Cash Audit PDF

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Summary

Cash and Cash Equivalents:2-1. The statement of financial position of the Money Company shows cash of P330,280. The following items were found to comprise this total amount: Checking account in Metrobank, (outstanding check As of year-end totaled P15,200) P105, Savings account at Far East Bank 30, P...

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Cash and Cash Equivalents:

2-1. The statement of financial position of the Money Company shows cash of P330,280. The following items were found to comprise this total amount: Checking account in Metrobank, (outstanding check As of year-end totaled P15,200)

P105,200

Savings account at Far East Bank

30,800

Petty cash fund (including expense receipts for 250)

1,500

Cash on Hand (undeposited sales receipts)

4,200

Sinking fund cash

35,000

Cash in foreign bank (in equivalent pesos)

65,000

Customers’ check on hand: Traveler’s check

14,000

Manager’s check

23,120

Short-term treasury bills

52,000

REQUIRED: What is the correct amount of cash?

Solution: Cash Balance

330820

Checking Account

90000

Savings Account

30800

Petty cash fund

1250

Cash on hand

4200

Cash in Foreign Bank

65000

Traveler’s check

14000

Manager’s check

23120

Total Cash

559190

2-2. Cotton Company’s checkbook balance at December 31, 2013 was P180,000. In addition, Cotton held the following items in its safe on that date.

Check payable to Cotton dated January 2,2014 in payment of a sale made in December 2013, included in December 31 checkbook balance.

P65, 000

Check payable to Cotton deposited December 15, But returned by the bank on December 30 stamped “DAIF.”

20,000

Check drawn on Cotton’s account, payable to a vendor, dated and recorded on December 30 but not yet mailed to payee as of December 31, 2013.

15, 000

REQUIRED: What is the amount shown as Cash on Cotton’s December 31, 2013 statement of financial position?

Solution: Cash Balance

180000

Check payable to Cotton in payment of a sale

(65000)

DAIF

(20000)

Check drawn on Cotton’s account, payable to a vendor

15000

Total Cash

110000

2-3. Grain Company’s general ledger showed a balance of P2,205,600 in its “Cash” account on December 31, 2013. Included in this balance are the following items:

DAIF checks returned by bank

P 20,000

Saving account

750,000

IOUs

1,200

Postage stamps

600

Bank draft

10, 000

Cash on Hand

30, 000

Cash in sinking fund

500,000

Customers’ checks dated January, 2014

5,400

Travel advances

4,000

Traveler’s Check

8,000

REQUIRED: Determine total that should be included in cash balance at December 31, 2013.

Solution: Saving account

750,000

Bank draft

10, 000

Cash on Hand

30, 000

Traveler’s Check

8,000

Total Cash

798000

2-4. Rod Company reported a cash balance of P2, 205,00 on December 31, 2013 which consisted of the following:

Petty cash, including IOU from an employee of P 1,250

P10, 000

Cash on Hand, including a customer’s Postdated check of P2,500

625,000

Cash in bank, General Account, net of P12,500 Bank overdraft in another bank’s account

750,000

Cash in bank, Payroll Account, net of P10,000 Check dated December 28, 2013 but Unreleased as of December 31

320, 000

Saving deposit, restricted for the purchase And intended for plant expansion

500, 000

REQUIRED: What is the correct amount of cash that should be shown in Rod Company’s statement of financial position at December 31, 2013?

Solution: Petty cash, including IOU from an employee Cash on Hand`

8750 622,500

Bank overdraft

750,000

Cash in bank, Payroll Account

330, 000

Total Cash

1711250

2-5. The chief accountant of Latte Company is determining the amount of cash and cash equivalents to be reported on its December 31, 2013 statement of financial position. She found out that the “Cash and Cash Equivalents” balance in the general ledger was composed of the following items. (a) Savings account of P900,000 and a commercial checking account with balance of P1,400,000 are held at Allied Bank. (b) Petty cash fund of P15,000; composed of expense receipts of P5,000; and bills and coins of P9,850 at December 31. (c) Cash fund in savings account with Metrobank, P1,500,000 held for retirement of bonds payable, due December 31,2018. (d) Money market fund account held at BDO which permits, Latte Company to write checks on this balance, P2,000,000. (e) Three certificates of deposit with Metrobank, each totaling P1,000,000, two of which have maturity of 120 days from date of placement (November 30, 2013); one has a maturity of 90 days (placed on December 29,2013). She also obtained the following information: (g) A customer’s check on hand dated January 10,2014 for P320,000. The check was recorded as collected in December and was included in the P900,000 savings accounts with Allied Bank. (h)

