In connection with sour audit of the financial statements of ONOR COMPANY for the year ended December 31, 2018, you gathered the following information. 1. The company maintains its current account with Tsunami Bank. The bank statement on December 31, 2018, showed a balance of P638,340. Your audit of thé company’s account with Tsunami Bank disclosed the following: ¢ Acheck for P22,500 received from a customer whose account is current had been deposited and then returned by the bank on December 28, 2018. No entry was made for the return of this check. The customer replaced the check on January 15, 2019. ¢ A check for P5,720 was cleared by the bank as P7,520. The bank made the correction on January 2, 2019.A check for P3,500 representing payment of an employee advance was received and deposited on December 27, 2018, but was not recorded until January 3, 2019. Postdated checks totaling P67,300 were included in the deposits in transit. These represent collections of current accounts receivable from. customers. The checks were actually deposited on January 5, 2019. Various debit memos for drafts purchased for payment of importation of equipment totaling P230,000 were not yet recorded. These purchases were previously set up as accounts payable. Said equipment arrived in December 2018. . Interest éarned on the bank balance for the 4t» quarter of 2018, amounting to P1,950 was not recorded. © Bank service charges totaling P1,260 were not recorded. © Deposit in transit and outstanding checks at December 31, 2018, totaled P136,250 and P276,380, respectively. . Various expenses from the company’s imprest petty cash fund dated December 2018, totaled P16,250, while those dated January 2019, amounted to P5,903. Another disbusement from the fund dated December 2018 was a cash advance to an employee amounting to P3,500. A replenishment of the petty cash fund was made on January 8, 2019. . The company’s trial balance on Décember 31, 2018, includes the following accounts: Cash in bank - Tsunami Bank P 748,320 Cash in bank - Earthquake Bank (restricted account for plant expansion, expected to be disbursed in 2019) 700,000 Petty cash fund 30,000 Time deposit, placed December 20, 2018, and due March 20, 2019 1,000,000Money mariet placement Prudential Bank 4,000,099 1, What is the adjusted petty cash fund balance on December 31 018? a P4347 Cc. P30,000 B. P10,250 D. P24,097 2, The petty cash shortage on December 31, 2018, is “A. PO C. P3500 “BL P5,903 D. P4347 3. What is the adjusted Cash in bank—Tsunami Bank balance oq _December 31, 2018? A. PS00,010 C; P432,710 B. P748,320 D. 429,110 4. The entry to adjust the Cash in bank - Tsunami Bank account should include a debit to A. Accounts receivable for P89,800. B. Accounts receivable for P86,300. C. Accounts payable for P228,200. D._ Interest expense for P1,950. 5. The December 31, 2018, statement of financial position should show “Cash and cash equivalents” at A. P6,142,960 C. P4,442,960 B. 5,439,360 D. P5,442:960 SOLUTION 1-7 ae 1. Petty cash fund per trial balance Various expenses dated December 2018 . est) Employee fat, advance San Hjust ash fund balance ‘ 10.250 Answer: B. The petty cash shortage cannot be determined because of insufficient information. Answer: A Book Bank Unadjusted balances P748,320 P638,340 NSF check ‘ (22,500) Bank error (P7,520 = P5,77.0) 1,800 Unrecorded cash receipt 3,500 Postdated checks (67,300) . Deposits in transit (P136,250 - P67,300) _ 68,950 Bank debit memos (230,000) Interest earned 1,950 Bank service charges (1,260) Outstanding checks : 276,380) Adjusted balances 432,710 P432.710 Answer: C . Accounts receivable (P22,500 + P67,300) 89,800 Accounts payable 230,000 Bank service charges 1,260 Cash in bank ~ Tsunami Bank 315,610 Advancés to e, aployees 3,500 Interest income 1,950 Answer: K ash in bank - Tsunami Bank P43; Petty cash fund . ta 250 Time deposit. 1,000,000 Money market placement 4,000,000 Cash and cash equivalents P5,442,960 Answer: D