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CASH AND CASH EQUIVALENTSProblem - Joe Company had the following account balances on December. 31, 2019: Petty cash fund 50, Cash in bank – current account 4,000, Cash in bank – payroll account 1,200, Cash in bank - sinking fund 2,000, Cash on hand 500, Cash in bank - restricted account for plant ad...

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CASH AND CASH EQUIVALENTS Problem -1 Joe Company had the following account balances on December. 31, 2019: Petty cash fund 50,000 Cash in bank – current account 4,000,000 Cash in bank – payroll account 1,200,000 Cash in bank - sinking fund 2,000,000 Cash on hand 500,000 Cash in bank - restricted account for plant addition and expected to be disbursed in 2020 1,500,000 Treasury bills- 3 months 1,000,000 The petty cash fund included unreplenished December 2019 petty cash expense vouchers P5,000 and employee IOU P5,000. The cash on hand included a P100,000 customer check payable to Joe dated January 15, 2020. In exchange for a guaranteed line of credit, the entity has agreed to maintain a minimum balance of P200,000 in the unrestricted current bank account. The sinking fund is set aside to settle a bond payable that is due on December 31, 2020. What total amount should be reported as cash on December 31, 2019? a. 5,640,000 b. 7,640,000 c. 5,750,000 d. 5,645,000 What total amount should be reported as cash equivalents on December 31, 2019? a. 3,000,000 b. 2,000,000 c. 1,000,000 d. 0 What total amount should be reported as cash and cash equivalents on December 31, 2019? a. 8,640,000 b. 7,440,000 c. 7,640,000 d. 5,640,000 Solution 1 Answer a Petty cash fund Cash on hand Current account Payroll account Sinking fund Treasury bills Unreplenished petty cash vouchers Employee IOU

50,000 500,000 4,000,000 1,200,000 2,000,000 1,000,000 ( 5,000) ( 5,000)

Customer check postdated January 31, 2020 Total cash and cash equivalents

(100,000) 8,640,000

Problem 2 On December 31, 2019, Lenny Company reported cash account balance per ledger of P9,500,000 which included the following: Cash in bank - demand deposit 3,000,000 Time deposit-30 days 500,000 NSF check of customer 200,000 Money market placement due on June 30, 2020 2,000,000 Saving deposit 1,000,000 IOU from an employee 300,000 Pension fund 1,500,000 Customer check dated January 3, 2020 600,000 Customer check outstanding for 18 months 400,000 9,500,000 * Check of P100,000 in payment of accounts payable was dated and recorded on December 31, 2019 but mailed to creditors on January 15, 2020. *Check of P300,000 dated January 31, 2020 in payment of accounts payable was recorded and mailed December 31, 2019. *The cash receipts journal was held open until January 15, 2020, during which time P200,000 was collected and recorded on December 31, 2019. What is the Adjusted Cash balance on December 31, 2019? a. 3,200,000 b. 3,000,000 c. 3,400,000 d. 3,300,000 What total amount should be reported as cash and cash equivalents on December 31, 2019? a. 4,700,000 b. 6,700,000 c. 4,900,000 d. 5,100,000 Solution 2 Answer a Cash in bank-demand deposit Time deposit - 30 days Saving deposit Total cash and cash equivalents Cash in bank - demand deposit Undelivered check dated and recorded on December 31, 2019 but mailed on January 31, 2020 Check postdated January 31, 2020 recorded on December 31, 2019

3,200,000 500,000 1,000,000 4,700,000 3,000,000 100,000

300,000

Collections during January 2020 recorded on December 31, 2019 Adjusted cash in bank

( 200,000) 3,200,000

Problem 3 Lenny Company reported the following information in relation to cash on December 31, 2019: Checkbook balance, P4,000,000 Undeposited collections, P400,000 A customer check amounting to P200,000 dated January 2, 2020 was included in the December 31, 2019 checkbook balance Another customer check for P500,000 deposited on December 22, 2019 was included in the checkbook balance but returned by the bank for insufficiency of fund. This check was redeposited on December 26, 2019 and cleared two days later. A P400,000 check payable to supplier dated and recorded on December 30, 2019 was mailed on January 16, 2020. A petty cash fund of P50,000 comprised the following on December 31, 2019: Coins and currencies 5,000 Petty cash vouchers 40,000 Refundable deposit for returnable containers 5,000 A check of P40,000 was drawn on December 31, 2019 payable to Petty Cash. 50,000 1. What is the adjusted cash in bank on December 31, 2019? a. 4,600,000 b. 4,200,000 c. 4,400,000 d. 3,700,000 2. What total amount should be reported as cash on December 31, 2019? a. 4,645,000 b. 4,845,000 c. 4,600,000 d. 4,650,000 Solution 3 Question 1 Answer b Checkbook balance Postdated customer check erroneously included Undelivered check payable to supplier Adjusted cash in bank

4,000,000 (200,000) 400,000 4,200,000

Question 2 Answer a Cash in bank Cash on hand- undeposited collections Coins and currencies Replenishment check Total cash