A check for P300,000 was issued to a supplier on December 29,2013 and drawn from Allied Bank account. The check was dated January 8,2014 and was traced to have been entered in the December check register (i)

Latte maintains a P5,000,000 cash balance at all times at BPI to ensure future credit availability.

(j) A check for P50,000 for adjustment in salaries of an employee for the month of November was still on hand at December 31,2013. The check was verified to have been recorded in the cash disbursements journal in December. REQUIRED: (a)Compute the amount of cash and cash equivalents to be reported on December 31,2013 statement of financial position. It is the policy of the company to treat as cash equivalents instruments with maturity date of 90 days. (b) Indicate the proper reporting for items that are not reported as cash and cash equivalents at December 31,2013.

Cash and cash equivalents: Savings account with Allied Bank Per books Customer’s postdated check

P900,000 (320,000)

P580,000

Checking account with Allied Bank Per books Issued postdated check

P1,400,000 300,000

1,700,000

Bills and coins in the petty cash fund

9,850

Money market fund which allows check writing (see above correction)

2,000,000

Certificate of deposit with term of 90 days

1,000,000

Payroll fund with BDO Per books Unissued but recorded check

P6,000,000 50,000

6,050,000

Cash balance with BPI

5,000,000

Correct cash and cash equivalents

P16,339,850

The non-cash and non-cash equivalents shall be presented as Expenses in the statement of comprehensive income (P150 cash shortage in petty cash fund + expense receipts of P5,000)

P

5,150

Current assets: Trading securities or FVPL (certificates of deposit)

2,000,000

Accounts receivable (customer’s postdated check)

320,000

Non-current assets: Cash fund for retirement of bonds payable

1,500,000

Current liabilities Accounts payable (PDC issued to supplier)

300,000

Salaries payable (unissued check to employee)

50,000

2-6. As a step to safeguard the company’s cash balance, the Jessie Company established an imprest petty cash fund in November 2013. The company, from November 2013 through January 2014 completed the following transactions related to petty cash.

2013 Nov.20The company established an imprest petty cash fund amounting to P5,000. Issued a check payable to the petty cash custodian. Nov. 20

The petty cash custodian paid the following from petty cash fund, all supported by

Dec. 15

properly approved petty cash vouchers: Transportation

P1,500

Representation

1,200

Freight for merchandise purchased

1,300

Computer repairs

920

Dec. 16 The petty cash custodian submitted the above paid petty cash vouchers to request for replenishment of the fund. A check amounting to P4,920 was issued to the petty cash custodian.

Dec.16-31

The petty cash custodian paid the following for petty cash fund. Transportation Office Supplies

P 340 1,400

Dec.31 A count of the petty cash fund revealed the following composition: Bills and coins

P3,260

Paid petty cash vouchers for Transportaion

340

Office supplies

1,400

The fund was not replenished on this date.

2014 Jan. 1-8

The petty cash custodian paid the following: Representation

P1,800

Office Supplies

1,300

Transportation

120

Jan.9 The petty cash custodian submitted the petty cash vouchers evidencing payments from December 16 through January 8. A check was issued to the petty cash fund for its replenishment and to increase its balance by P3,000.

