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AUDIT OF CASH AND CASH EQUIVALENTSPROBLEM NO. 1The controller of the Legarda Company is in the process of preparing the company’s December 31, 2018 financial statements. He is trying to determine the correct balance of cash and cash equivalents to be reported as a current asset in the statement of f...

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AUDIT OF CASH AND CASH EQUIVALENTS PROBLEM NO. 1 The controller of the Legarda Company is in the process of preparing the company’s December 31, 2018 financial statements. He is trying to determine the correct balance of cash and cash equivalents to be reported as a current asset in the statement of financial position. The following items are being considered: 1. Savings account of ₱900,000 and a checking account balance of ₱1,200,000 are held at Manila Bank. 2. Money market placement with maturity of 3 months, ₱7,500,000. 3. Currency and coins on hand amounted to ₱11,550. 4. Travel advances of ₱270,000 for the first quarter of next year (employee reimbursement will be through salary deduction). 5. Legarda Company has purchased ₱3,150,000 of commercial paper of Mendez Corp. which is due in 60 days. 6. A separate cash fund amounting to ₱2,250,000 is restricted for the retirement of longterm debt. 7. Petty cash fund of ₱1,500. 8. An IOU from an employee of Legarda Company in the amount of ₱2,000. 9. Two certificates of deposit, each totaling ₱500,000. These CDs have a maturity of 120 days. 10. Legarda Company has received a check from a customer in the amount of ₱187,500 dated January 15, 2018. 11. Legarda Company has agreed to maintain a cash balance of ₱50,000 at all times at Manila Bank to ensure future credit availability but not restricted as to withdrawal. 12. On January 1, 2018, Legarda Company purchased marketable equity securities to be held as “trading” for ₱3,000,000. On December 31, 2018, its market value is ₱4,300,000. What amount should be reported as cash and cash equivalents on December 31, 2018? A. ₱13,763,050 C. ₱12,751,500 B. ₱13,000,550 D. ₱12,763,050 PROBLEM NO.2 In connection with your audit of Pureza Corporation for the year ended December 31, 2018, you gathered the following: Current account at Metrobank Current account at BPI Payroll account Foreign bank account - restricted (in equivalent pesos) Postage stamps Employee's post dated check IOU from controller's sister Credit memo from a vendor for a purchase return

₱2,000,000 (100,000) 500,000 1,000,000 1,000 4,000 10,000 20,000

Traveler's check Not-sufficient-funds check Money Order Petty cash fund (₱4,000 in currency and expense receipts for ₱6,000) Treasury bills, due 3/31/2019 (purchased 12/31/2018) Treasury bills, due 1/31/2019 (purchased 1/01/2018)

50,000 15,000 30,000 10,000 200,000 300,000

Based on the above information and the result of your audit, compute for the cash and cash equivalent that would be reported on the December 31, 2018 balance sheet. A. ₱2,784,000 B. ₱3,084,000

C. D.

₱2,790,000 ₱2,704,000

PROBLEM NO.3 In the course of your audit of the Tayuman Corporation, its controller is attempting to determine the amount of cash to be reported on its December 31, 2018 balance sheet. The following information is provided: 1. Commercial savings account P1,200,000 and a commercial checking account balance of P1,800,000 are held at PS Bank. 2. Travel advances of P360,000 for executive travel for the first quarter of the next year (employee to reimburse through salary deduction). 3. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a long term debt. 4. Petty cash fund of P10,000 5. An I.O.U from a company officer in the amount of P40,000. 6. A bank overdraft of P250,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank. 7. The company has two certificates of deposit, each totaling P1,000,000. These certificates of deposit have maturity of 120 days. 8. Tayuman Corp. has received a check dated January 2, 2019 in the amount of P150,000. 9. Tayuman Corp. has agreed to maintain a cash balance of P200,000 at all times at PS Bank to ensure future credit availability. 10. Currency and coin on hand amounted to P15,000. Questions: Based on the above and the result of your audit, how much will be reported as cash and cash equivalent at December 31, 2018? A. ₱3,025,000 B. ₱2,825,000

C. D.

₱2,575,000 ₱5,025,000

PROBLEM NO. 4 Laborious Company closed the accounts on June 30. The entity provided the following transactions:

May 2 – The entity established an imprest fund of P10,000 May 29 – The fund is replenished. The petty cash items include: Currency and coin P2,000 Postage 1,000 Supplies 3,000 Transportation 2,500 Miscellaneous Expense 1,500 June 30 – The fund was not replenished. The fund is composed of the following: Currency and coin P6,000 Supplies 2,000 Postage 1,000 Transportation 1,000 July 15 – The fund is replenished and increased to P15,000 Currency and coin Supplies Postage Transportation Miscellaneous Expense

