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Cash and Cash Equivalents Which is true when a petty cash fund is used? a) The petty cashier’s summary of petty cash payments serves as a journal entry that is posted to the appropriate general ledger account b) The reimbursement of the petty cash fund should be credited to the cash account c) The p...

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Cash and Cash Equivalents 1. Which is true when a petty cash fund is used? a) The petty cashier’s summary of petty cash payments serves as a journal entry that is posted to the appropriate general ledger account b) The reimbursement of the petty cash fund should be credited to the cash account c) The petty cash fund balance should be reported as investment d) Entries that include a credit to the cash account should be recorded at the time payments from the petty cash fund are made 2. In preparing its bank reconciliation, Ram Company had the following information available at December 31, 2019. Balance per bank statement 380, 750 Deposit in transit 52,000 Outstanding checks 65,000 Amount erroneously debited Bank to Ram Company’s account 3,000 Bank Service charge for December 750 NSF checks deposited in November but returned by the bank in December 5,000 Check drawn, dated and recorded December 31, 2019 but not mailed until January 10, 2020 (included in the total outstanding checks above) 8,000 Check of Jay Company credited by bank to the account of Ram Company 5,000 Deposit of 12/23/2019 omitted by the bank to credit to Ram Company 7,000 Erroneous debit memo of 12/21/2019 to charge company’s account with settlement of bank loan which was paid by check #1022 on same date 5,000 Deposit of Ram Company on 12/07/2019 erroneously credited in the company’s account 19,000 What is the amount of cash in bank balance of Ram’s Company? a) Answer not given b) 370,500 c) 359,750 d) 361,750 e) 351,500 3. If the cash balance shown in an entity’s accounting records is less than the correct cash balance and neither the entity nor the bank has made any error, there must be a) Bank charges not yet recorded by the entity b) Outstanding checks c) Deposits in transit d) Deposits credited by the bank but not yet recorded by the entity 4. Seldom does the balance of the cash in bank account in the depositor’s books agree with the balance appearing in the bank statement at a particular date because of a) negligence by the bookkeeper b) a tax avoidance scheme c) time-lapse difference d) bank secrecy requirements

5. The petty cash fund of Y Company at the end of the fiscal year ended June 30, 2019, is composed of the following:

Currencies

3,800

Coins

1,200

Paid vouchers: Office supplies

1,750

Postage stamps

2,000

Loans to employees

6,000

Check drawn by the manager, returned by bank marked NSF

2,750

Check drawn by the company, payable to the order of the petty cash custodian, representing her salary

12,500

The amount of petty cash fund that should be shown on the statement of financial position at June 30,2019 of Y company is? a) 18,256 b) 20,250 c) 17,500 d) Answer not given e) 24,256 6. Encantadia Company reported a balance of P43,000 in its Cash account at the end of the month. There were P20,000 deposits in transit and P15,000 of outstanding checks. The bank statement showed a balance of P50,000, service charges of P6,000 and the proceeds of note collected by the bank for the company. The note had a face value of P15,000. The interest on the note collected by the bank was a) 12,000 b) 6,000 c) 9,000 d) 3,000 7. In reconciling the book and bank balances of the Cash account of Philippine Company, you discover the following for the month of December 2019: Balance per bank statement Balance per books Receipts of 12/31/2019 not yet deposited Bank service charges for December A paid check for P40,000 was recorded in the cash book as 4,000 Customer’s check returned by bank marked DAIF

400,000 387,000 100,000 1,000 22,000

Assuming no other errors except as noted, what is the amount of the outstanding checks at December 31, 2019? a) 150,000 b) 172,000 c) Answer not given d) 194,000 e) 180,000 8. The following pertains to Kerry Corporation on December 31, 2017: Postage stamp 500 Credit memo from a vendor for a purchase return 10,000 Answer: Current account at BPI (50,000) 50,000 Current account at Metrobank 1,000,000 1,000,000 Employees postdated check 2,000 250,000 Foreign bank account - restricted (in equivalents pesos) 500,000 15,000 IOU from controller’s sister 5,000 25,000 Listed stocks held as temporary investments 7,500 100,000 Payroll account 250,000 100,000 Petty cash fund (2,000 in currency and expense receipts for 3,000) 5,000 25,000 Postal money order 15,000 1,567,000 Traveler’s checks 25,000 Treasury bills, due 1/31/2018 (Purchased 01/31/2017) 150,000 Treasury bills, due 3/31/2018 (Purchased 12/31/2017) 100,000 Additional information:  Check of P100,000 in payment of accounts payable was recorded on December 31,2017 but mailed to suppliers on January 5,2018.  Check of P50,000 dated January 15, 2018 in payment of accounts payable was recorded and mailed on December 31, 2017.  Check of P25,000 dated January 15, 2017 in payment of accounts payable was recorded and mailed on January 15, 2017. As of the reporting period. The same has not been encashed by the payee and still outstanding. How much cash and cash equivalents should Kerry Corp. report on the December 31, 2016 statement of financial position? a) 1,567,000 b) 1,772,000 c) 1,6370,000 d) 1,950,000 e) Answer not given 9. Bank statements provide information about all of the following, except a) b) c) d)

Checks cleared during the period NSF checks Errors made by the depositor entity Bank charges for the period

10. 11. 12. 13.