4,200,000 400,000 5,000 40,000 4,645,000

Problem 4 Randel Company reported the checkbook balance on December 31,2019 at P5,000,000 and held the following items on same date:

Check payable to Randel, dated January 2, 2020 in payment of a sale made in December 2019, not included in December 31 checkbook balance 2,000,000. Check payable to Randel, deposited December 15 and included in December 31 checkbook balance, but returned by bank on December 30 stamped “NSF." The check was redeposited on January 2, 2020 and cleared on January 9, 2020 500,000 Check drawn on Randel account, payable to a vendor, dated and recorded in Randel books on December 31, 2019 but not mailed until January 10, 2020 300,000 Certificate of time deposit 90 days 1,000,000 What amount should be reported as cash on December 31, 2019? a. 5,800,000 b. 3,300,000 c. 6,500,000 d 4,800,000 Solution 4 Answer-a Checkbook balance NSF customer check Undelivered company check Certificate of time deposit 90 days Adjusted cash balance

5,000,000 ( 500,000) 300,000 1,000,000 5,800,000

Problem 5 On December 31, 2019, Summer Company had the following cash balances: Cash in bank -current account 1,800,000 Petty cash fund - all funds were reimbursed at year-end 50,000 Time deposit due February 1, 2020 250,000 Time deposit in bank closed by BSP 1,000,000 Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement on December 31, 2019. The compensating balance is legally restricted as to withdrawal. On December 31, 2019, what total amount should be reported as cash ? a. 1,250,000 b. 2,500,000 c. 2,100,000 d. 1,500,000 On December 31, 2019, what total amount should be reported as cash equivalents? a. 250,000 b. 1,250,000 c. 2,100,000 d. 1,500,000 Solution Answer d Cash in bank (1,800,000 – 600,000 compensating balance) Petty cash fund Time deposit Total cash

1,200,000 50,000 250,000 1,500,000

BANK RECONCILIATION Problem 1 In reconciling the cash balance on December 31 with that shown in the bank statement, Sam Company provided the following information: Balance per bank statement 4,000,000 Balance per book 2,700,000 Outstanding checks 600,000 Deposit in transit 475,000 Service charge 10,000 Proceeds of bank loan, December 1, discounted for 6 months at 12%, not recorded on Sam Company's books 940,000 Customer check charged back by bank for absence of counter signature 50,000 Deposit of P100,000 incorrectly recorded by bank as 10,000 Check of Sim Company charged by bank against Sam account 150,000 Customer note collected by bank in favor of Sam Company. Face 400,000 Interest 40,000 Total 440,000 Collection fee 5,000 435,000 Erroneous debit memo of December 28, to charge Sam account with settlement of bank loan 200,000 Deposit of Sim Company credited to Sam account 300,000 What amount should be reported as adjusted cash in bank on December 31? a. 4,315,000 b. 3,925,000 c. 3,075,000 d. 4,015,000 Solution 16-3 Answer d Balance per book

2,700,000

Add: Proceeds of bank loan

940,000

Customer note collected by bank

435,000

Total

4,075,000

Less: Service charge

10,000

Customer check charged back

50,000

Adjusted book balance

1,375,000

60,000 4,015,000

Balance per bank

4,000,000

Add: Deposit in transit

475,000

Incorrect deposit

90,000

Erroneous bank charge

150,000

Erroneous debit memo

200,000

Total

915,000 4,915,000

Less: Outstanding checks

600,000

Erroneous bank credit

300,000

Adjusted bank balance

900,000 4,015,000

Problem 2 In preparing the bank reconciliation for the month of December, Case Company provided the following data: Balance per bank statement 3,800,000 Deposit in transit 520,000 Amount erroneously credited by bank to Case's account 40,000 Bank service charge for December 5,000 NSF check 50,000 Outstanding checks 675,000 What is the adjusted cash in bank? a. 3,685,000 b. 3,645,000 c. 3,600,000 d. 3,605,000 What is the unadjusted cash in bank balance per book? a. 3,550,000 b. 3,660,000 c. 3,610,000 d. 3,655,000 Solution 2 Question 1 Answer d Question 2 Answer b Balance per bank statement Deposit in transit Outstanding checks Bank error - erroneous bank credit Adjusted bank balance

3,800,000 520,000 ( 675,000) ( 40,000) 3,605,000

Unadjusted book balance (SQUEEZE)

3,660,000

Bank service charge NSF check Adjusted cash in bank balance

(5,000) (50,000) 3,605,000

Problem 3 Aries Company kept all cash in a checking account. An examination of the accounting records and bank statement for the month of June revealed the following information: ● The cash balance per book on June 30 was P8,500,000. ● A deposit of P1,000,000 that was placed in the bank's night depository on June 30 did not appear on the bank statement. ● The bank statement showed that on June 30 the bank collected note for the entity and credited the proceeds of P950,000 to the entity's account, net of collection charge P50,000. ● Checks outstanding on June 30 amounted to P300,000 including certified check of P100,000. ● The entity discovered that a check written in June for P200,000 in payment of an account payable had been recorded in the entity's records as P20,000. ● Included with the June bank statement was NSF check for P250,000 received from a customer on June 26. ● The bank statement showed a P20,000 service charge for June. 1. What amount should be reported as cash in bank on June 30? a. 9,000,000 b. 8,300,000 c. 9,360,000 d. 9,180,000 2. What is the balance per bank statement on June 30? a. 8,300,000 b. 9,700,000 c. 8,660,000 d. 8,200,000 3. What is the net adjustment to cash in bank on June 30? a. Net debit P950,000 b. Net credit P450;000 c. Net debit P500,000 d. Net debit P860,000 Solution 15-8 Question 1 Answer a Balance per book Note collected by bank Total Book error (200,000-20,000) NSF check Service charge Adjusted book balance

