BM2008

NAME: Camille Madlangbayan M. DATE: 11/6/2022 SCORE:

QUIZ
I. MULTIPLE CHOICE
Select the best answer for each of the following. (5 items x 2 points)

1. An auditor for a large rice company is performing an audit of the company’s cash balance. The
auditor is considering the most appropriate audit procedure to use to ensure that the amount of cash is
accurately recorded on the company's financial statements. The most appropriate audit procedures for
the objective are:
a. Examine bank reconciliations, confirm bank balances, and verify cut off of- receipts and
disbursements; foot totals of reconciliations and compare to cash account balances.
b. Review collection procedures and perform an analytical review of accounts receivable; confirm
balances of accounts receivable and verify the existence of appropriate procedures and
facilities.
c. Compare cash receipt lists with the receipts journal and bank deposit slips; review the
segregation of duties, observe, and test cash receipts.
d. Review the organizational structure and functional responsibilities; verify the existence and
describe protection procedures for unused checks, including security measures.
2. While performing an audit of cash, an auditor begins to suspect check kiting. Which of the following
is the best evidence that the auditor could obtain concerning whether kiting is taking place?
a. Documentary evidence obtained by vouching credits on the latest bank statement to supporting
documents.
b. Documentary evidence obtained by vouching entries in the cash account to supporting
documents.
c. Oral evidence obtained by discussing with controller personnel.
d. Evidence obtained by preparing a schedule of interbank transfers.
3. If the balance shown on an entity’s bank statement is less than the correct cash balance and neither
the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity.
b. Outstanding checks.
c. Deposits in transit.
d. Bank charges not yet recorded by the entity.
4. When counting cash on hand, the auditor must exercise control over all cash and other negotiable
assets to prevent
a. Theft
b. Substitution
c. Irregular endorsement
d. Deposit in transit
5. The primary audit objective for cash is to establish that the balance is properly stated. This involves
determining:
a. b. c. d.
That cash on hand, as shown in the general ledger, is represented by
currency and coins on hand Yes Yes Yes Yes
Ownership and proper accountabilities No Yes No Yes
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That cash balances are available without restrictions No Yes Yes No

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II. PROBLEM SOLVING

Determine the requirement in each question. Show your computations. (10 items x 5 points)

A. In connection with your audit of the financial statements of EXO-SC COMPANY for the year
ended December 31, 2019, you gathered the following information.

 The company maintains its current account with SM Bank. The bank statement on December 31,
2019 showed a balance of P638,340.
Your audit of the company's account with SM Bank disclosed the following:
 A check for P22,500 received from a customer whose account is current had been deposited
and then returned by the bank on December 28, 2019. No entry was made for the return of
this check. The customer replaced the check on January 15, 2020.
 A check for P5,720 was cleared by the bank as P7,520. The bank made the correction on
January 2, 2020.
 A check for P3,500 representing payment of an employee advance was received and
deposited on December 27, 2019 but was not recorded until January 3, 2020.
 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, 2020.
 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 2019.
 Interest earned on the bank balance for the 4th quarter of 2019, 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, 2019 totaled P136,250 and
P276,380, respectively.
 Various expenses from the company’s imprest petty cash fund dated December 2019 totaled
P16,250, while those dated January 2020 amounted to P5,903. Another disbursement from the
fund dated December 2019 was a cash advance to an employee amounting to P3,500. A
replenishment of the petty cash fund was made on January 8, 2020
 The company’s trial balance on December 31, 2019 includes the following accounts:

Cash in bank - SM Bank P 748,320

Cash in bank - YG Bank (restricted for plant expansion, expected to be 700,000
disbursed
in 2020)
Petty cash fund 30,000
Time deposit, placed December 20, 2019 and due on March 20, 2020 1,000,000
Money market placement 4,000,000

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Based on the preceding information, determine the following:

6. What is the adjusted petty cash fund on December 31,

2019? a. P 4,347
b. P10,250
c. P30,000
d. P24,097

P30,000
Petty cash fund

Various expenses- Dec.2019 (P 16,250)

Employee cash advance (3,500) (19,750)
Adjusted petty cash fund P10,250

7. The petty cash shortage on December 31, 2019 is

a. P 0
b. P5,903
c. P3,500
d. P4,347
 The shortage of petty cash cannot be determined because of not having enough information.

