Chapter 3

Cash
MULTIPLE CHOICE
1. C 2. B 3. D 4. A 5. B
6. B 7. C 8. C 9. C 10. D
11. B 12. C 13. C 14. D 15. D

Problem 1

(a) Audit adjustments

Cash Equivalents 3,000,000

Cash 3,000,000

Other Non-current Financial Assets 3,200,000

Cash 3,200,000

Cash 35,000
Accrued Salaries Expense 35,000

Other Non-current Financial Assets 900,000

Cash 900,000

Miscellaneous Expenses 6,800

Advances to Employees 1,200
Cash (Petty Cash Fund) 8,000

Cash 5,300
Accrued Utilities Expense 5,300

Accounts Receivable 25,000

Cash 25,000

(b) Cash and Cash Equivalents

Savings account with Metrobank P1,500,000
Checking account with Metrobank 800,000 + 5,300 805,300
Certificates of deposit 3,000,000
Payroll fund 1,200,000 + 35,000 1,235,000
Tax fund 500,000
Petty cash fund 12,000
Undeposited collections 85,000 – 25,000 60,000
Correct cash and cash equivalents P7,112,300

Problem 2 (Sta. Monica, Inc.)

Expenses 10,500
Petty Cash Fund 10,500

Correct balance of petty cash fund = P20,000 – P10,500 = P9,500

Chapter 3
Cash
Problem 3 (Victor Company)

(a) Correct amount of petty cash fund

Currencies and coins P6,400

(b) Per count

Currencies and coins P 6,400
Paid petty cash vouchers 2,250
Employee’s NSF check 1,200
Wedding gift contribution (with bills) 1,500
Total per count P11,350
Cashier’s accountability:
Petty cash fund, per ledger P10,000
Wedding gift contribution 1,500 11,500
Cash shortage P 150

(b) Audit Adjusting Entries

Delivery Expense 250

Office Supplies Expense 160
Employees Medicine 240
Transportation Expense 400
Repairs and Maintenance 400
Receivables from Employees 2,000
Cash Shortage (or Misc. Expenses or Receivables fr Employees) 150
Petty Cash Fund 3,600

Problem 4 (Rainbow Corporation)

(a) Total per count P 35,000

Cashier’s Accountability
Petty Cash Fund, per ledger P35,000
Unused postage stamps 1,800
Unused office supplies 1,200
Wedding gift contribution 1,000 39,000
Cash shortage P 4,000

(b). Telephone Expense 1,500

Water Expense 1,600
Office Supplies Expense (3,700 – 1,200) 2,500
Postage Expense (2,800 – 1,800) 1,000
Prepaid Expenses (1,200 + 1,800) 3,000
Receivables from Employees (3,900 + 4,000) 7,900
Petty Cash Fund 17,500

(c) Correct amount of petty cash fund = P35,000 – P17,500 = P17,500

Cash items in the petty cash fund:

Bills and Coins P 2,500
Replenishment check 15,000
Total P17,500

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Cash
Problem 5

Bills and Coins (show details of denomination and pieces per denomination) P6,717.50
Checks:
Date Maker Amount
12-28-12 Urquiola, employee P 3,000.00
12-29-12 Sta. Maria, employee 1,500.00
12-31-12 L. Chua, customer 2,500.00
01-02-13 A. Bobadilla, customer 3,200.00
01-12-13 C. German, employee
(check received 12-28-12) 1,500.00 11,700.00
Vouchers
Date Voucher No. Particulars Amount
12-13-12 151 Freight out P 500.00
12-28-12 183 Supplies 300.00
12-29-12 184 Freight In 394.20
12-31-12 189 Freight on cabinet 741.10
01-02-13 001 Freight in 244.70 2,180.00
IOUs
12-21-12 S. Dechavez 300.00
Unused office supplies 40.00
Total per count P20,937.50
Cashier’s accountability:
Petty cash fund, per ledger P15,000.00
Unremitted cash sales
Inv. # 118 December 30 P1,000.40
Inv. # 129 December 31 2,500.00
Inv. # 133 January 2 3,200.00 6,700.40
Unused office supplies 40.00 21,740.40
Cash shortage P 802.90

Audit Adjusting Entries:

