LESSON 1: Cash and Cash Equivalents and Petty Cash Fund

EXERCISES
PROBLEM 1: On December 31, 2022, Wag Kang Aayaw Co’s “cash and cash equivalents account”
balance per ledger of P5,700,000 includes:
Manager’s checks 70,000

Travelers’ checks 100,000

Treasury note 50,000

Treasury shares, purchased on 12/1/2022, to be reissued on 3/1/2023 150,000

Escrow Deposits 200,000

Bank drafts 20,000

Postal money orders 20,000

Demand deposit 100,000

Treasury bills, purchased December 16, 2022 due March 15, 2023 50,000

160 – day treasury bills 30,000

Time deposit – PCIB, one year, due March 31, 2023 180,000

Time deposit – PNB – 90 days 170,000

Time deposit – BPI – 120 days 45,000

Money market instrument – due 2/28/2023 40,000

Money market instrument – due 6/1/2023 70,000

Cash in bank – Metrobank, which includes a compensating balance of 50,000

for short term borrowing arrangement. The compensating balance is not legally
restricted as to withdrawal. 1,050,000

Cash in bank - Metrobank (100,000)

Cash in bank – Firstbank, which includes a compensating balance of 50,000

for long term borrowing arrangement. The compensating balance is legally
restricted as to withdrawal 450,000

Cash in bank - Secondbank (60,000)

Cash in bank – Seatacbank, which includes a compensating balance of 40,000

for short term borrowing arrangement. The compensating balance is legally
restricted as to withdrawal. 150,000

Cash in bank – Seabank, which includes a compensating balance of 40,000 250,000

for short term borrowing arrangement.

Petty Cash fund, which includes an unreplenished voucher for P4,000 10,000

Payroll fund 100,000

Travel fund 20,000

ACCT 1046: Intermediate Accounting 1, Short Term, SY 2022-2023

Interest fund 40,000

Tax fund 30,000

Sinking Fund 420,000

Preferred redemption fund 100,000

Contingent fund 200,000

Insurance fund 500,000

Fund for acquisition for PPE expected to be disbursed in 2023 800,000

IOU from officers 20,000

Customer’s postdated checks 70,000

Customer’s check returned by bank marked “NSF” 20,000

Redeemable preferred shares – acquired 3 months before maturity date 15,000

Unused credit line 200,000

Revolving fund 100,000

Visa card – credit limit 20,000

Total 5,700,000

Requirements:
1. Identify what are the items above that must be included as part of your cash and cash
equivalents.
2. Compute the total cash and cash equivalents that should be shown in the statement of
financial position.

Problem 2: On December 26, 2022, KETO Company’s received a check amounting to 100,000
dated January 15, 2023 from a customer. The check was encashed by KETO Company on January
15, 2023 and cleared by the bankon the same date.
a. What is the journal entry made on December 26, 2022 by the company?

b. What is the adjusting entry to be made (if any) on December 31, 2022?

c. Journal entry on January 15, 2023?

ACCT 1046: Intermediate Accounting 1, Short Term, SY 2022-2023

Problem 3: On December 26, 2022 KETO Company’s issued a check amounting to 100,000 dated
January 15, 2023 to a supplier. The check was encashed by the supplier on January 15, 2023 and
cleared by the bank on the same date.
a. What is the journal entry made on December 26, 2022 made by the company?

b. What is the adjusting entry to be made (if any) on December 31, 2022?

c. Journal entry on January 15, 2023?

Problem 4: A check was drawn for the payment of accounts of KETO Company amounting 100,000
dated and recorded on December 26, 2022 but only delivered to the payee on January 15, 2023.
a. What is the journal entry made on December 26, 2022 by the company?

b. What is the adjusting entry to be made (if any) on December 31, 2022?

c. Journal entry on January 15, 2023?

Problem 5 : As of December 31, 2022, KETO Company has a sinking fund amounting to 5,000,000
which is established for the retirement of a 5-year bonds amounting to 5,000,000. The bond is
already due on July 1, 2023.
a. How are you going to classify the sinking fund in the statement of financial position on
December 31, 2022?

b. Journal entry on July 1, 2023 for the payment/retirement of bonds?

c. Assuming the sinking fund is established for acquisition of Property, Plant and Equipment to
be disbursed on July 1, 2023, and it is presented as separate line item in the noncurrent
asset portion in the prior years, how are you going to classify the sinking fund in the
statement of financial position on December 31, 2022?

ACCT 1046: Intermediate Accounting 1, Short Term, SY 2022-2023

Problem 6: KETO Company provided the following information on December 31, 2022:
500,000 PNB current account No. 2 (50,000)
Cash on hand
(overdraft)
1,000,000 3,000,000
Security Bank current account BSP treasury bill – 70 days
400,000
PNB current account No. 1

● The cash on hand included a customer postdated check of 100,000 and postal money order
of 40,000.
● A check for 200,000 in payment of account was drawn against Security Bank account, dated
January 15,2023, delivered to the payee and recorded December 31, 2022.
Compute the total amount of cash and cash equivalents should be reported on December 31, 2022

Problem 7: The accountant for DITO Company established a petty cash fund of P1,400. During
September, the fund was depleted by the following disbursements:
Shipping Expenses P740 Postage Expenses P230
Travel Expenses P240 Miscellaneous ExpensesP170

In addition to receipts for the above items, the petty cash box contained P8 in coins and an IOU of
P8 from secretary handling the fund. The company uses a cash overage or shortage account, as
needed. The company decided to decrease the petty cash fund to P1,000.
a. Provide the entry to establish the petty cash fund.
b. Provide the entry to record the disbursements as they occur (use a compound entry).
c. Provide the entry to replenish the petty cash fund.
d. Provide the entry to record the decrease in the petty cash fund.

ACCT 1046: Intermediate Accounting 1, Short Term, SY 2022-2023