ACTIVITY 5

The bank statement for the checking account of MSU, INC. showed a December 31,
2011 balance of P1,463,212.00. Information that might be useful in preparing a bank
reconciliation as follows:
(1,463,212 – 132,025 + 57,500 – 87500) = 1,301,187
a) Outstanding checks were P132,025
b) The December 31, 2011 cash receipts of P57,500 were not deposited in the bank until
January 2, 2012
c) One check written in payment of rent for P24,600 was correctly recorded by the bank but was
recorded by MSU as P26,400 disbursement
d) Bank service charges of P1,400 were listed on the bank statement
e) In accordance with prior authorization, the bank withdrew P45,000 directly from the checking
account as payment on a mortgage note payable. The interest portion of that payment was
P35,000. MSU has made no entry to record the automatic payment.
f) A deposit of P87,500 was recorded by the bank on December 13, but did not belong to MSU.
The deposit should have been to the checking account of SUM, INC
g) The bank statement included a sum of P8,500 for an NSF check. The check was returned
with the bank statement and the company will seek payment from the customer.
h) MSU maintains a P20,000 petty cash fund that was appropriately reimbursed at the end of
December.
i) According to instruction for MSU on December 30, the bank withdrew P1,000,000 from the
account and purchased Treasury Bills for MSU. MSU recorded the transaction in its books on
December 31 when it received notice from the bank. Half of the treasury bills mature in two
months and the other half in six months.

QUESTIONS
1. What is the cash balance per books on December 31, 2011?
1,301,187 – 1,800 + 1,400 + 45,000 + 8,500 = 1,354,287
2. What is the corrected cash balance on December 31, 2011? 1,301,187

3. What amount of cash and cash equivalents should be reported in the current asset section of
the balance sheet on December 31, 2011?
Adjusted balance + PCF + Cash equivalent = 1,301,187 + 20,000 + 500,000 = 1,821,187