Receivables from Employees (1,500.00 + 300.00) 1,800

Freight out 500
Supplies Expense (100 – 40) 260
Prepaid Expenses 40
Furniture and Equipment 741.10
Freight in 394.20
Cash Shortage (Receivable from Employees) 802.90
Petty Cash Fund 4,538.20

Cash in Bank (1,000.40 + 2,500.00) 3,500.40

Sales 3,500.40

Correct balance of petty cash fund (P15,000 – 4,538.20) P10,461.80

Composed of the following cash items at December 31, 2009

Bills and coins P6,717.50
Checks dated December 7,000.00
Petty cash vouchers dated January (undisbursed as
of December 31) 244.70
Total cash items as of December 31 P13,962.20
Unremitted cash sales as of December 31
( 1,000.40 + 2,500) (3,500.40)
Petty cash fund, per audit, December 31 P10,461.80

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Chapter 3
Cash

Problem 6 (Da King Company)

Bills and coins

500 x 1 P 500
100 x 8 800
50 x 3 150
10 x 4 40
5x2 10
1x3 3 P 1,503
Checks:
12/29/12 M. Roxas, employee P2,000
12/30/12 J. Madrigal Company 1.500
01/02/13 J. Estrada Junk Shop 2,450
01/15/13 F. Chavez, employee (received 12/27/12) 1,800 7,750
Paid petty cash vouchers:
12/16/12 Vo. No. 145 Freight on goods bought P500
12/26/12 164 Postage 200
12/29/12 165 Transportation of messenger 50
01/02/13 166 Repairs, completed Dec. 29, 2012 1,500 2,250
IOU
Ed Gil, employee 1,200
Postage stamps 10 pcs x P12 120
Total per count P 12,823
Cashier’s accountability
Petty cash fund P10,000
Unremitted collections
12/30/12 Refund for merchandise returned P 1,500
01/06/13 Sale of junk and scrap materials 2,450 3,950
Unused postage stamps 120 14,070
Cash shortage P1,247

Adjusting entries
Receivable from Employees (1,800 + 1,200 + shortage of 1,247) 4,247
Freight in/Cost of Goods Sold 500
Transportation Expense 50
Postage Expense (200 – 120) 80
Prepaid Expenses 120
Petty Cash Fund 4,997

Repairs and Maintenance 1,500

Accrued Expenses 1,500

Cash in Bank 1,500

Purchase Returns and Allowances /Cost of Goods Sold 1,500

Correct Petty Cash Fund = P10,000 – P4,997 = P5,003

Cash items as of December 31:
Bills and coins P1,503
Checks dated December 3,500
Petty cash voucher dated January 2013 1,500
Cash refund for purchase returns (1,500)
Correct petty cash fund balance P5,003

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Cash
Problem 7 (Cisco Systems, Inc.)
(1) Bank reconciliation:

Per bank Per books

Unadjusted balances P 1,463,212 P1,352,312*
Outstanding checks (140,000)
Undeposited receipts 59,500
Error in recording check issued for rental payment 1,800
Bank charge for payment of loan and interest (45,000)
Bank service charges (1,400)
Deposit of another company (87,500)
Customer’s DAIF check (12,500)
Adjusted balances P1,295,212 P1,295,212

(2) Adjusting entry:

Notes Payable – Bank 40,000

Interest Expense 5,000
Bank Service Charges 1,400
Accounts Receivable 12,500
Rent Expense 1,800
Cash in Bank 57,100

(3) Cash and cash equivalents:

Petty cash fund P 20,000
Cash in bank 1,295,212
Treasury bills maturing in 2 months 500,000
Total cash and cash equivalents P1,815,212

Problem 8 (Sunshine Corporation)

1. Per Bank Per Books

Unadjusted Balances P 424,000 P465,000
Outstanding checks (113,000)
Undeposited collections 48,000
Customer’s note collected by bank 19,000
Bank service charge (1,500)
Adjusted balances P359,000 P482,500
Cash shortage (123,500)
Cash balance, December 31, per audit P359,000 P359,000

