331752071 Audit Prob Cash and Cash Equivalents PDF

Preview

Summary

Charis Marie F. Urgel BSA – IV“CASH AND CASH EQUIVALENTS”PROBLEM NO. 1 – Composition of cash and cash equivalentsThe following data pertain to PRTC Corporation at December 31, 2015:Current account at Metrobank P 1,800, Current account at Allied Bank (100,000) Payroll account 500, Foreign bank accoun...

Description

Charis Marie F. Urgel

BSA – IV “CASH AND CASH EQUIVALENTS”

PROBLEM NO. 1 – Composition of cash and cash equivalents The following data pertain to PRTC Corporation at December 31, 2015: Current account at Metrobank Current account at Allied Bank Payroll account Foreign bank account (in equivalent pesos) Savings deposit in a closed bank Postage stamps Employee’s post dated check IOU from employees Credit memo from a vendor for a purchase return Traveler’s check Money order Petty cash fund (P4, 000 in currency and expense receipts for P6, 000) Pension fund DAIF check of customer Customer’s check dated 1/1/16 Time deposit – 30 days Money market placement (due 6/30/16) Treasury bills, due 3/31/16 (purchased 12/31/15) Treasury bills, due 1/31/16 (purchased 2/1/15)

P 1,800,000 (100,000) 500,000 800,000 150,000 1,000 4,000 10,000 20,000 50,000 30,000 10,000 2,000,000 15,000 80,000 200,000 500,000 200,000 300,000

REQUIRED: Determine the cash and cash equivalents to be reported on the entity’s December 31, 2015 statement of financial position. SOLUTIONS: Current account at Metrobank 1,800,000 Payroll account 500,000 Foreign bank account (in equivalent pesos) 800,000 Traveler’s check 50,000 Money order 30,000 Petty cash fund 4,000 Time deposit – 30 days 200,000 Treasury bills, due 3/3/16 (purchased12/31/15) 200,000 Cash and cash equivalents – Dec. 31, 2015 3,584,000

PROBLEM NO. 2 – Computation of adjusted cash and cash equivalent You were able to gather the following from the December 31, 2015 trial balance of PRTC Corporation in connection with your audit of the company: Cash on hand Petty cash fund BPI current account Security Bank current account No. 01 Security Bank current account No. 02 PNB saving s account PNB time deposit

P372,000 10,000 950,000 1,280,000 (40,000) 500,000 300,000

Cash on hand includes the following items: a. Customer’s check for P60,000 returned by bank on December 26, 2015 due to insufficient fund but subsequently redeposited and cleared by the bank on January 8, 2016. b. Customer’s check for P30,000 dated January 2, 2016, received on December 29, 2015. c. Postal money orders received from customers, P36,000. The petty cash fund consisted of the following items as of December 31, 2015. Currency and coins P2,100 Employees’ vales 1,600 Currency in an envelope marked “collections for charity” with names attached 1,200 Unreplenished petty cash vouchers 800 Check drawn by PRTC Corporation, payable to the petty cashier 4,600 P10,300 Included among the checks drawn by PRTC Corporation against the BPI current account and recorded in December 2015 are the following: a. Check written and dated December 29, 2015 and delivered to payee on January 2, 2016, P50,000. b. Check written on December 27, 2015, dated January 2, 2016, delivered to payee on December 29, 2015, P86,000. The credit balance in the Security Bank current account No. 2 represents checks drawn in excess of the deposit balance. These checks were still outstanding at December 31, 2015.