8. What is the adjusted Cash in bank - SM Bank balance on December 31,

2019? a. P500,010
b. P748,320
c. P432,710
d. P429,110

Unadjusted cash balances P638,340

Deposits in transit (136, 250 - 67, 300) 68, 950
Outstanding checks (276, 380)
Bank error (7, 520 - 5, 720) 1, 800
Adjusted cash in bank P 432, 710

9. The entry to adjust the Cash in bank - SM 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.

Adjusted Receivable (22, 500 + 67,300) P89, 800

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10. The December 31, 2019 statement of financial position should show “Cash and cash equivalents”
at
a. P6,142,960
b. P5,439,360
c. P4,442,960
d. P5,442,960

Cash in Bank- SM Bank P432,710

Petty cash fund 10,250
Time deposit 1,000,000
Money market placement 4,000,000
Cash and cash equivalents P5,442,960
B. The cash account of CBX COMPANY shows the following activities:

Date Debit Credit Balance

Nov. 30 Balance P345,000
Dec. 2 November bank charges P 150 344,850
4 November bank credit for notes receivable P30,000 374,850
collected
15 NSF check 3,900 370,950
20 Loan proceeds 145,500 516,450
21 December bank charges 180 516,270
31 Cash receipts book 2,121,900 2,638,170
31 Cash disbursements book 1,224,000 1,414,170

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CASH
BOOKS
RECEIPTS PAYMENTS
Date OR No. Amount Check No. Amount
Dec. 1 110-120 P 33,000 801 P 6,000
2 121-136 63,900 802 9,000
3 137-150 60,000 803 3,000
4 151-165 168,000 804 9,000
5 166-190 117,000 805 36,000
8 191-210 198,000 806 57,000
9 211-232 264,000 807 78,000
10 233-250 231,000 808 90,000
11 251-275 63,000 809 183,000
12 276-300 90,000 810 21,000
15 301-309 165,000 811 24,000
16 310-350 24,000 812 48,000
17 351-390 57,000 813 60,000
18 391-420 27,000 814 66,000
19 421-480 51,000 816 108,000
22 481-500 63,000 817 33,000
23 501-525 96,000 818 150,000
23 - - 819 21,000
23 - - 820 12,000
26 526-555 222,000 821 9,000
28 556-611 15,000 822 36,000
28 - - 823 39,000
29 612-630 114,000 824 87,000
29 - - 825 6,000
29 - - 826 33,000
Totals P2,121,900 P1,224,000

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BANK
STATEMENT

Date Check Charges Credits

Dec. 1 792 P 7,500 P 25,500
2 802 9,000 33,000
3 - - 63,900
4 804 9,000 60,000
5 EC 243,000 243,000
8 805 36,000 285,000
9 CM 16 - 36,000
10 799 21,150 462,000
11 DM 57 3.900 231,000
12 808 90,000 63,000
15 803 3,000 -
16 809 183,000 255,000
17 DM 61 180 24,000
18 813 60,000 57,000
19 CM 20 - 145,500
22 815 18,000 -
23 816 108,000 141,000
23 811 24,000 -
23 801 6,000 -
26 814 66,000 96,000
28 818 150,000 222,000
28 DM 112 360 -
29 821 9,000 15,000
29 CM 36 - 36,000
29 820 12,000 -

Additional information:
1. DMs 61 and 112 are for service charges.
2. EC is error corrected.
3. DM 57 is for an NSF check.
4. CM 20 is for loan proceeds, net of P450 interest charges for 90 days.
5. CM 16 is for the correction of an erroneous November bank charge.
6. CM 36 is for customers’ notes collected by bank in December.
7. Bank balance on December 31 is P1,776,810

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Based on the preceding information, determine the following:

11. Outstanding checks at December 31

a. P459,000
b. P477,000
c. P441,000
d. P487,650

Check No. 806 57,000

807 78,000
810 21,000
812 48,000
817 33,000
819 21,000
822 36,000
823 39,000
824 87,000
825 6,000
826 33,000
Outstanding Checks P459,000

12. Deposit in transit at December 31

a. P114,000
b. P139,500
c. P132,000
d. P 0
Deposit in transit- Nov. 30 P 25, 500
Collection 2,121, 900
Total 2, 147, 400
Deposits (2, 033, 400)
Deposit in transit- Dec. 31 P 114, 000

13. Adjusted bank receipts for the month of December

a. P2,297,400
b. P2,291,400
c. P2,303,400
d. P2,321,400

Unadjusted bank balances P 2, 493, 900

Deposit in transit:
November 30 (25, 500)
December 31 114, 000
Error corrected (243, 000)
Erroneous bank charge- Nov (36, 000)
Adjusted bank balances P 2, 303, 400

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14. Adjusted book disbursements for the month of December

a. P1,228,440
b. P1,246,440
c. P1,210,440
d. P1,246,620

Unadjusted book balance P 1, 228, 230

Bank service charges:
November 30 (150)
December 31 360
Unrecorded disbursement 18, 000
Adjusted book disbursement P 1, 246, 440

15. Adjusted bank balance at December 31

a. P1,449,810
b. P1,674,810
c. P1,431,810
d P 1,776,810

Unadjusted bank balance-Dec. 31 P 1,776,810

Outstanding check- Dec. 31 (459,000)
Deposit in transit- Dec. 31 114,000
Adjusted bank balance-Dec. 31 P1,431,810

Rubric for grading:

CRITERIA POIN
TS
Correct accounts and amounts used. 3
Computed final amounts are correct and balanced. 2
TOTAL 5

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