INTERMEDIATE ACCOUNTING MIDTERMS 1

CASH & CASH EQUIVALENTS

C 1 Which of the following is most likely not to be considered as CASH for financial reporting purposes?
a Bank draft and money orders c Post-dated checks from customers
b Stale checks issued to coeditors d Undelivered checks to trade suppliers

D 2 Cash Equivalents (CE) are short-term and highly liquid investments that are
a Classified as available-for-sale securities
b Readily convertible into cash and acquired one year before maturity
c Readily convertible into cash and acquired six months before maturity
d Readily convertible into cash and acquired three months before maturity

C 3 Assuming that an entity's balance sheet date is December 31, 2018, which of the following is not CE?
a 1 - month money market placement
b 3 - month BSP treasury bill due March 15, 2019 (date of purchase, Dec. 15, 2018)
c 6 - month BSP treasury note due January 15, 2019 (date of purchase: October 1, 2018)
d 12 - month BSP treasury note due February 15, 2019 (date of purchase : November 30, 2018)

D 4 Cash deposited in bank experiencing financial difficulty is written down to

a Present value c Value in use
b Maturity value d Estimated realizable value

A 5 Cash denominated in foreign currency shall be translated to Philippine peso using

a Closing rate c Historical rate
b Average rate d Passing rate

B 6 Significant deposits in a foreign bank subject to foreign exchange restriction should be reported separately
and classified
a As non-trade receivables with appropriate disclosure
b As part of non-current assets with appropriate disclosure
c As cash and cash equivalents with appropriate disclosure
d As held-to-maturity securities with appropriate disclosure

B 7 A material credit balance in the "cash in bank account" ( I e., Bank Overdraft)
a Is treated as an error
b Is treated as a current liability
c Is netted against cash and a net cash amount is reported
d May be offset against a demand deposit account maintained in another bank

C 8 Checks drawn before the balance sheet but held for later delivery (I e. undelivered checks)
a Should be treated as trade receivable
b Should be regarded as certified checks
c Should still be considered as part of cash balance
d Should be treated as outstanding checks for bank reconciliation purposes

B 9 Deposits held as compensating balances

a Usually do not earn interest
b If unrestricted as to withdrawal, may be included as cash
c If legally restricted and held against short-term loan may be included as cash equivalents
d If legally restricted and held against long-term loan may be included among current assets
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A 10 What happens when an entity records the payment of payable made after the close of the accounting
period as if it were made at the end of the current period?
a Window dressing b Lapping c Kiting d Fishing

D 11 All of the following are necessary components of internal control over cash, except
a Daily deposit of all receipts in the company's bank account
b Bank reconciliation
c Petty cash system
d Cash reserve

D 12 Which of the following is an incorrect application of the Imprest System of cash control?
a Cash receipts must be deposited on a regular basis
b Material cash disbursements must be made in the form of checks
c Insignificant cash disbursements must be made out of the petty cash fund
d Cash disbursements must be made in the form of checks, regardless of the amount

PETTY CASH FUND

D 13 Petty cash fund is
a Restricted cash
b Sets aside for the payment of payroll
c Separately classified as a current asset
d Money kept on hand for making minor disbursements of coins and currency

B 14 What is the major purpose of an imprest petty cash fund?

a To ease the payment of cash to vendors
b To effectively control cash disbursements
c To effectively plan cash inflows and outflows
d To determine the honesty of the petty cashier

C 15 Under the imprest fund system, the petty cash fund account is debited
a Only when the fund is created
b When the fund is created and every time it is replenished
c When the fund is created and when the size of the fund is increased
d When the fund is abolished and when the size of the fund is decreased

B 16 The entry to replenish the petty cash fund for P 1,000 of various minor expenditures would include a
a Debit to cash c Debit to petty cash
b Credit to cash d Credit to petty cash

A 17 IOUs found in the petty cash drawer at the time of replenishment should be reported as part of
a Cash and cash equivalents c Trading securities
b Receivables d Inventories

D 18 An employee asks for an authorized reimbursement of transportation charges out of the imprest petty
cash fund. To document this transaction, the petty cashier should
a Debit 'transportation expense c Credit cash
b Debit 'receivable from employee d Prepare the petty cash voucher

D 19 The "Cash Short or Over' account

a Is a real account
b Is contra-cash account
INTERMEDIATE ACCOUNTING MIDTERMS 1
c Is debited upon reimbursement when the petty cash funds proves out over
d Is debited upon reimbursement when the petty cash funds proves out short

B 20 A debit balance (i. e., shortage) in the Cash short or Over' account at the end of the period that can be
attributed to the fault of the petty cashier is treated as a
a Payable to employee c Miscellaneous expense
b Receivable from employee d Miscellaneous income

A 21 A debit balance (i. e., shortage) in the Cash short or Over' account at the end of the period that cannot be
attributed to the fault of the petty cashier is treated as a
a Payable to employee c Miscellaneous expense
b Receivable from employee d Miscellaneous income

D 22 A credit balance (i. e., overage) in the Cash short or Over' account at the end of the period that cannot be
attributed to the fault of the petty cashier is treated as a
a Payable to employee c Miscellaneous expense
b Receivable from employee d Miscellaneous income

BANK RECONCILIATION
D 23 A Bank Reconciliation is
a A statement sent by the bank to depositor on a monthly basis
b A merger of two previously competing banks currently in the process of reconciliation
c A formal financial statement that lists all of a firm's bank account balances and previously
closed bank accounts
d A schedule that accounts for the inferences between a firm's bank statement balance (balance per bank)
and the balance shown in the general ledger (balance per book)

D 24 Which is normally added to the cash balance per ledger in order to determine the correct cash balance?
a Service charge
b NSF Customer check
c Erroneous bank debit
d Note receivable collected by bank in favor of the depositor and credited to depositor's account

C 25 Which is normally deducted from the bank statement balance in preparing bank reconciliation?
a Certified checks
b Deposits in transit
c Outstanding checks
d Reduction of loan charged to the account of the depositor

A 26 Balance per bank is less than correct balance. No error was committed. There must be
a Deposits in transit
b Outstanding checks
c Bank charges not yet recorded by the company
d Deposits credited by the bank but not yet recorded by the company

C 27 Balance per book is more than correct balance. No error was committed. There must be
a Deposit in transit
b Outstanding checks
c Bank charges not yet recorded by the company
d Deposits credited by the bank but not yet recorded by the company
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D 28 Bank statements provide information about all of the following, except

a NSF Customer checks
b Bank charged for the period
c Checks cleared during the period
d Errors unintentionally committed by the depositor

C 29 Which will not require an adjusting entry in the depositor's books?

a Bank service charge
b NSF checks from customer
c Deposits of another entity is credited by the bank to the account of the depositor
d Check in payment of account payable for P 5,000 is recorded by the depositor as P 500

B 30 Under existing rules, cash and receivables are both considered as

a Fixed assets
b Financial assets
c Depreciable assets
d Non-monetary assets