P3,000 3,500 1,500 1,500 500

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

PROBLEM NO. 5 In connection with your audit of the cash account of ANNIE CORP, you gathered the following information. a. Balance per bank statement, December 1, 2018

P145,000

b.Total Bank receipts (credits) in December

346,000

c. Balance per bank, December 31, 2018

114,500

d. Outstanding checks, Nov. 30, 2018 (including P12,000 paid by bank in December)

67,500

e. Outstanding checks, December 31, 2018 (including checks issued in November)

94,162

f. Deposit in transit, November 30, 2018

39,458

g. A customer’s check received on December 4, 2018, was returned by bank on December 7 marked ‘’NSF’’. It was redeposited on December 8, 2018. The only

11,143

Entry made was to take up the collection on December 4, 2018. 1. What is the total book receipts in December? a. P295,399 c. P334,857 b. P306,542 d. P346,000 2. What is the total bank disbursements in December? a. P315,500 c. P231,500 b. P376,500 d. P346,000 3. What is the total book disbursements in December? a. P447,519 c. P403,662 b. P376,500 d. P392,519 PROBLEM NO.6 Shown below is the bank reconciliation for J.Ruiz Company for November 2018: Balance per bank, November 30, 2018 Add: Deposits in transit Total Less: Outstanding checks Bank credit recorded in error Cash balance per books, November 30, 2018

₱150,000 24,000 174,000 28,000 10,000

38,000 ₱136,000

The bank statement for December 2018 contains the following data: Total deposits Total charges, including an NSF check of ₱8,000 and a service charge ₱400

₱110,000 ₱ 96,000

All outstanding checks on November 30, 2018, including the bank credit, were cleared in the bank in December 2018. There were outstanding checks of ₱30,000 and deposits in transit of ₱38,000 on December 31, 2018. 1. How much is the cash balance per bank on December 31, 2018? A. ₱154,000 C. ₱164,000 B. ₱150,000 D. ₱172,400 2. How much is the December receipts per books? A. ₱124,000 C. ₱110,000 B. ₱96,000 D. ₱148,000 3. How much is the December disbursements per books? A. ₱96,000 C. ₱89,600 B. ₱79,600 D. ₱98,000 4. How much is the cash balance per books on December 31, 2018? A. ₱150,000 C. ₱180,400 B. ₱170,400 D. ₱162,000

5. The adjusted cash in bank balance as of December 31, 2018 is A. ₱141,600 C. ₱172,000 B. ₱162,000 D. ₱196,000 PROBLEM NO.7 Your examination of the financial statements of Gilmore Group Co. for the year ended December 31, 2018 you obtained the following information on the checking account of the company: a. The bank statement on November 30, 2018 showed a balance of ₱15,300. b. Among the bank credits in November was a customer’s note for ₱5,000 collected for the account of the company which the company recognized in December among its receipts. c. Included in the bank debits in November was a cost of checkbooks amounting to ₱60. d. A check for ₱2,000 issued by MAGULO Group Co. in November was charged by the bank in error against Gilmore Group Co. account. e. You also ascertained that there were deposits in transit amounting to ₱4,000 and outstanding checks totaling ₱8,500 as of November 30, 2018. f. The bank statement for the month of December showed total credits of ₱20,800 and total charges of ₱10,200. g. Company books for December showed total receipts of ₱36,780 and disbursements of ₱20,360. h. Bank debit memos for December were: No. 418 for service charges, ₱80 and No. 504 on a customer’s returned check marked “Refer to Drawer” for ₱1,200. i. On December 29, 2018 the company placed with the bank a customer’s promissory note with a face value of ₱6,000 for collection. The company treated this note as part of its receipts although the bank was able to collect on the note only in January, 2019. j. A check for ₱198 was recorded in the company cash payments books in December as ₱1,980. 1. Adjusted cash balance as of December 31, 2018. A. ₱24,280 B. ₱36,880 C. ₱18,782

D. ₱16,940

2. Unadjusted book balance November 30, 2018. A. ₱12,800 B. ₱7,800 C. ₱12,860

D. ₱7,860

3. Adjusted cash balance November 30, 2018. A. ₱8,800 B. ₱12,800 C. ₱21,300

D. ₱10,800

4. Deposit in transit as of December 31, 2018. A. ₱21,980 B. ₱10,980 C. ₱8,890

D. ₱16,980

5. Outstanding Checks as of December 31, 2018. A. ₱19,940 B. ₱16,818 C. ₱19,880

D. ₱18,098

PROBLEM NO. 8 Cubao Company has a current account in Metrobank. Your audit of the company’s cash account reveals the following: a. Balances taken from the company’s general ledger: Cash balance, November 30, 2018