The savings account deposit in PNB has been set aside by the board of directors for acquisition of new equipment. This account is expected to be disbursed in the next 3 months from the balance sheet date. REQUIRED: 1. Compute for the adjusted balances of following: a. Cash on hand b. Petty cash fund c. BPI current account d. Cash and cash equivalent 2. Adjusting entries as of December 31, 2015 SOLUTIONS: A. Cash on Hand Unadjusted cash on hand Less: Returned customer’s check Customer’s check dated Jan. 2, 2016 Adjusted cash on hand B. Petty cash fund Petty cash fund total Employee’s vales Currency in an envelope marked “collections for charity” Unreplenished petty cash vouchers Adjusted petty cash fund

372,000 (60,000) (30,000) 282,000

10,300 (1,600) (1,200) ( 800) 6,700

C. BPI current account Unadjusted BPI current account Unreleased check Postdated check delivered Adjusted BPI account

950,000 50,000 86,000 1,086,000

D. Cash and cash equivalents Cash on hand Petty cash fund BPI current account Security Bank current account PNB Time deposit Adjusted cash and cash equivalents

282,000 6,700 1,086,000 1,240,000 300,000 2,914,700

Adjusting Entries a. Accounts Receivable Cash on hand

90,000 90,000

b. Advances to employees Expenses Cash short/over Petty cash fund

1,600 800 900

c. BPI current account Accounts payable

50,000

d. Accounts Receivable Cash on hand

86,000

3,300

50,000

86,000

PROBLEM NO. 3 – Cash count and shortage computation In connection with the audit of the financial statements of Rupee Company for the year ended December 31, 2015, you performed a surprise count of the petty cash fund and undeposited collections under the custody of Ms. Jessie at 8:15 a.m. on January 2, 2016. Your count disclosed the following: Bills and coins Bills P100 50 20 10

10 pieces 80 pieces 70 pieces 54 pieces

Coins P1.00 0.50 o.25

410 pieces 324 pieces 64 pieces

Unused postage stamp – P730 Checks Date Dec. 30 Dec. 30 Dec. 31 Dec. 31 Dec. 31 Dec. 31

Payee Cash Rupee Company Rupee Company Rupee Company Rupee Company German Corp.

Drawer Ms. Jessie Robert Jay Ar, Sales Manager Francis Ryan Rupee Company

Amount P 2,400 28,000 3,300 35,000 16,600 54,000

Expense Vouchers Date Payee Description Dec. 23 Jay Ar, sales manager Cash advance for trip to Baguio City Dec. 27 Central Post Office Postage stamps Dec. 29 Messengers Transportation Dec. 29 PC Express Computer repair

Amount P14,000 3,200 300 1,600

Other items found inside the cash box: a. Two pay envelopes which had been opened and the contents aggregating P15,000 representing unclaimed salaries had been removed. b. The sales manager’s liquidation report for the Baguio trip: Cash advance received on Dec. 23 Less: Hotel accommodation Bus fare for two Cash given to Roy, salesman Balance

P14,000 P9,000 800 600

Accounted for as follows: Cash returned by Roy to the sales manage Personal check of sales manager Total

10,400 P 3,600

P 240 3,360 P 3,600

Additional information: a. The custodian is not authorized to cash checks. b. The last official receipt included in the deposit on December 30 is No. 351 and the last official receipt issued for the current year is No. 355. The following official receipts are all dated December 31, 2015. O.R. No. 352 353 354 355

Amount P27,200 35,600 7,200 16,600

Form of payment Cash Check Cash Check

c. The Petty Cash balance per general ledger is P20,000. The last replenishment of the fund was made on December 22, 2015.

REQUIRED: 1. Determine shortage or overage, if any 2. Adjusting entries as of December 31

SOLUTIONS: Requirement No. 1 Rupee Company CASH COUNT SHEET January 3, 2016 – 8:15 a.m. Bills and coins: Denomination Quantity 100 10 50 80 20 70 10 54 1 410 .50 324 .25 64 Checks: Date Drawer Dec.30 Ms. Jessie Dec.30 Robert Dec.31 Jay, Ar 3,360 Dec.31 Frances Dec.31 Ryan Unreimbursed vouchers: Date Account Dec. 23 Advances Dec.27 Postage Dec.29 Transportation Dec. 29 Repairs Total cash accounted Less: Accountabilities Petty cash Collections (per official receipt) Unclaimed salary Excess travel advance Unreceipted collection from Robert CASH SHORTAGE

