Chapter – Cash and Cash Equivalents CHAPTER CASH AND CASH EQUIVALENTS PROBLEMS 2.1 (Money Company) Checking account in Metrobank Savings account at Far East Bank Petty cash fund (1,500 – 250) Cash on hand (undeposited sales receipts) Cash in foreign bank (in equivalent pesos) Customers’ check on hand: Traveler’s check Manager’s check Total amount of cash P105,200 30,800 4,200 65,000 1,250 14,000 23,120 P243,570 Alternative computation: Reported total Less Sinking fund cash Short term treasury bills Unreplenished petty cash expenses Correct cash balance P330,820 ( 35,000) ( 52,000) ( 250) P243,570 The outstanding checks of P15,200 was simply ignored since the given balance of cash is a cash balance per books Short-term treasury bills of P52,000 is reported as part of trading securities unless there is an indication of a maturity of three months or less in which case, it is included as part of cash and cash equivalents Meanwhile, sinking fund cash of P35,000 is reported as a noncurrent financial asset 2-2 (Cotton Company) Reported checkbook balance Adjustments: Customer’s post dated check included in the balance Customer’s check returned by bank marked DAIF Company check recorded but not yet mailed Cash reported on December 31, 2009 balance sheet 2-3 2-4 (Grain Company) Balance per general ledger Non-cash items: Customer’s NSF checks IOUs Postage stamps Cash in sinking fund Customers’ post dated checks Travel advances Correct cash balance P180,000 ( 65,000) ( 20,000) 15,000 P110,000 P2,205,600 ( 20,000) ( 1,200) ( 600) ( 500,000) ( 5,400) ( 4,000) P1,674,400 NSF checks, IOUs and customers’ post dated checks are reported as receivables while postage stamps and travel advances are prepaid expenses Meanwhile, cash in sinking fund is reported as a noncurrent financial asset (Rod Company) Chapter – Cash and Cash Equivalents Petty cash (10,000 – 1,250) Cash on hand (625,000 – 2,500) Cash in bank- General (750,000 + 12,500) Cash in bank, Payroll (320,000 + 10,000) Total P 8,750 622,500 762,500 330,000 P1,723,750 IOU from an employee and customers’ post dated check are receivable items; the bank overdraft in another bank is reported as a current liability (offset can be made only if the accounts are with the same bank); the savings deposit is a non-current item since it is intended for a non-current purpose (for plant expansion) 2-5 (Jessie Company) Nov 20 Petty Cash Fund Cash in Bank Nov 20 to Dec 15 No entry Dec 16 Transportation Expense Representation Expense Freight-in Repairs Expense Cash in Bank 5,000 1,500 1,200 1,300 920 4,920 Dec 16 – 31 No entry Dec 31 Transportation Expense Office Supplies Petty Cash Fund 340 1,400 Jan Petty Cash Fund Transportation Expense Office Supplies 1,740 Jan 1-8 No entry Jan Transportation Expense Office Supplies Representation Expense Cash in Bank 460 2,700 1,800 Petty Cash Fund Cash in Bank 3,000 Jan 2-6 5,000 1,740 340 1,400 4,960 3,000 (Coral Company) (a) Petty cash fund P5,000.00 Amount of cash on hand Total petty cash vouchers: Office supplies Postage Representation Transportation Miscellaneous 4,951.00 Shortage in the petty cash fund 49.00 P 670.40 P 341,60 780.00 1,000.00 1,321.40 837.60 4,280.60 P Chapter – Cash and Cash Equivalents (b) 2-7 Office Supplies Expense Postage Expense Representation Expense Transportation Expense Miscellaneous Expense Cash Short and Over Petty Cash Fund 4,329.60 341.60 780.00 1,000.00 1,321.40 837.60 49.00 (Silver Company) Balance per bank statement Deposits in transit Outstanding checks Erroneous credit by bank Undelivered check included in the outstanding checks 9,000 Check of Silver Lining charged by bank to Silver Co.’s account 12,000 Correct cash balance 2-8 P380,750 52,000 (67,500) ( 4,000) P382,250 (Lily Company) a 35,000 August deposits per bank statement P275,000 Deposit in transit at August 31 Deposit in transit at July 31 Note collected by bank in behalf of Lily Company ( 50,000) Cash receipts per books during August P220,000 b ( 40,000) August disbursements per bank statement Outstanding checks at August 31 Outstanding checks at July 31 ( 60,000) Erroneous bank credit in July corrected in August NSF check Service charge by bank ( 1,500) Cash disbursements per books during August P138,500 P220,000 25,000 c P150,000 Balance per books at July 31 Cash receipts per books (see a) 220,000 Cash disbursements per books (see b) ( 138,500) Unadjusted cash balance per books at August 31 P231,500 or Unadjusted bank statement balance