2. Understated book balance 456,000 – 465,000 P 9,000

Overstated bank balance 424,000 – 454,400 30,400
Omitted outstanding checks
183 4,500
198 12,500
Understated outstanding checks
52,000 – 25000 27,000
9,000 – 900 8,100
25,000 – 15,000 10,000
Overstated undeposited collections 3,000
Omission of bank credit memo 19,000
Total cash shortage P123,500

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Cash

3. Undeposited collections, December 31 P 48,000

Collections, January 1 – 15 199,000
Total amount available for deposit P247,000
Amount deposited, per deposit slips (110,000)
Undeposited collections, January 15 P137,000
Cash on hand, January 15 (52,000)
Additional cash shortage in January P 85,000

.4. Adjusting Entries

Bank Charges 1,500
Receivable from Employees (or Loss) 123,500
Cash 106,000
Notes Receivable 19,000

Problem 9 (Pamela Manufacturing Company)

Nov. 30 Receipts Disbursements. Dec. 31

Unadjusted bank balance 876,750 9,153,760 8,526,550 1,503,960
Outstanding checks
November 30 (254,720) (254,720)
December 31 335,610 (335,610)
Deposits in transit
November 30 164,220 (164,220)
December 31 209,180 209,180
Check of Pamplona Company (5,830) 5,830
Adjusted Balances 786,250 9,198,720 8,601,610 1,383,360

Nov. 30 Receipts Disbursements Dec. 31

Balance per books 821,950 9,198,720 8,613,010 1,407,660
Error in recording check no. 359 2,700 2,700
Bank service charge
November (3,500) (3,500)
December 2,250 (2,250)
NSF check returned in November (34,900) (34,900)
Interest charged by the bank 24,750 (24,750)
Adjusted Balances 786,250 9,198,720 8,601,610 1,383,360

Audit adjusting entries:

Cash in Bank 2,700

Office Furniture 2,700

Bank Service Charge 2,250

Cash in Bank 2,250

Interest Expense 24,750

Cash in Bank 24,750

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Chapter 3
Cash
Problem 10 (Golden Bells Company)

Nov. 30 Receipts Disbursements Dec. 31

Unadjusted bank balance 2,500,000 2,300,000 1,700,000 3,100,000
Deposits in transit
November 30 58,000 (58,000)
December 31 47,000 47,000
Outstanding checks
November 30 (97,000) (97,000)
December 31 46,000 (46,000)
Erroneous bank charges
November 30 25,000 (25,000)
December 31 (37,000) 37,000
Erroneous bank credit
November 30 (45,000) (45,000)
December 31 (50,000) (50,000)
Adjusted balances 2,441,000 2,214,000 1,567,000 3,088,000

Nov. 30 Receipts Disbursements Dec. 31

Unadjusted book balances (squeezed) 2,390,000 2,206,000 1,549,000 3,047,000
NSF checks returned by bank
November 30 (15,000) (15,000)
December 31 25,000 (25,000)
Bank service charges
November (10,000) (10,000)
December 18,000 (18,000)
Note collected by bank
November 76,000 (76,000)
December 84,000 84,000
Adjusted balances 2,441,000 2,214,000 1,567,000 3,088,000

Accounts Receivable 25,000

Cash in Bank 25,000

Bank Service Charges / Miscellaneous Expenses 18,000

Cash in Bank 18,000

Cash in Bank 84,000

Notes Receivable 84,000

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Cash
Problem 11 (Starr Company)
May 1-31
Apr. 30 Receipts Disb. May 31
Unadjusted bank balance 470,360 883,200 1,320,600 32,960
Deposits in transit
April 30 29,360 (29,360)
May 31 (squeezed) 40,560 40,560
Outstanding checks
April 30 (144,800) (144,800)
May 31 133,600 (133,600)
Adjusted balances 354,920 894,400 1,309,400 (60,080)

May 1-31
Apr. 30 Receipts Disb. May 31
Unadjusted book balances (squeezed) 363,040 654,400 621,240* 396,200
DAIF checks returned by bank
April 30 (8,000) (8,000)
May 31
Bank service charges
April (120) (120)
May 280 (280)
Check issued by the treasurer to himself 696,000 (696,000)
Proceeds of loan granted by bank
May 240,000 240,000
Adjusted balances 354,920 894,400 1,309,400 (60,080)