Compute for the cash disbursements per books during August Unadjusted cash balance per ledger at August 31, 2019 Correct cash balance at August 31, 2019 Compute for the cash receipts per books during August

#11 choices

#10 choices a) b) c) d) e)

220,000 231,500 Answer not given 245,000 138,000

a) b) c) d) e)

220,000 231,500 Answer not given 245,000 138,500

a) b) c) d) e)

#12 choices

#13 choices

231,500 220,000 245,000 Answer not given 138,500

a) b) c) d) e)

Answer not given 220,000 231,500 138,500 245,500

14. In preparing its August 31, 2019 bank reconciliation, Diamond Company has available following information: Balance per bank statement, 8/31/2019 Deposit in Transit, 8/31/2019 Return to customer’s NSF check, 8/31/2019 Outstanding checks, 8/31/2019 Bank service charges for August

180,500 32,500 6,000 27,500 1,000

At August 31, 2019, Diamond company’s correct cash balance is a) 185,500 b) 178,500 c) 192,500 d) 179,500 e) Answer not given 15. The cash account of Ria on December 31, 2017 has a balance of P462,000 and it consists of the following: Balance in Savings Account with a bank closed by the BSP

72,000

Bills and coins on hand Checking Account Balance in Bank of Philippine Island Customer’s check dated January 15, 2017 Customer’s check dated January 16, 2018 Customer’s check returned on 12/21/2017 for lack of sufficient fund IOU of an employee Money order Petty cash including paid cash vouchers of (P1,650) 4,000-1650 = 2,350 Postage stamps Traveler’s check

105,560 44,000 16,000 60,000 100,000 800 1,600 4,000 240 44,800

The correct cash and cash equivalents balance on December 31, 2017 is? a) 198,310 b) 205,320 c) 185,320 d) Answer not given e) 202,920 16. What is the proper accounting treatment for a stale check? a) Either a or b b) Revert back to cash and a credit to gain. c) Ignored d) Revert back to cash and accounts payable. 17. A bank overdraft, should be a) Reported as a current liability, when there is no valid basis for offsetting against another bank account b) netted against cash and a net cash amount reported c) Reported as a deduction from the current asset section d) Reported as a deduction from cash 18. The December 31, 2017 trial balance of Agee Company includes the following accounts: Petty cash fund Current account – Metrobank Current account – BPI (overdraft) 120-day Money market placement –RCBC Time deposit – PNB

70,000 4,000,000 (250,000) 1,000,000 2,000,000

Additional Information: • The petty cash fund includes unreplenished December 2017 petty cash expense vouchers for P15,000 and an employee check for P5,000 dated January 31,2018. • A check for P100,000 was drawn against Metrobank current account dated and recorded December 27, 2017 but delivered to payee on January 10, 2018. • The PNB time deposit is set aside for land acquisition in early January 10,2018. What should be reported as cash and cash equivalents on December 31, 2017? a) 5,920,000 b) Answer not given c) 4,150,000 d) 5,900,000

e) 6,150,000 19. The petty cash fund account under the imprest fund system is debited a) Only when the fund is created b) When the fund is created and when the fund is decreased c) When the fund is created and every time it is replenished d) When the fund is created and when the size of the fund is increased 20. The principal purpose of a voucher system is to provide assurance that a) all cash receipts are recorded in the accounting records. b) all cash disbursements are approved before a check is issued. c) all purchase invoices are supported by debit memoranda. d) all cash receipts are deposited intact in the bank. 21. Sampaguita company users four-column reconciliation. The bank reconciliation for July shows P5,000 of deposits still in transit. The bank statement for August showed that the bank recorded receipts totaling P45,500 , P7,500 of which was a note collected from one of its clients. The bank made an erroneous charge of P10,000 in July, which was corrected only in August. During August, the company recorded in its books total receipts of P40,000. Included in these receipts were P5,000 proceeds of note collected by the bank July which the company recorded only on August. Answer: 45,500 (5,000) What is the amount of deposits still in transit for August 31, reconciliation? 12,000 SQUEZZED a. Answer not given (7,500) b. 10,000 (10,000) c. 60,000 5,000 d. 12,000 40,000 e. 57,000 22. Jollibee Company attempting to determine an apparent cash shortage that they believe resulted from an employee’s theft. You have assembled the following information for the month of March.