8,500,000 950,000 9,450,000 ( 180,000) ( 250,000) (20,000) 9,000,000

Question 2 Answer d Balance per bank (SQUEEZE) Deposit in transit

8,200,000 1,000,000

Outstanding checks (300,000 - 100,000 certified check Adjusted bank balance Question 3 Answer c Cash in bank Service charge Note receivable

( 200,000) 9,000,000

950,000 50,000 1,000,000

Accounts payable 180,000 Accounts receivable 250,000 Service charge 20,000 Cash in bank 450,000 The two entries can be compounded and the net effect is a debit to cash in bank of P500,000. Problem 4 Boracay Company kept all cash in a checking account. An examination of the bank statement for the month of December revealed a bank statement balance of P8,470,000. A deposit of P950,000 placed in the bank's night depository on December 29 does not appear on the bank statement. Checks outstanding on December 31 amount to P270,000. The bank statement showed that on December 25 the bank collected a note for Boracay Company and credited the proceeds of P935,000 to the entity's account which included P35,000 interest. Boracay Company discovered that a check written in December for P183,000 in payment of an account had been recorded as P138,000. Included with the December 31 bank statement was an NSF check for P250.000 that Boracay Company had received from a customer on December 20. The bank statement showed a P15,000 service charge for December. 1. What is the adjusted cash in bank on December 31? a. 9,150,000 b. 9,240,000 c. 9,195,000 d. 9,215,000 2. What is the unadjusted balance per book on December 31? a. 8,480,000 b. 8,525,000 c. 8,435,000 d. 8,510,000 3. What is the net adjustment to cash in bank on December 31? a. Net debit 935,000 b. Net credit 310,000 c. Net debit 625,000 d. Net credit 625,000 Solution 15-9 Question 1 Answer a

Balance per bank Deposit in transit Checks outstanding Adjusted bank balance Question 2 Answer b Balance per book (SQUEEZE) Note collected by bank for the depositor Book error in recording check (183,000 – 138,000) NSF check Service charge Adjusted book balance Question 3 Answer c Cash in bank Service charge Note receivable

8,470,000 950,000 ( 270,000) 9,150,000 8,525,000 935,000 ( 45,000) ( 250,000) (15,000) 9,150,000

935,000 15,000 950,000

Accounts payable 45,000 Accounts receivable 250,000 Service charge 15,000 Cash in bank 310,000 The two entries can be compounded and the net effect is a debit to cash in bank of P625,000. Problem 5 Pearl Company maintains a checking account at the City Bank. The provides a bank statement along with canceled checks on the last day of each month. The July bank statement included the following information: Balance, July 1 550,000 Deposits 1,800,000 Checks processed 1,400,000 Service charge 30,000 NSF check 120,000 Monthly loan payment deducted by bank from account 100,000 Deposits outstanding totaled P100,000 and all checks written by the entity were processed by the bank except for check of P150,000. A P200,000 July deposit from a credit customer was recorded as P20,000 debit to cash and credit to accounts receivable. A check correctly recorded by the entity as P30,000 disbursement was incorrectly processed by the bank as P300,000 disbursement. 1. What is the balance per bank on July 31? a. 700,000 b. 550,000 c. 800,000 d. 950,000 2. What is the adjusted cash in bank on July 31? a. 650,000 b. 920,000 c. 380,000

d. 970,000 3. What is the cash in bank balance per ledger on July 31? a. 1,350,000 b. 1,170,000 c. 990,000 d. 890,000 Solution 15-10 Question I Answer a Balance per bank - July 1 Deposits Checks processed Service charge NSF check Monthly loan payment Balance per bank - July 31

550,000 1,800,000 (1,400,000) ( 30,000) ( 120,000) ( 100,000) 700,000

Question 2 Answer b Balance per bank - July 31 Deposit in transit Outstanding check Bank error - overstatement of disbursement Adjusted bank balance

700,000 100,000 (150,000) 270,000 920,000

Correct amount of disbursement Recorded by bank Bank error - overstatement of disbursement

30,000 300,000 270,000

Question 3 Answer c Balance per ledger- July 31 (SQUEEZE) Service charge NSF check Monthly loan payment Book error- understatement of collection Adjusted book Balance

990,000 ( 30,000) (120,000) (100,000) 180,000 920,000

Correct amount of accounts receivable collected Recorded by depositor Book error - understatement of collection

200,000 20,000 180,000...