₱637,860

Cash balance, December 31, 2018 Receipts, December 1-31, 2018 b. Outstanding checks, November 30, 2018 (₱26,140 was paid by bank in December) c. Checks written and recorded in December; not included in the checks returned with the December bank statement d. Deposit in transit, November 30, 2018 e. Deposit in transit, December 31, 2018 f. A bank credit memo was issued in December to correct an erroneous charge made in November g. Note collected by bank in December (company was not informed of the collection)

576,420 306,220

h. A check for ₱2,020 (payable to a supplier) was recorded in the Check Register in December as ₱3,000

980

i. A check for ₱2,240 was charged by the bank as ₱2,420 in December j. Cubao Company issued a stop payment order to the bank in December. This pertains to a check written in December which was not received by the payee. A new check was written and recorded in the Check Register in December. The old check was written off by a journal entry, also in December k. Bank service charge, November 30, 2018

180

64,140 36,080

15,260 16,140 1,500 2,060

780

60

1. The total outstanding checks on December 31, 2018, should be: A. ₱38,000 B. ₱74,080 C. ₱36,080

D. ₱62,220

2. What is the bank statement balance on November 30, 2018? A. ₱684,400 B. ₱587,420 C. ₱685,180

D. ₱688,180

3. What is the bank statement balance on December 31, 2018? A. ₱636,440 B. ₱637,220 C. ₱637,580

D. ₱637,160

4. The total bank receipts for the month of December should be: A. ₱309,680 B. ₱304,000 C. ₱308,900

D. ₱308,120

5. The total bank disbursements for the month of December is: A. ₱356,080 B. ₱356,860 C. ₱357,640

D. ₱356,200

PROBLEM NO.9 The cash account of the Recto Corporation as of December 31, 2018 consists of the following: On deposit in current account with Real Bank Cash collection not yet deposited to the bank A customer's check returned by the bank for insufficient fund

₱900,000 350,000 150,000

A check drawn by the Vice-President of the Corporation dated January 15, 2019 A check drawn by a supplier dated December 28, 2018 for goods returned by the Corporation A check dated May 31, 2018 drawn by the Corporation against the Piggy Bank in payment of customs duties. Since the importation did not materialize, the check was returned by the customs broker. This check was an outstanding check in the reconciliation of the Piggy Bank Account. Petty Cash fund of which ₱5,000 is in currency; P3,600 in form of employees' I.O.U s; and P1,400 is supported by approved petty cash vouchers for expenses all dated prior to closing of the books on December 31, 2018. Total Less: Overdraft with Piggy Bank secured by a Chattel mortgage on the Inventories Balance per ledger

70,000 60,000

410,000

10,000 1,950,000 300,000 ₱1,650,000

At What amount will the account ‘’Cash’’ appear on the December 31, 2018 balance sheet? A. ₱1,315,000 B. ₱1,425,000

C. ₱1,495,000 D. ₱1,725,000

PROBLEM NO.10 In the course of your audit of the Tayuman Corporation, its controller is attempting to determine the amount of cash to be reported on its December 31, 2018 balance sheet. The following information is provided: 1. Commercial savings account P1,200,000 and a commercial checking account balance of P1,800,000 are held at PS Bank. 2. Travel advances of P360,000 for executive travel for the first quarter of the next year (employee to reimburse through salary deduction). 3. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a longterm debt. 4. Petty cash fund of P10,000 5. An I.O.U from a company officer in the amount of P40,000. 6. A bank overdraft of P250,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank. 7. The company has two certificates of deposit, each totaling P1,000,000. These certificates of deposit have maturity of 120 days. 8. Tayuman Corp. has received a check dated January 2, 2019 in the amount of P150,000. 9. Tayuman Corp. has agreed to maintain a cash balance of P200,000 at all times at PS Bank to ensure future credit availability. 10. Currency and coin on hand amounted to P15,000. Questions: Based on the above and the result of your audit, how much will be reported as cash and cash equivalent at December 31, 2018? A. ₱3,025,000

C.

₱2,575,000

B. ₱2,825,000

D.