Amount 1,000 4,000 1,400 540 410 162 16__ P 7,528

Total

Amount P 2,400 28,000 35,600 16,600_ Amount P 14,000 3,240 300 1,600

20,000 86.600 15,000 3,360 28,000

P 85,960

19,140 P 112,628

P 152,960 P 40,332

Requirement No. 2 - Adjusting Entries: a. Cash Accounts receivable b. Advances to officers and employees Postage expense Transportation expense Repairs expense Petty cash fund c. Unused postage Postage expense d. Cash

28,000 28,000 14,000 3,240 300 1,600 19,140 730 730 54,000

Accounts payable e. Cash

54,000 15,000

Salaries payable f. Receivable from custodian Cash

15,000 40,332 40,332

g. Travel expenses 10,160 Petty cash fund 3,360 Advances to officers and employees

13,520

PROBLEM NO. 4 – Bank Reconciliation The Cash in Bank account of Dollar Company disclosed a balance of P203,000 as of December 31. The bank statement as of December 31 showed a balance of P106,000. Upon comparing the bank statement with cash records, the following facts were developed: a. The company’s account was charged on December 26 for a customer’s uncollectible check amounting to P30,000. b. A two-month, 17% P60,000 customer’s note dated October 25, discounted on November 25, was dishonored on December 25, and the bank charged the company P62,000, which included a protest fee of P2,000. c. A customer’s check for P15,400 was entered as P14,500 by both the depositor and the bank but was later corrected by the bank. d. Check no. 142 for P12,425 was entered in the cash disbursements journal at P12,245 and check no. 156 for P3,290 was entered as P32,900. e. Bank service charges of P1,830 for December were not yet recorded on the books. f. A bank memo stated that a customer’s note for P25,000 and interest of P1,000 had been collected on December 28; and the bank charged P500. (No entry was made on the books when the note was sent to the bank for collection). g. Receipts on December 31 for P24,000 were deposited on January 2. h. The following checks were outstanding on Dec. 31: No. 123 P3,000 No. 154 P4,000 No. 143 * 2,000 No. 157 6,000 No. 144 7,000 No. 159 7,000 No. 147 3,000 No. 169 5,000 * Certified by the bank in December i. A deposit of P20,000 was recorded by the bank on December 5, but it should have been recorded for Dolor Company rather than Dollar Company. j. Petty cash of P10,000 was included in the Cash in Bank balance

k. Proceeds from cash sales of P60,000 for December 18 were stolen. The company expects to recover this amount from the insurance company. The cash receipts were recorded in the books, but no entry was made for the loss. l. The December 21 deposit included a check for P20,000 that had been returned on December 15 marked NSF. Dollar Company had made no entry upon return of the check. The redeposit of the check on December 21 was recorded in the cash receipts journal of Dollar Company as a collection on account. REQUIRED: 1. Bank reconciliation using: a. Bank to book method; b. Book to bank method; and c. Adjusted balance method 2. Adjusting entries as of December 31, 2015.

SOLUTIONS: A. Bank to book method Bank balance Deposit in Transit Outstanding Checks Bank error - check of another company charged by the bank Customer’s uncollectible check Dishonored checks Book error – customer’s check Book error –understatement of cash disbursement Book error – overstatement of cash disbursement Bank charges Customer’s note collected by bank Petty cash fund – included in the cash in bank Claims from insurance company NSF Checks returned Book Balance

Dec. 31 106,000 24,000 (35,000) (20,000) 30,000 62,000 (900) 180 (29,610) 1,830 (25,500) 10,000 60,000 20,000 203,000

B. Book to Bank Method Book Balance Customer’s uncollectible check Dishonored checks Book error – customer’s check Book error – understatement of cash disbursement Book error – overstatement of cash disbursement Bank charges Customer’s note collected by bank Petty cash fund – included in the cash in bank Claims from insurance company NSF Checks returned Deposit in Transit Outstanding Checks Bank error - check of another company charged by the bank Bank Balance