at August 31 ( 10,000) ( 35,000) Chapter – Cash and Cash Equivalents (180,000 + 275,000 – 220,000) P235,000 Outstanding checks, August 31 ( 25,000) Deposits in transit, August 31 35,000 NSF check Bank service charges Note collected by bank ( 50,000) Unadjusted cash balance per ledger at August 31 35,000 1,500 P231,500 d Unadjusted bank statement balance P235,000 Outstanding checks Deposits in transit Correct cash balance at August 31 or 50,000 ( 25,000) 35,000 P245,000 Unadjusted cash balance per books NSF check Bank service charges Note collected by bank P231,500 ( 35,000) ( 1,500) Correct cash balance at August 31 P245,000 2-9 Cash balance per books, March Cash receipts during March Cash disbursements during March Bank service charge for March ( 92.00) Cash balance per books at March 31 27,637.60 Cash balance per bank statement Deposit in transit Outstanding checks Cash balance reflected per bank 21,637.60 Suspected cash shortage (undeposited collections) 6,000.00 2-10 P115,963.70 246,475.00 (334,709.10) P P15,341.40 9,000.00 ( 2,703.80) P (VAB, Inc.) Outstanding checks at April 30 30,000 89,000 P Add cash disbursements per books: Total credits in all journals during May Less Service charge in April recorded in May Total Less checks cleared during May: Checks and charges by bank in May Less: May service charge ( NSF check returned as a bank charge in May 69,500 P90,000 ( 1,000) P119,000 P80,000 500) (10,000) Chapter – Cash and Cash Equivalents Outstanding checks at May 31 49,500 2-11 P (Lorna Cruz’ Hearing Aid) Deposits in transit at July 31 Receipts per books (27,000 – 3,120) Deposits per bank (30,600 – 6,300) Deposits in transit at August 31 P 4,500 23,880 (24,300) P 4,080 Proof: August Receipts Per bank Per books P30,600 P27,000 ( 4,500) 6,300 Reported Deposits in transit, July 31 Note collected by bank in August Note collected by bank in July recorded by the company in August Deposits in transit at August 31 (see above) 4,080 Correct totals P30,180 2-12 (Fernando Company) 2-13 Check book balance Add check drawn payable to a vendor but not yet mailed Correct cash balance at December 31, 2009 (Real Gem Company) ( 3,120) P30,180 P300,000 12,000 P312,000 Outstanding checks, 12/31/09 P37,855.00 Add checks cleared by bank during December Bank disbursements during December P62,277.00 Outstanding checks, 11/30/09 ( 24,750.00) Erroneous bank credit in November cleared in December ( 9,218.00) 28,309.00 Cash disbursements per books during December P66,164.00 2-14 (Pearl Corporation) Balance per bank statement P400,000 Add receipts of 12/31/07 not yet deposited 100,000 Balance per bank statement before outstanding checks P500,000 Balance per books P387,000 Bank service charge for December ( 1,000) Paid check for P40,000 recorded as P4,000 ( 36,000) Customer’s check returned by bank marked DAIF ( 22,000) 328,000 Outstanding checks at December 31, 2009 P172,000 Proof: Balance per bank Balance per books Reported balances P400,000 P387,000 Receipts not yet deposited 100,000 December bank service charge ( 1,000) Paid check for P40,000 recorded as P4,000 ( 36,000) Customer’s check returned by bank ( 22,000) Outstanding checks at December 31 (see above) (172,000) Correct cash balance P328,000 P328,000 Chapter – Cash and Cash Equivalents 2-15 (Lira Company) Deposits in transit, August 31 Add cash receipts per general ledger Less deposits per bank Deposits in transit, September 30 P 9,500 30,500 (30,200) P 9,800 Outstanding checks, September 30 Add checks cleared by bank during September Less cash disbursements per general ledger Outstanding checks, August 31 P 2,000 23,600 (24,000) P 1,600 2-16 (Pound Company) Per Books Per Bank Balances before adjustments Bank service charge Debit memo for printed checks Outstanding checks Deposit of July 31 not yet recorded by bank Proceeds of a bank loan, net of P300 interest Proceeds from customer’s note, including P100 interest Check #1210 for P2,100 erroneously deducted by bank as P1,200 Stolen check lacking authorized signature deducted by bank in error Customer’s NSF check returned by bank Correct cash balance 2-17 P17,194 ( 109) ( 125) (6,728) 4,880 5,700 8,100 (900) 800 _ P30,000 (760) P30,000 (Amethyst Corporation) Balance per bank statement Deposit in transit, April 30 Outstanding checks, April 30 ( 59,435) Erroneous charge by bank NSF checks not yet redeposited (3,435 – 1,835) 1,600 Proceeds of note collected by bank Bank service charge Unadjusted book balance