REQUIRED: Prepare journal entries for the given transactions. Include any appropriate adjusting entries on December 31, the end of the company’s accounting period, and reversing entries on January 1. Solution: Nov. 20

Petty Cash Fund

5000

Cash in Bank

Dec. 16

5000

Transportation

1500

Representation

1200

Freight purchased

1300

Computer repairs

920

Cash in Bank

Dec. 1 Transportation

4920

340

Office Supplies

1400

Petty Cash Fund

Jan. 1

Petty Cash Fund Transportation Office Supplies

1740

1740 340 1400

2-7. Coral established a petty cash fund of P5,000 for incidental expenses on June 1,2013. At the end of the month, the count of cash on hand indicated that P670.40 remained in the fund. A review of the petty cash vouchers disclosed the following expenses had been incurred during the month.

Office Supplies

P 341.60

Transportation

1,321.40

Postage

780.00

Miscellaneous

837.60

Representation

1,000.00

REQUIRED: (a)

What is the amount of shortage in the petty cash fund?

(b) the

Prepare the necessary adjusting entry on June 30, the company’s reporting date, to remove non-cash items from the Petty Cash Fund. (a)

P5,000.0 0

Petty cash fund Total petty cash vouchers: Postage Representation Transportation Miscellaneous Shortage in the petty cash fund Postage expense Representation expense Transportation expense Miscellaneous expense Cash short and over Petty cash fund

780.00 1,000.00 1,321.40 837.60

4,280.60 P 49.00 780.00 1,000.00 1,321.40 837.60 49.00 4,329.60

2.8. Prada Company established a petty cash fund to help ensure internal control over its small expenditures. The following are the transactions affecting the petty cash fund for the month of May,2013: 1.

On May 2, the company established a petty cash fund in the amount of P8,000.

2.

The following were paid by the petty cash custodian from May 2 through May 20: Freight on merchandise purchases Freight on merchandise sold

P2,500 3,000

Supplies purchased

800

IOUs from employees

1,200

3. on

On May 18, the employees paid their IOUs as indicated above (the advances were granted May 10; the proceeds from such collection were returned to the petty cash fund).

4.

On May 20, the fund was replenished.

5.

Payments from petty cash fund from May 20 through May 31 are as follows: Freight on merchandise purchases

P1,200

Transportation of messenger

150

Medicines for employees

320

IOUs from employees

500

6. A count of the fund on May 31 revealed bills and coins in the petty cash fund amounting to P5,700. The company’s reporting period ends May 31. REQUIRED: Prepare journal entries for the above transactions, including any adjustments at May 31,2013.

1.

May 2 Petty cash fund

8,000

Cash in bank 8,000

2.

May 2-20

3.

No entry

No entry

4.

May 20

5.

No entry

6.

May 31

Freight-in 2,500 Freight-out 3,000 Supplies Expense 800 Cash in Bank 6,300

Freight-in 1,200 Transportation expense 150 Employee Benefit expense 320 Advances to Employees 630 Petty Cash Fund

2,300

Per count Bills and coins

P5,700

Paid petty cash vouchers (1,200 + 150 + 320 + 500)

2,170

Total P7,870 Petty cash fund, imprest balance

8,000

Cash shortage P 130 2-9. In your cash count of the petty cash fund of Canon Company as of July 4,2013, you found the following composition of its petty cash fund:

Bills and coins counted

P 2,450

Approved and signed petty cash vouchers Dated June 2013 Date July 1-4, 2013 IOU from Joe Santos, an employee

3,300 800 1,400

A check drawn by Juvy Victoria, an employee, dated July 15,2013

2,000

The petty cash fund has an imprest balance of P10,000. The company’s reporting period ends on June 30.

REQUIRED: (a) Determine the amount of petty cash fund that will be included in the cash balance at June 30, 2013. (b)

Determine the amount of cash shortage or overage.

(c) Prepare the necessary adjusting entry to bring the petty cash fund to its correct amount at June 30,2013.

(a)

Bills and coins PCVs dated July 2012 (undisbursed as of June 30) Adjusted balance of PCF

2,450 800 3,250

(b)

Per count PCVs dated June PCVs dated July IOUs PDC drawn by Juvy Victoria Total Petty cash fund, per ledger Cash shortage

3,300 800 1,400 2,000 9,950 10,000

Receivable from employees (IOU + PDC) Cash short/over

3,400 50

50

2-10. The December 31,2013 bank statement for Giordano Corp. showed a P199,925 balance. On this date, the company’s Cash account reflected a P32,560 overdraft. In reconciling these amounts, the following information is discovered:

a.