₱5,025,000

PROBLEM NO.11 You were able to gather the following from the December 31, 2018 trial balance of V.Mapa 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 savings account PNB time deposit

₱500,000 10,000 1,000,000 1,080,000 (80,000) 1,200,000 500,000

Cash on hand includes the following items: a. Customer’s check for ₱40,000 returned by bank on December 26, 2018 due to insufficient funds but subsequently redeposited and cleared by the bank on January 8, 2019. b. Customer’s check for ₱20,000 dated January 2, 2019, received on December 29, 2018. c. Postal money orders received from customers, ₱30,000. The petty cash fund consisted of the following items as of December 31, 2018. Currency and coins Employees' vales Currency in an envelope marked '' collections for charity'' with names attached Unreplenished petty cash vouchers Check drawn by V.Mapa Corporation, payable to the petty cashier

₱2,000 1,600 1200 1,300 4,000 ₱10,100

Included among the checks drawn by V.Mapa Corporation against the BPI current account and recorded in December 2018 are the following: a. Check written and dated December 29, 2018 and delivered to payee on January 2, 2019, ₱80,000. b. Check written on December 27, 2018, dated January 2, 2019, delivered to payee on December 29, 2018, ₱40,000 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, 2018. 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.

Based on the above and the result of your audit, determine the adjusted balances of the following: 1. Cash on hand A. ₱410,000 B. ₱530,000 2. Petty cash fund A. ₱6,000 B. ₱7,200 3. BPI current account A. ₱1,000,000 B. ₱1,120,000 4. Cash and cash equivalents A. ₱2,917,200 B. ₱3,074,900

C. D.

₱470,000 ₱440,000

C. D.

₱2,000 ₱4,900

C. D.

₱1,080,000 ₱1,040,000

C. D.

₱3,052,000 ₱3,066,000

PROBLEM NO.12 In connection with the audit of Betty Go Belmonte Company’s financial statements, you obtained the following information pertaining to its cash account. Cash in bank July 31 Book receipts- August

₱136,429 ₱141,230

Book disbursements- August August 31 balance

₱111,423 ₱166,236

Further examination revealed the following: ▪ ▪ ▪

The cash receipts book in August was underfooted by ₱10,000. Included in the book receipts in August is a note collected by the bank in July for ₱1,500. July NSF checks of ₱526 and bank service charges of ₱50 were recorded by the Company in August.

▪

The bank statement in August showed total debits of ₱110,098, total credits of ₱149,951, and an ending balance of ₱180,413.

▪

Among the bank debits are: NSF checks ₱700 Bank error 900 Correction of July error 1,000 Service charges 65 Among the bank credits are: Correction of July error ₱600 Note collected by bank 4,277 Bank error 3,000 Deposits in transit: July 31, ₱5,200; Aug. 31, ₱8,330 Outstanding checks as of July 31, ₱8,007.

▪

▪ ▪

Determine the following: 1. Cash Shortage A. ₱6,026 B. ₱4,526 2. Outstanding checks, August 31 A. ₱11,421 B. ₱9,332 3. Adjusted cash Balance, August. 31 A. ₱175,222 B. ₱169,748 4. Adjusted cash balance, July 31 A. ₱136,429 B. ₱137,353

C. ₱5,474

D. ₱4,000

C. ₱8,007

D. ₱3,876

C. ₱125,841

D. ₱166,236

C. ₱111,612

D. ₱148,481

PROBLEM NO.13 The general ledger accounts showed the following cash balances at December 31, 2007: BDO current account EPCI savings account Working Fund Total per WBS

₱210,000 90,000 10,000 ₱310,000

BDO Current – The following bank reconciliation as of December 31, 2007, was given to you by the accountant: Balance per books, December 31, 2007 Add: Deposit in transit Debit memo for customer’s check returned unpaid Less: Checks drawn but not paid by bank, per schedule below Error for an account payable entered on books as ₱7,000 but drawn and paid by bank as P12,000 Computed balance Unlocated difference Balance per bank, December 31, 2007

₱210,000 8,000 10,000 ₱18,000 5,000

(23,000) 202,000 6,000 ₱208,000

Check drawn but not paid by bank Check No. 346 490 509 615 805 950

₱2,250 4,960 7,490 3,710 1,550 1,040 ₱18,000

You traced the balance per books to the general ledger and the balance per bank to the bank confirmation reply. EPCI Savings Account – The balance in this account represents funds set aside for the purchase of a computer, per resolution of the Board of Directors. Working Fund – This fund was replenished as of December 31, 2007.

1. How much is the adjusted and reconciled balance of the BDO current account as of December 31, 2007? A. ₱200,000 B. ₱210,000 C. ₱198,000 D. ₱195,000 2. After considering all audit adjustments, what should be the correct total of outstanding checks? A. ₱21,000 B. ₱18,000 C. ₱16,000 D. ₱13,000 3. The amount of cash to be reported in the audited balance sheet at December 31, 2007 is A. ₱195,000 B. ₱295,000 C. ₱205,000 D. ₱310,000

PROBLEM NO.14 The accountant for the Anonas Company assembled the following data:

Cash account balance Bank statement balance Dep...