Chapter 1: cash and cash equivalents PDF

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INTERMEDIATE ACCOUTING(Volume 1)“PracticeProblems”Chapter 1PROBLEM 1-1 (IAA)On December 31, 2020, Albania Company provided the following data:Cash in bank 3,000, Time deposit – 30 days 1,000, Money market placement due on June 30, 20212,000,Saving deposit in closed bank 100, Sinking fund for bond pa...

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INTERMEDIATE ACCOUTING (Volume 1)

“Practice Problems” Chapter 1

PROBLEM 1-1 (IAA)

On December 31, 2020, Albania Company provided the following data:

Cash in bank Time deposit – 30 days Money market placement due on June 30, 2021 Saving deposit in closed bank Sinking fund for bond payable due June 30, 2022 Petty cash fund    

3,000,000 1,000,000 2,000,000 100,000 1,500,000 20,000

The cash in bank included customer check of P200,000 outstanding for 18 months. (CUSTOMER STALE CHECK) Check of P250,000 in payment of accounts payable was dated and recorded on December 31, 2020 but mailed to creditors on January 15, 2021. (UNDELIVERED CHECK) Check of P100,000 dated January 31, 2021 in payment of accounts payable was recorded and mailed December 31, 2020. (POSTDATED CHECK) The reporting period is calendar year. The cash receipts journal was open until January 15, 2021 during which time an amount of P450,000 was collected and recorded on December 31, 2020.

Required: 1. Prepare adjusting entries on December 31, 2020. 2. Compute the total amount of cash and cash equivalents that should be reported on December 31, 2020. 3. 3. Explain the presentation of the items excluded from cash and cash equivalents.

Answer: 1.

Accounts Receivable Cash in Bank Cash in Bank Accounts Payable Cash in Bank Accounts Payable Accounts Receivable Cash

2.

3.

200,000 200,000 250,000 250,000 100,000 100,000 450,000 450,000

Cash in Bank

3,000,000

Outstanding check for 18 months

(200,000)

Undelivered check

250,000

Postdated check

100,000

Cash receipts

(450,000)

Adjusted cash in bank

2,700,000

Time deposit- 30 days

1,000,000

Petty cash fund

20,000

TOTAL CASH AND CASH EQUIVALENTS:

3,720,000

Money market placement due on June 30, 2021 – should be separately classified as current asset or short-term investment due after 2020 for 6 months Saving deposit in closed bank – restricted cash, hence, not readily available for immediate use Sinking fund for bond payable due June 30, 2022 – noncurrent asset

PROBLEM 1-2 (IAA)

Argentina Company reported the following accounts on December 31, 2020:

Cash on hand Petty cash fund Security Bank current account PNB current account BDO current account (overdraft) BSP treasury bill – 120 days BPI time deposit – 90 days Bond sinking fund  

 

1,000,000 50,000 2,000,000 1,500,000 (200,000) 3,000,000 2,000,000 2,500,000

The cash on hand included a customer postdated check of P150,000 and postal money order of P50,000. The petty cash fund included unreplenished petty cash vouchers (EXPENSES) for P10,000 and an employee check (RECEIVABLE FROM EMPLOYEE) for P5,000 dated January 31, 2021. The BPI time deposit is set aside for acquisition of land to be made in early January 2021. The bond sinking fund is set aside for payment of bond payable due December 31, 2021.

Required: 1. Prepare adjusting entries on December 31, 2020. 2. Compute the total amount of cash and cash equivalents. 3. Explain the presentation of the items excluded from cash and cash equivalents.

Answer: 1.

Accounts Receivable

150,000

Cash on Hand Expenses

10,000

Receivable from employee

5,000

Petty cash fund

2.

3.

150,000

15,000

Cash on hand

1,000,000

Customer postdated check

(150,000)

Adjusted cash on hand

850,000

Petty cash fund

50,000

Unreplenished petty cash

(10,000)

Receivable from employee

(5,000)

Adjusted petty cash fund

35,000

Security Bank current account

2,000,000

PNB current account

1,500,000

TOTAL CASH AND CASH EQUIVALENTS:

4,385,000

BDO account (overdraft) – classified as current liability BSP treasury bill - 120 days – separately classified as current asset BPI time deposit – 90 days – classified as noncurrent asset due to long-term investment (acquisition of land) Bond sinking fund – separately classified as current asset since the bond payable is already due within one year after the end of reporting period.

PROBLEM 1-3 (IAA)

Armenia Company reported the following information on December 31, 2020:

Cash on hand Petty cash fund Cash in bank Saving deposit Total 

1,000,0000 50,000 4,000,000 2,000,000 7,050,000

Cash on hand included the following: a. Customer check of P100,000 returned by bank December 26, 2020 due to insufficient fund but subsequently redeposited and cleared by bank January 5, 2021. (NSF CUSTOMER CHECK) b. Customer check for P150,000 dated January 15, 2021 received December 22, 2020. (POSTDATED CUSTOMER CHECK) c. Postal money orders received from customer, P 200,000. The petty cash fund consisted of the following items: Currency and coins 2,000 Employees’ IOUs 10,000 Currency in envelope marked collections 5,000 for Christmas Party Check drawn by Armenia payable to petty 33,000 cashier Total 50,000

 

Check written and dated December 22, 2020 and delivered to payee on January 5, 2021, P200,000. (UNDELIVERED COMPANY CHECK) Check written December 26, 2020 and dated January 31, 2021 delivered to payee on December 26, 2020, P300,000. (POSTDATED COMPANY CHECK DELIVERED)

Required: 1. Prepare adjusting entries on December 31, 2020. 2. Compute the total cash on December 31, 2020.