*621,240 = 613,120 + 8,000 + 120

(a) 1. P363,040
2. P40,560
3. P696,000
4. P(60,080)

(b) Adjusting entries:

Bank Service Charges 280

Cash in Bank 280

Loss from Theft/Receivable from Officers 696,000

Cash in Bank 696,000

Cash in Bank 240,000

Notes Payable – Bank 240,000

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Cash
Problem 12 (Rocky Mountain High)
Nov. 30 Receipts Disbursements Dec. 6
Unadjusted bank balance P888,800 P555,500 P666,600
Deposits in transit
November 30 148,900 (148,900)
December 31 (102,000 – 12,000) 90,000 90,000
Payment from collections 12,000 12,000
Outstanding checks
November 30 (116,200) (116,200)
December 31 = 62,000 + 105,000 + 30,000 +
40,000 237,000 (237,000)
Adjusted balances 921,500 508,600 799,400 630,700

Nov. 30 Receipts Disbursements Dec. 6

Unadjusted book balances (squeezed) 921,500 508,600 571,400 858,700
Bank charges in December (200,000 + 28,000) 228,000 (228,000)
Adjusted balances 921,500 508,600 799,400 630,700

Answers:
(a) P148,900
(b) P116,200
(c) P921,500
(d) P630,700

Problem 13

1. A,D 6. M, P 11. D, F 16. I, L

2. C, G. 7. I, L 12. A, D 17. Not a reconciling item
3. B, F 8. K, O 13. F, G 18. J, N
4. E, H 9. D, H 14. D, F 19. L, N
5. J, N 10. B, F 15. J, N 20. N, O

Problem 14 (Contronics Company)

Petty Cash Purchasing Cash in Bank Total

Fund Fund
Balances, per ledger P 15,000 P 35,000 P134,500 P184,500
Disbursed in 2012 (6,000) (20,000) (26,000)
Bank credit memo 58,000 58,000
Balances per audit P9,000 P15,000 192,500 P216,500

Adjusting entries
Gasoline Expense 4,500
Miscellaneous Expenses 500
Transportation Expense 1,000
Petty Cash Fund 6,000

Purchases or Inventory 20,000

Purchasing Fund 20,000

Cash in Bank 58,000

Notes Receivable 58,000

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Cash
Problem 15 (Fortune Company)
(a) Audit Adjustments
Sales 285,200
Cash 285,200

Cash 19,300
Utilities Payable 19,300

Accounts Receivable 57,800

Cash 57,800

Accounts Receivable 32,500

Cash 32,500

No entry, dividend fund is part of cash.

Accounts Receivable 3,500

Cash 3,500

Cash Shortage/ Receivable from Employees 550

Cash 550

No entry, payroll fund is part of cash.

Cash Shortage / Receivable from Employees 300

Miscellaneous Expenses 5,500
Cash 5,800

Cash 13,500
Miscellaneous Income 13,500

(b) Correct amount of cash

Cash balance, per ledger P1,640,000
Cash sales of 2013 (285,200)
Unreleased check for utilities 19,300
Postdated checks received (57,800)
Customers’ NSF checks (32,500)
Stale check (3,500)
Shortage in the change fund (550)
2012 vouchers in petty cash fund (5,500)
Cash shortage in the petty cash fund (300)
Unrecorded deposits (sale of scrap) 13,500
Cash balance, per audit 1,287,450

Supply the Answers

Note to the Teacher: Please supply the petty cash imprest balance of P50,000 in problem B. (You may supply
another figure for variation in your other classes.)

Summary of Answers:

1. 308.40
2. 4,606.60

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3. 5,000 shortage
4. 35,000
5. 800
6. 5,700
7. 400
8. 5,300
9. 53,800
10. 838,600
11. 157,950
12. 780,650 or 761,650 (NSF checks may be treated as deduction from receipts)
13. 625,700 or 606,700 (NSF checks may be treated as deduction from receipts)
14. 3,000
15. 92,000
16. 145,600
17. 71,950
18. 1,828,212
19. imprest system – deposit of collections intact to the bank
20. segregation of duties of custodial function and bookkeeping function
21. 125,250
22. 194,550
23. 255,700
24. 55,000