Dec. 31 203,000 (30,000) (62,000) 900 (180) 29,610 (1,830) 25,500 (10,000) (60,000) (20,000) 24,000 (35,000) (20,000) 106,000

C. Unadjusted Book Balance Customer’s uncollectible check Dishonored checks Book error – customer’s check Book error – understatement of cash disbursement Book error – overstatement of cash disbursement Bank service charge Customer’s note collected by bank Petty cash fund – included in the cash in bank Claims from insurance company NSF Checks returned Adjusted Cash Balances

Dec. 31 203,000 (30,000) (62,000) 900 (180) 29,610 (1,830) 25,500 (10,000) (60,000) (20,000) 75,000

Unadjusted Bank Balance Deposit in Transit Outstanding checks Bank error – check by another company charged by the bank Adjusted Cash Balances

Dec. 31 106,000 24,000 (35,000) (20,000) 75,000

Adjusting Entries: a) Accounts Receivable Cash in Bank

30,000 30,000

b) Notes Receivable – dishonored Cash in Bank

62,000

c) Notes Receivable – discounted Notes Receivable

60,000

d) Cash in Bank

62,000

60,000 900 900

Accounts Receivable e) Accounts Payable Cash in Bank f) Cash in Bank Accounts Payable g) Bank Service Charge Cash in Bank

180 180 29,610 29,610 1,830 1,830

h) Cash in Bank Bank Service Charge Notes Receivable Interest Income

25,500 500

i) Petty Cash Fund Cash in Bank

10,000

j) Claims from insurance company Cash in Bank

60,000

k) Accounts Receivable Cash in Bank

20,000

25,000 1,000

10,000

60,000

20,000

PROBLEM NO. 5 - Bank reconciliation and amount of shortage computation You are conducting an audit of the Swerte Company for the year ended December 31, 2015. The internal control procedures surrounding cash transactions were not adequate. The bookkeeper-cashier handles cash receipts, maintains accounting records, and prepares the monthly bank reconciliations. The bookkeeper-cashier prepared the following reconciliation at the end of the year: Balance per bank statement Add: Deposit in transit Note collected by bank Total

P 350,000 P 175,250 15,000

Less outstanding checks Balance per general ledger

190,250 540,250 246,750 P 293,500

In the process of your audit, you gathered the following: • At December 31, 2015, the bank statement and general ledger showed balances of P 350,000 and P293,500, respectively. • The cut-off bank statement showed a bank charge on January 2, 2016 for P 30,000 representing correction of an erroneous bank credit. • Included in the list of outstanding checks were the following: a. A check payable to a supplier, dated December 29, 2015, in the amount of P 14,750, released on January 5, 2016. b. A check representing advance payment to a supplier in the amount of P 37,210, the date of which is January 4, 2016, and released in December, 2015. • On December 31, 2015, the company received and recorded customer's postdated check amounting to P 50,000. REQUIRED: 1. Compute for the following as at December 31, 2015: a. Adjusted deposit in transit c. Adjusted cash in bank b. Adjusted outstanding check d. Cash shortage 2. Adjusting entries as of December 31, 2015 SOLUTIONS: a. DIT, beg. Less: postdated checks Adjusted deposit in transit

P 175,250 (50,000) P 125,250

b. Unadjusted outstanding checks Unreleased check

P 246,750 (14,750)

Postdated check delivered Adjusted outstanding checks

(37,210) P 194,790

Book balance P 293,500 Bank balance P 350,000 Add: Add: DIT 125,250 Unreleased check 14,750 Total 475,250 Postdated check 37,210 Less: OC (194,790) Credit memo 15,000 Erroneous bank Total 360,460 credit ( 30,000) Less: Adjusted bank bal. P 250,460 Postdated check received (50,000) Cash Shortage (60,000) Adjusted book balance P 250,460 Adjusting Entries: a. Accounts Receivable Cash in bank