Answer: 1.

Accounts receivable (100,000+250,000)

250,000

Cash on hand

250,000

Advances to employees

10,000

Cash short or over

5,000

Petty cash fund Cash in bank (200,000+300,000)

15,000 500,000

Accounts payable

2.

500,000

Cash on hand

1,000,000

NSF customer check

(100,000)

Postdated customer check

(150,000)

Adjusted cash on hand

750,000

Currency and coins

2,000

Check drawn payable to petty cashier

33,000

Adjusted petty cash

35,000

Cash in bank

4,000,000

Undelivered company check

200,000

Postdated company check delivered

300,000

Adjusted cash in bank

4,500,000

Cash on hand

750,000

Petty cash fund

35,000

Saving deposit

2,000,000

Cash in bank

4,500,000

TOTAL CASH:

7,285,000

PROBLEM 1-4 (PHILCPA Adapted)

Callous Company reported the following accounts on December 31, 2020:

Cash on hand Petty cash fund Philippine Bank current account City bank current account No. 1 City bank current account No. 2 (overdraft) Asia Bank saving account Asia Bank time deposit, 90 days 



250,000 2,000,000

Cash on hand included the following items: a. Customer check for P35,000 returned by bank December 26, 2020 due to insufficient fund but subsequently redeposited and cleared by the bank on January 10, 2021. (NSF CUSTOMER CHECK) b. Customer check for P15,000 dated January 10, 2021, received December 23, 2020. (POSTDATED CUSTOMER CHECK) The petty cash fund consisted of the following items:

Currency and coins IOUs from officers Unreplenished petty cash vouchers 

200,000 20,000 5,000,000 4,000,000 (100,000)

5,000 2,000 12,000

Included among the checks drawn by Callous Company against the Philippine Bank current account and recorded in December 2020, were the following: a. Check written and dated December 23, 2020 and delivered to payee on January 31, 2021, P25,000. (UNDELIVERED COMPANY CHECK) b. Check written December 26, 2020, dated January 30, 2021, delivered to payee on December 28, 2020, P45,000. (POSTDATED COMPANY CHECK DELIVERED)

Required: 1. Compute the total cash and cash equivalents. 2. Prepare adjusting entries on December 31, 2020.

Answer: 1.

2.

Cash on hand

200,000

NSF customer check

(35,000)

Postdated customer check

(15,000)

Adjusted cash on hand

150,000

Petty cash fund

5,000

Philippine Bank current account

5,000,000

Undelivered company check

25,000

Postdated company check delivered

45,000

Adjusted cash in bank

5,070,00

City bank current account no.1

4,000,000

City bank current account no. 2

(100,00)

Asia bank saving account

250,000

Asia bank time deposit, 90 days

2,000,000

TOTAL CASH AND CASH EQUIVALENTS

11,375,000

Accounts receivable

50,000

Cash on hand

50,000

Receivable from officers

2,000

Expenses

12,000

Cash short or over

1,000

Petty cash fund Cash in bank Accounts payable Cash in bank Accounts payable

15,000 25,000 25,000 15,000 15,000

PROBLEM 1-5 (ACP)

Zealous Company established a petty cash fund.

1. Established a petty cash fund of P10,000 on January 2. 2. Petty cash expense – January 2-31 are: Postage Supplies Transportation Miscellaneous expense

1,500 5,500 1,200 800

3. The fund is replenished on February 1 and increased by P5,000.

Required: Prepare journal entries to record the transaction under the fluctuating fund system and imprest fund system.

Answer: IMPREST FUND SYSTEM

Jan. 2

Petty cash fund

10,000

Cash in bank Jan. 31 Feb. 1

10,000

No entry (Memorandum Journal) Petty cash fund

5,000

Expenses

9,000

Cash in bank

14,000

FLUCTUATING FUND SYSTEM

Jan. 2

Petty cash fund

10,000

Cash in bank Jan. 31

Expenses Petty cash fund

Feb. 1

Petty cash fund Cash in bank

10,000 9,000 9,000 14,000 14,000

PROLEM 1-6 (ACP)

Zenith Company provided the following chronological transactions in relation to petty cash:

1. The entity established a petty cash fund of P10,000. 2. Petty cash disbursement were: Postage Supplies

1,500 3,000

3. Petty cash disbursement were: Transportation Accounts payable

1,000 3,500

4. Issued check for an amount to replenish the fund and bring the balance of the petty cash to P20,000.

Required: Prepare journal entries to record the transaction under the fluctuating fund system and imprest fund system.