SUPPORTING COMPUTATIONS

A. 1. Total per count P 10,761.60

Cashier’s accountability
Petty cash fund P 10,500
Postage stamps 220
Other collections 350 11,070
Cash shortage P308.40

2. Correct petty cash fund = 1,156.60 + 3,450 P4,606.60

B. 3. Total per count P 53,500

Cashier’s accountability
Petty cash fund P 50,000
Check payable to Meralco 3,500
Birthday gift contribution 4,500
Unused postage 500 58,500
Cash shortage P 5,000

4. Correct petty cash fund = P17,000 + P18,000 P35,000

C. 5. Total per count P19,700

Cashier’s accountability
Petty cash fund P 15,000.00
Undeposited collections 5,500.00 20,500
Cash shortage P 800

6. Bills and coins P6,400

Customers’ checks 4,800
Undeposited collections (5,500)
Petty cash fund, per audit P5,700

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D. 7. Total per count (exclude the unsigned pay envelope with no contents) P 19,600
Cashier’s accountability
Petty cash fund P15,000
Unreleased payroll 5,000 20,000
Cash shortage P 400

8. Bills and coins P7,300

Vouchers with January 2013 dates 200
Employee’s check dated December 2012 2,800
Total cash items as of December 31 P10,300
Unreleased payroll (5,000)
Correct petty cash balance on December 31 P5,300

E. Bank Books
9. Unadjusted balances P850,000 P750,500
Bank credit memo 150,000
Bank debit memo (4,500)
Outstanding checks (120,400)
Check of Kin 21,000
Error in recording check (3,600)
Cash on hand 88,000
Balances before cash shortage P838,600 P892,400
Cash shortage ( 53,800)
10. Cash balance, per audit P838,600 P838,600

F. January 31 Receipts Disbursements Feb. 28

Unadjusted balances per bank 13,500 790,450 647,700 156,250
Outstanding checks
January 31 (65,000) (65,000)
February 28 43,000 (43,000)
Deposits in transit
January 31 54,500 (54,500)
February 28 44,700 44,700
Adjusted balances 3,000 780,650 625,700 157,950
January 31 Receipts Disbursements Feb. 28
Unadjusted balances, per books (92,250) 805,350 630,300 82,800
Bank credit memo
January 123,500 (123,500)
February 98,800 98,800
Bank service charges
January (3,250) (3,250)
February 4,650 (4,650)
NSF checks returned by bank
January (25,000) (25,000)
February 19,000 (19,000)
Adjusted balances 3,000 780,650 625,700 157,950

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Cash
G. December Disbursements
Per bank Per books
15. Unadjusted disbursements P195,000 P190,400
Outstanding checks, November 30 (90,000)
Customers’ NSF checks
November (6,000)
December 12,000
Bank service charges
November (2,400)
December 3,000
Balances before outstanding checks, December 31 P105,000 P197,000
105,000
Outstanding checks, December 31 P92,000

H. June Receipts
Per bank Per books
16. Unadjusted receipts in June P310,000 420,000
Collections made directly by bank in May (30,300)
Deposits in transit, May 31 (15,000)
Loans granted by bank in June 50,000
Error in recording deposit 900
Balances before deposits in transit, June 30 P295,000 P440,600
295,000
Deposits in transit, June 30 P145,600

I. Per bank Per books

Unadjusted balances 1,555,000 1,890,162
Credit memo for collections by bank 10,000
Outstanding checks (106,229)
Undeposited receipts 379,441
Balances before shortage P1,828,212 P1,900,162
17. Amount stolen (71,950)
18. Actual cash existing P1,828,212 P1,828,212

19. and 20. Features of internal control missing: Imprest system and segregation of duties

J. Per bank Per books

Unadjusted balances P350,000 P293,500
Erroneous bank credit (25,000)
22. Outstanding checks (246,750 – 15,000 – 37,200) (194,550)
Unreleased checks 15,000
Postdated checks issued and recorded as disbursements 37,200
Customer’s postdated check (50,000)
21. Deposits in transit (175,250 – 50,000) 125,250
Note collected by bank 15,000
Balances before cash shortage P255,700 P310,700
24. Cash shortage (55,000)
23. Actual cash existing P255,700 P255,700

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