50,000

b. Cash in Bank Accounts Payable

14,750

c. Cash in Bank Accounts Payable

37,210

d. Cash in bank Account Receivable

15,000

e. Receivable from cashier Cash in bank

60,000

50,000

14,750

37,210

15,000

60,000

PROBLEM NO. 6 – Cash shortage computation You were engaged to audit the books of Davao Company. From the records of the company, you gathered the following information: Davao Company started operations on October 2, 2015 with the owners investing P150,000 cash. Monthly bank reconciliation statements have not been prepared; however, bank statements for October, November and December were made available to you. Your analysis of these bank statement; showed total bang; credits (deposits) of P575,000 including the owners' initial investment and a bank loan, details of which are in additional data. The bank statement in December, 2015 showed an ending balance of P91,500. Examination of the paid checks disclosed that checks totaling P4,500 were issued by the company in December, 2015, and were presented for payment only in January, 2016. Cash count of the cashier's accountability amounted to P5,000. You were told by the cashier that these were collection; from credit sales on December 30, 20I5, deposited on January 2, 2016: Additional information are as follows: a. At counts receivable subsidiary ledgers had a total balance of P70,000 at December 31, 2015. P5,000 of this was ascertained to be uncollectible. b. Suppliers' unpaid invoices for merchandise totaled P15,000; while an account for store fixtures bought for P50,000 had an unpaid balance of P5,000. c. Merchandise inventory at December 31, 2015 amounted to P30,000 but P5,000 of these were spoiled with no resale value. d. The bank statement in October showed a bank credit for P98,000, dated October 2, 2015. Inquiry from the cashier disclosed that the amount represents proceeds of a 90-day, discounted bank note. P 80,000 of this loan was paid by check in December, 2015. e. Operating expenses paid during the period totaled P 180,000; while merchandise purchases amounted to P250,000. f. The gross profit rate is 120% of cost. REQUIRED:

Determine the cash shortage as of December 31, 2015. SOLUTIONS: Unadjusted balance per bank, Dec. 31 Outstanding checks Deposit in transit Adjusted balance per bank Cash balance per books, Dec. 31 Cash over (short) Cash receipts: Owner’s investment Proceeds from loan Collections from customers Total Cash disbursements: Purchases (250,000 – 15,000) Store fixtures (50,000 – 5,000) Loan payment Expenses paid Cash balance per books, Dec. 31

91,500 ( 4,500) 5,000 92,000 122,000 ( 30,000)

150,000 98,000 414,000 662,000 235,000 45,000 80,000 180,000

540,000 122,000

PROBLEM NO. 7 - Proof of cash You were able to obtain the following information during your audit of Euro Company Reconciling items: Nov. 30 Undeposited collections P 200,000 Outstanding checks 80,000 Customer's notes collected by bank 100,000 Bank service charges 2,000 bank debits 10,000 Erroneous bank credits 40,000 NSF checks not redeposited 5,000 check deposited December 10, returned by bank on December 16 marked NSF, and redeposited immediately; no entry made on books for return or redeposit

Unadjusted balances: Books Bank

? 230,000

Dec. 31 P120,000 60,000 120,000 3,000 Erroneous 20,000 30,000 7,000 Customers

10,000

P90,000 ?

December Transactions:

Receipts Disbursements

Bank P420,000 500,000

REQUIRED: 1. Prepare a 4-column bank reconciliation for the month of December a. Bank to book method; b. Book to bank method; and c. Adjusted balance method 2. Adjusting entries as of December 31, 2015.

Books P270,000 407,000

SOLUTIONS: A. Bank to Book Method Nov. 30 Bank balance

Receipts

230,000

420,000

200,000

(200.000)

Disbursement Dec. 31 500,000

150,000

Deposit ...