Answer: IMPREST FUND SYSTEM

1. Petty cash fund Cash in bank 2. No entry (Memorandum Journal) 3. No entry (Memorandum Journal) 4. Petty cash fund Expenses Cash in bank

10,000 10,000

10,000 9,000 19,000

FLUCTUATING FUND SYSTEM

1. Petty cash fund Cash in bank 2. Expenses Petty cash fund 3. Expenses Petty cash fund 4. Petty cash fund Cash in bank

10,000 10,000 4,500 4,500 4,500 4,500 19,000 19,000

PROBLEM 1-7 (IAA)

Laborious Company closed the accounts on June 30. The entity provided the following transactions:

May 2 29

The entity established an imprest fund of P10,000 The fund is replenished. The petty cash items include:

Currency and coin Postage Supplies Transportation Miscellaneous expense June 30

The fund was not replenished. The fund is composed of the following:

Currency and coin Supplies Postage Transportation July 15

2,000 1,000 3,000 2,500 1,500

6,000 2,000 1,000 1,000

The fund is replenished and increased to P15,000.

Currency and coin Supplies Postage Transportation Miscellaneous expense

3,000 3,500 1,500 1,500 500

Required: Prepare journal entries to record the transaction under the fluctuating fund system and imprest fund system.

Answer: IMPREST FUND SYSTEM May 2

Petty cash fund

10,000

Cash in bank May 29

Expenses

10,000 8,000

Cash in bank June 30

Expenses

8,000 4,000

Petty cash fund July 1

Petty cash fund

4,000 4,000

Expenses July 15

4,000

Petty cash fund

5,000

Expenses

7,000

Cash in bank

12,000

FLUCTUATING FUND SYSTEM May 2

Petty cash fund

10,000

Cash in bank May 29

Expenses

10,000 8,000

Petty cash fund Petty cash fund

8,000 8,000

Cash in bank June 30

8,000

Supplies expense

2,000

Postage expense

2,000

Transportation expense

1,000

Petty cash fund July 15

4,000

Supplies expense

1,500

Postage expense

500

Transportation expense

500

Miscellaneous expense

500

Petty cash fund Petty cash fund Cash in bank

3,000 12,000 12,000

PROBLEM 1-8 (IAA)

Tacit Company provided the following transactions:

2020 Nov. 2

The entity established an imprest petty cash fund of P10,000.

30

An examination of the cash fund disclosed:

Currency and coin Memorandum showing expenditures for: Postage Supplies

3,000 2,000 5,000

A check was drawn to replenish the fund and to increase its amount to P20,000. Dec. 31

The fund was not replenished.

Currency and coin Memorandum showing expenditures for: Postage Supplies Deposit for 20 cases of soft drinks

11,000 3,000 4,000 2,000

2021 Jan. 2 31

The deposit for the 20 cases of soft drinks is collected. A check was drawn to replenish the fund.

Currency and coins Postage stamps Memoranda showing expenditures since November 30, 2020 for: Postage Supplies Payment of account Required: Prepare journal entries to record the transactions.

1,000 500

5,000 6,000 7,000

Answer: IMPREST FUND SYSTEM

2020 Nov. 2

Petty cash fund

10,000

Cash in bank Nov. 30

10,000

Petty cash fund

10,000

Expenses

7,000

Cash in bank Dec. 31

Expenses

17,000 9,000

Petty cash fund

9,000

2021 Jan. 1

Petty cash fund

9,000

Expenses

9,000

Jan. 2

No entry

Jan. 31

Expenses

18,000

Cash short or over

1,000

Cash in bank

19,000

PROBLEM 1-9 (IAA)

On December 1, 2020, Wacky Company established an imprest petty cash fund.

2020 Dec. 1 20

Established an imprest petty cash fund of P10,000 by writing a check on National Bank. Replenished the petty cash fund by writing a check on National Bank. The fund contained:

Currency and coins Vouchers for selling expenses Vouchers for miscellaneous expense Vouchers for equipment Dec. 31

1,000 5,000 2,000 2,000

The petty cash fund was not replenished. The fund contained:

Currency and coins Postdated employee’s check Vouchers for selling expenses Vouchers for transportation

6,000 2,000 1,500 500

2021 Jan. 15 31

Encashed the employee’s check. The proceeds were retained in the fund. Replenished the petty cash fund by writing a check on National Bank. The petty cash vouchers for January expenditures are:

Distribution costs Administrative expenses Transportation Payment for supplier’s invoice

500 2,000 1,000 1,200

Required: 1. Prepare journal entries to record the transactions. 2. How much is the petty cash on January 31, 2021 before the replenishment? 5,300 Petty cash fund 10,000 Less: Expenses 4,700 Total: 5,300

Answer: IMPREST FUND SYSTEM

2020 Dec. 1

Petty cash fund

10,000

Cash in bank Dec. 20

Expenses

10,000 9,000

Cash in bank Dec. 31

Expenses

9,000 4,000

Petty cash fund

4,000

2021 Jan. 1

Petty cash fund

4,000

Expenses Jan. 15

No entry

Jan. 31

Expenses Cash in bank

4,000

4,700 4,700...