Cash balance per books, March 1 Cash receipts for March, per books Cash disbursement for March, per books Cash balance, per bank statement, March 31 Deposit in transit, March 31 Outstanding checks, March 31 Bank Service Charge for March

116,000 245,000 335,000 15,500 9,000 2,750 50.00

By preparing a book to bank reconciliation, compute the amount of the suspected cash shortage. a. 1,400 b. Answer not given c. 1,300 d. 1,600 e. 1,500 23. The following information was included in the bank reconciliation of Boozy, Inc. Assume all other reconciling items are listed below: Checks and charges recorded by bank in May

Including a May service charge of P500 Service charge made by bank in April and recorded in the books in May Total credits to cash in all journals during May Customer’s NSF check returned as a bank charge in May (no entry made In the books) Customer’s NSF check returned in April and redeposited in May (no entry made in The books in either April or May) Outstanding checks at April 30

85,000 2,000 90,000 10,000 5,000 40,000

How much were the total outstanding checks at May 31? a) Answer not given b) 68,500 c) 63,500 d) 49,500 e) 53,500 24. Assume the following data of Dianne Corporation of its cash and short-term highly liquid investments for December 31,2016: Cash Checking account No. 143-BPI Checking account No. 155-BPI Securities 120-day Certificate of Deposit BSP-Treasury Bills (No.1) BSP-Treasury Bills (No.2) 180 days Commercial Paper Money Market Funds

80,000 200,000 (30,000) Date acquired 12/10/2016 11/30/2016 10/31/2016 12/01/2016 11/21/2016

Maturity Date 01/31/2017 04/30/2017 01/20/2017 06/20/2017 02/10/2017

Amount 600,000 5,000,000 1,000,000 1,400,000 2,000,000

The correct cash and cash equivalents balance on December 31, 2016 is? a) 3,710,000 b) 3,850,000 c) Answer not given d) 3,880,000 e) 3,680,000 25. Which of the following is not a basic characteristic of a system of cash control? a) Internal audits at irregular intervals b) Daily deposit of all cash received c) Combined responsibility for handling and recording cash d) Use of a voucher system 26. In preparing its bank reconciliation at December 31, 2019 Huawei Company had made available the following information: Balancer per bank statement Deposit in Transit Outstanding checks Amount erroneously credited by bank to Huawei account Bank service charge for December

400,000 60,000 67,500 6,000 750

Check drawn, dated and recorded December 31, 2019 but not mailed until January 10,2020 (included in the total outstanding checks above) Check of Samsung Company charged by bank to the account of Huawei Company

9,000 15,000

What is the amount shown as Cash on Huawei’s December 31, 2019 Statement of Financial position? a. 524,500 b. Answer not given c. 382,250 d. 416,500 e. 410,500 27. Total cash and cash equivalent of P6,325,000 reported by Kristine Co. on December 31, 2016 include the following information: a. Two certificates of deposits, each totalling P500,000, having a maturity of 120 days. b. A check that is dated January 12,2017 in the amount of P125,000. c. A commercial paper of P2,100,000 which is due in 90 days. d. Currency and coins in hand amounted to P7,700. Kristine Co. has agreed to maintain a cash balance of P500,000 in one of its banks at all times to ensure future credit availability (this amount is not legally restricted as to withdrawal and was included in the above balance). How much is the correct amount of cash and cash equivalents that Kristine should report in its December 31, 2016 statement of financial position? a) 5,825,000 b) 5,325,000 c) Answer not given d) 5,700,000 e) 5,200,000 28. A cash short and over account is a) Not generally accepted b) debited when the petty cash fun proves out short c) a contra account to cash d) debited when the petty cash fund proves out over 29. In preparing a monthly bank reconciliation, which of the following items would be added to the balance reported on the bank statement to arrive at the correct cash balance? a) Deposit in transit b) Outstanding checks c) Bank Service charge d) A customer’s note collected by bank on behalf of the depositor. 30. Which of the following should be considered cash?

a) Money market checking accounts b) Postdated checks c) Certificates of deposit d) Money market savings certificates 31. The following information was given under Andrei Company. At September 30, 2019, cash receipts and cash disbursements per general ledger Cash in Bank account of Andrei Company are P30,500 and P24,000, respectively. The bank statement for the same month indicates that only P30,200 in deposits were received during the month and checks clearing the bank were P23,600. The August 31, 2019 bank reconciliation showed deposits in transit of P9,500. Outstanding checks at September 30, 2019 were P2,000. 

