52. What is the amount of cash disbursements per books in December 2021?
a. P146,000
b. P171,000
c. P249,200
d. P277,400

53. What is the amount of cash receipts per books in December 2021?
a. P204,500
b. P219,500
c. P246,000
d. P317,500

54. What is the cash balance per books at December 31, 2021?
a. P257,200
b. P242,200
c. P207,200
d. P192,200

55. The journal entries for a bank reconciliation

a. are taken from the "balance per bank" section only.
b. may include a debit to Office Expense for bank service charges.
c. may include a credit to Accounts Receivable for an NSF check.
d. may include a debit to Accounts Payable for an NSF check.

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