Cash on hand for undeposited sales receipts, December 31,2013, P13,025.

b.

Customer’s NSF check returned with bank statement, P42,040.

c. Cash sales of P64,025 for the week ended December 18,2013 were recorded in the books. The cashier reports this amount missing, and it was not deposited in the bank. d. Note receivable of P250,000 and interest of P2,500 were collected by the bank and not recorded in the books. e.

Deposit in transit December 31,2013, P35,000.

f. A customer’s check for P29,040 in payment of its account was recorded in the books at P94,020. g. Outstanding checks, P204,055, include a duplicate check of P7,085 to C. Santos, who notified Giordano that the original was lost. Giordano stopped payment on the original check and has already adjusted the cash account in its accounting records for this amount. h. The cash account includes petty cash fund in the amount of P5,000. When the fund is counted on December 31, it was found to include paid petty cash voucher totaling P1,800.

REQUIRED: (a) Prepare a bank reconciliation at December 31,2013 that brings both the bank and book balances to a corrected figure.

(b)

Prepare adjusting entries for the foregoing. Giordano Corporation Bank Reconciliation December 31, 2013

Balance per bank statement Add: Cash on hand for undeposited receipts Deposit in transit

P199,925 P13,025 35,000

48,025

Total Deduct: Outstanding Checks Adjusted Balance

P252,950 (204,055) P 43,895

Balance per books Add: Note Receivable collected by bank, incl interest of P 2,500 Total Deduct: Customer’s NSF check returned by bank Customer’s check of P29,040 erroneously recorded as P94,020 Cash sales missing Petty Cash Fund

P(32,560) 252,500 P219,940 P42,040 64,980 64,025 5,000

Adjusted balance

(b)

(176,045) P 43,895

Adjusting entries: Cash

252,500 Notes Receivable Interest Income

250,00 2,500

Accounts Receivable (42,040 + 64,980) Loss from Theft Petty cash fund Cash

107,020 64,025 5,000

Miscellaneous Expenses Petty Cash Fund

176,045 1,800

Total Cash on the statement of financial position Petty cash fund of P3,200 + Cash in bank of P43,895 P47,095

1,800

2-11. The following data pertaining to the cash transactions and bank accounts of Pound Company for July 2013 are as follows: Cash balance per accounting records, July 31,2013, P17,194 Cash balance per bank statement, July 31,2013, P31,848 Bank service charge for July, P109 Debit memo for printed checks delivered by the bank; the charge has not been recorded in the accounting records, P225. Outstanding checks, July 31,2013, P6,728. Deposit of July 31 not recorded by the bank until August 1,P4,880. Proceeds of a bank loan on July 31 not recorded in the accounting records, net of P300 interest, P5,700. Proceeds from customer’s promissory note, principal amount, P8,000, collected by the bank, not taken up in the books, with P100 interest, P8,1000. Check #1210 payable to a supplier entered in the accounting records as P2,100 deducted in the bank statement the erroneous amount of P1,200. Stolen check lacking an authorized signature deducted from Pound’s account by the bank in error, P800. Customer’s check returned by the bank marked DAIF, indicating that the customer’s balance was not adequate to cover the check. No entry has been made in the accounting records to record the returned check, P760. REQUIRED: (a)

What is the correct cash balance as of July 31,2013?

(b)

Prepare the necessary adjusting entries at July 31,2013.

Solution: Book Balance

17194

Bank Balance

31848

Bank Service Charge

Outstanding Check

Debit Memo

Deposit In Transit

4880

Note Collection

5700

Error

Error

8100

DAIF

Correct Cash Balance

29,900

Correct Cash Balance

29,900

2-12. In comparing the balance per books of Bench Company with the bank statement obtained from the bank, together with the canceled checks and other memoranda at December 31,2013, you ob...