How much were the deposit in transit at September 30, 2019? a) 9,500 b) 5,000 c) 1,600 d) 9,800



How much were the outstanding checks at August 31, 2019? a) b) c) d)

1,600 9,800 5,000 9,500

32. If the cash balance in an entity’s bank statement is less than the correct cash balance and neither the entity nor the bank has made any error, there must be a) Bank charges not yet recorded by the entity b) Outstanding checks c) Deposits in transit d) Deposits credited by the bank but not yet recorded by the entity

Receivables 1. A 180-day, 12 percent interest-bearing note receivable is sold to a bank after being held for 45 days. The proceeds are calculated using a 15 percent interest rate. The note receivable has been a) Discounted: No ; Pledged: Yes b) Discounted: No ; Pledged: No c) Discounted: Yes ; Pledged: Yes d) Discounted: Yes ; Pledged: No 2. On December 31, 2020, the YG Company Finance Company had a P5,000,000 note receivable from SM Entertainment Company. The note bears 12% interest. The books reported accrued interest of P600,000 on this date. Following the Covid-19 pandemic by SM Entertainment Company, YG Company Finance agreed to the restructuring and modification of the terms of its loan to SM Entertainment as follows: - Reduction of principal to P4,000,000 - Reduction of interest to 10% payable annually beginning December 31, 2021. - Accrued interest on December 31, 2020 is condoned; and - Principal payment was reset to December 31, 2022. 

How much premium/discount is to be recognized on the date of restructuring? a) 130,000 Discount b) 132,160 Premium c) 132,160 Discount d) 130,000 Premium

How much is the impairment loss? a) 1,832,160 b) 1,351,165 c) 1,732,160 d) 1,278,910



3. On September 1, 2019, CNblue Co. received P1,350,000 3-year note receivable from EXO Bank. The note bears interest at 12% and is payable on maturity date. Interest is payable annually. On this date, the bank’s market rate was 11%. The first annual payment for interest was made on September 1, 2020. 



How much is the premium/discount to be amortized on September 1, 2019? a) 30,000 Discount b) 30,000 Premium c) 32,999 Discount d) 32,999 Premium

On December 31, 2019 how much is the interest income should be reported by CNBlue Company? a) 108,685 b) 54,000 c) 50,710 d) 152,130



How much is the carrying amount of the notes as of September 1, 2020? a) 1,392,869 b) 1,373,129 c) 1,382,999 d) 1,350,000

4. On January 1, 2019, Super Juniors Co. sold transportation equipment with a historical cost of P20,000,000 and accumulated depreciation of P7,000,000 in exchange for cash of P500,000 and a noninterest-bearing note receivable of P8,000,000 due in 4 equal annual installments starting on December 31, 2019 and every December 31 thereafter. The prevailing rate of interest for this type of note is 12%. How much is the carrying amount of the receivable on December 31, 2020? a) 6,000,000 b) is3,380,102 How much the current portion of the c) on6,074,699 receivable December 31, 2019? a) 1,423,560 ,803,663 b) 3,380,102 c) 1,271,036 d) 1,594,388 





How much is the interest income in 2019? a) 678,334 b) 728,964 c) 728,946

5. On February 1, 2019, Army Company factored receivables with a carrying amount of P500,000 to Blink Company. Blink Company assessed a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction, you are to determine the amount of loss on sale to be reported in the income statement of Army Company for February. 



Assume that Army factors the receivables on a without recourse basis. How much is the total proceeds to be received by Army Company? a) 500,000 b) 460,000 c) 475,000 d) 485,000



Assume that Army factors the receivables on a with recourse basis. The recourse obligation has a fair value of P2,500. The loss to be reported is a) b) c) d)

17,500 15,000 25,000 42,500

Assume that Army factors the receivables on a without recourse basis. The loss to be reported is a) 15,000 b) 0 c) 25,000 d) 40,000

6. Multiplying a lump sum future amount by a Present Value of 1 factor results to a) Future value of 1. b) Present value of 1. c) Future amount. d) Present value.

7. On September 1, Jungkook Co. assigns specific receivables totaling P750,000 to Jimin as collateral on a P625,000, 12 percent note. Jungkook Co. will continue to collect the assigned accounts receivable. Jimin also assesses a 2 percent service charge on the total accounts receivable assigned. Jungkook Co. is to make monthly payments to Jimin with cash collected on assigned accounts receivable. Collections of assigned accounts during September...