Chapter 2

Cash & Cash Equivalents

PROBLEM 1: TRUE OR FALSE

1. TRUE
2. FALSE
3. TRUE
4. TRUE
5. FALSE
6. TRUE
7. TRUE
8. FALSE
9. FALSE
10. FALSE

PROBLEM 2: CLASSROOM DISCUSSION

1. D

2. Solution:
Checks drawn but not yet issued to payees 120,000
Customers’ checks dated Dec. 31, 20x1 40,000
SML’s check dated Jan. 15, 20x2 already mailed to payee 16,000
Cash on hand 130,000
Employees’ checks representing unclaimed salaries,
14,000
held by the treasurer
Petty cash fund (fully replenished) 20,000
Total 340,000

3. D

4. Solution:
Treasury bill acquired on Nov. 1, 20x1 300,000
Investment in redeemable preference shares 1,600,000
Three-month time deposit with UCPB - unrestricted 950,000

Total 2,850,000

5. D – Some entities present “Property, plant and equipment” as the

first line item in their statement of financial position.

6. D

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7. Solution: (2,250,000 + 125,000) = 2,375,000

8. A

9. Solution:
(40,000 + 100,000 – 10,000 overdraft – 20,000 compensating bal. ) =
110,000

10. D

11. A

12. B

13. Solution:
(a)
Petty Cash ................................ 1,400
Cash in bank................................... 1,400

(b) No entry

(c)
Shipping Expense .......................... 740
Travel Expense ............................ 240
Postage Expense ........................... 230
Miscellaneous Supplies .................... 170
Employee Receivables ...................... 8
Cash Over and Short ....................... 4
Cash in bank................................... 1,392

(d)
Cash in bank ...................................... 400
Petty Cash ............................. 400

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PROBLEM 3: EXERCISES
1. 350,000 + 250,000 + 800,000 = 1,400,000

2. 1,800,000 + 50,000 = 1,850,000

3. Solution:
Cash in banks (2,250,000 – 600,000) 1,650,000
Cash on hand 125,000
Adjusted balance 1,775,000

4. Solution:
Checking account #101 175,000
Checking account #201 (10,000)
Money market account 25,000
90-day certificate of deposit, due 2/28/04 50,000
Cash and cash equivalents 240,000

5. Solution:
Checkbook balance - 12/31/x3 5,000
NSF check (500)
Undelivered check 300
Adjusted balance 4,800

PROBLEM 4: CLASSROOM ACTIVITIES

1. Solution:
Exhibit No. Amount
Cash on hand 1 5,882.00
Cash in bank - Savings 3 522,277.54
Cash in bank - Current 4 645,353.03
Total cash 1,173,512.57

Notes:
➢ Exhibit 2.1 is a post-dated customer check.
➢ Exhibit 2.2 is an unreleased company check. Although this
check will increase the “Cash in bank” account per records, it
should not be included in the solution above because the amount
of “Cash in bank” in the solution is derived from the bank
statement and not from the Ledger.
➢ The unused credit in Exhibit 5 may be disclosed but it should not
be included in cash.

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2. Solutions:

Requirement (a):

ABC Co.
CASH COUNT SHEET
FUND: PETTY CASH FUND
DATE: DEC. 21, 20x1

CURRENCY QTY. AMT. TOTAL

1,000.00 1 1,000.00
500.00 - -
200.00 - -
100.00 1 100.00
50.00 - -
20.00 1 20.00 1,120.00
COINS
10.00 1 10.00
5.00 1 5.00
1.00 2 2.00 17.00

TOTAL BILLS & COINS 1,137.00

NO. PARTICULARS AMT.

VOUCHERS
01 Office supplies 356.00
02 Transportation 97.00
03 IOU's 600.00 1,053.00

CHECKS
- - - -

TOTAL PER COUNT 2,190.00

ACCOUNTABILITY 5,000.00
CASH (SHORTAGE)/OVERAGE (2,810.00)

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Requirement (b):
JOURNAL
DATE ACCOUNTS Ref. Debit Credit
12.3.20X1 Petty cash fund 5,000.00
Cash in bank 5,000.00

12.21.20X1 Office supplies 356.00

Transportation expense 97.00
Advances to employees 600.00
Receivable from custodian 2,810.00
Cash in bank 3,863.00

3. The students check their own work, grade themselves and submit their
grades to the teacher for recording.

PROBLEM 5: MULTIPLE CHOICE - THEORY

1. C 6. C
2. B
3. D
4. C
5. B

PROBLEM 6: MULTIPLE CHOICE - COMPUTATIONAL

1. C (375,000 + 5,000 – 125,000) = 255,000

2. D
Solution:
Per count (400 + 90) = 490 less Accountability 500 = 10 shortage

Various expense accounts 90

Cash shortage 10
Cash in bank 100

3. D

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