for cash, April 30, 2009 2-18 P31,948 P169,263 18,200 2,200 ( 7,548) 180 P124,460 (Giordano Corporation) Giordano Corporation Bank Reconciliation December 31, 2009 Balance per bank statement P199,925 Add: Cash on hand for undeposited receipts P13,025 Deposit in transit 35,000 48,025 Total P252,950 Deduct: Outstanding checks 204,055 Adjusted balance P 43,895 Balance per books P(32,560) Add: Note receivable collected by bank, incl interest of P2,500 252,500 Total P219,940 Deduct: Customer’s NSF check returned by bank P42,040 Customer’s check for P29,040 erroneously Chapter – Cash and Cash Equivalents recorded as P94,020 Cash sales missing Petty cash fund Adjusted balance 2-19 2-20 64,980 64,025 (Leo Company) a Outstanding checks, July 31, 2009 Disbursements per books during August Checks cleared during August Outstanding checks, August 31, 2009 P b Deposits in transit, August 31, 2009 Deposits per bank records during August Cash receipts per books during August Deposits in transit, July 31, 2009 P 40,000 320,000 ( 350,000) P 10,000 (Bench Company) 6,400 349,000 ( 344,000) P 11,400 Per Bank P892,346.30 Balances before adjustments Outstanding checks Per Books P590,884.60 (333,788.20) 53,172.00 Receipts of 12/31/07 deposited on 1/2/06 Service charges for December Proceeds of bank loan omitted from company records Deposit of 12/23/07 omitted from bank statement Check of Rome Products Co charged by bank for lack of counter signature ( 225.00) 97,000.00 28,924.10 (8,737.40) Bank error for a deposit of P31,824 recorded as P31,814 Check of Birch Company erroneously charged by bank Proceeds of note collected by bank Erroneous debit by bank for bank loan paid by company Bank error for a deposit of P48,071 recorded as P48,171 Deposit of Birch Company erroneously credited by bank Adjusted cash balance 2-21 5,000 176,045 P 43,895 10.00 26,900.00 20,350.00 50,000.00 ( 100.00 (18,192.00) P699,272.20 P699,272.20 (Penshoppe Company) Petty Cash Fund Currency and coins Replenishment check Cash on hand Reported amount Less: Customer’s NSF check returned Customer’s post dated check Cash in Metrobank Reported amount Add: Undelivered check #1214 Post dated check #1219 Cash in Allied Bank General account Less credit balance in Payroll account Correct cash balance P 1,490 1,830 P 3,320 P 19,700 ( 5,000) ( 1,500) 13,200 P110,200 2,500 4,300 117,000 P162,000 ( 4,000) 158,000 P291,520 Employee advances of P880 is reported as a receivable; unreplenished petty cash vouchers are expenses; and currency in an enveloped marked collections for charity Chapter – Cash and Cash Equivalents is a non-company fund Postal money orders of P1,800 is a proper inclusion to cash The savings account deposit in Security Bank is reported as a non-current asset since it is intended for a non-current purpose 2-22 (ABC Services, Inc.) ABC Services, Inc Four-Column Reconciliation November 30-December 31, 2009 Balances per bank statement Receipts not yet deposited November 30 December 31 Outstanding checks November 30 Nov 30 December Receipts P294,771.0 P1,065,620.0 21,270.00 (21,270.00) 32,925.00 December Disbursemen ts P1,211,405.0 P148,986.0 32,925.00 (40,525.00 ) December 31 Erroneous charge by bank Dec 31 (40,525.00) 35,191.50 _(625.00) Correct balances P275,516.0 Balances per books P270,311.0 P1,077,275.0 P1,072,850.0 P1,205,446.5 P1,195,536.5 (35,191.50) _625.0 P147,344.5 P147,624.5 (295.00) 158.00 (158.00) Bank service charges November 30 December 31 Interest credit by bank November 30 December 31 Uncollectible customer’s check NSF returned and redeposited in Dec Check #137412 for P2,300 recorded as P3,200 in error Correct balances (295.00) 5,500.00 (5,500.00) 4,925.00 5,000.00 5,947.00 5,000.00 _(900.00) P275,516.0 P1,077,275.0 P1,205,446.5 4,925.00 (5,947.00) _900.0 P147,344.5 MULTIPLE CHOICE QUESTIONS Theory MC1 MC2 MC3 MC4 MC5 MC6 MC7 MC8 MC9 b d a a d c d d b Problems MC27 c MC28 d MC29 b MC30 d MC31 b MC10 MC11 MC12 MC13 MC14 MC15 MC16 MC17 MC18 c b a c c b d b b MC19 MC20 MC21 MC22 MC23 MC24 MC25 MC26 d d c d d b c a 2,250,000 + 125,000 = 2,375,000 50,000 + 20,000 = 70,000 320,000 + 580 = 320,580 Dr Expenses-950; Dr Cash Short and Over-50; Cr Cash in Bank-1,000 3,800 + 12,00 + 12,500 = 17,500 Chapter – Cash and Cash Equivalents MC32 MC33 c d MC34 MC35 a a MC36 b MC37 MC38 MC39 MC40 MC41 MC42 b b a a b b MC43 MC44 MC45 d d c MC46 MC47 MC48 d b d MC49 MC50 MC51 MC52 b a d b 50,000 + 20,000 – 15,000 = 55,000; 43,000 – 6,000 + 15,000 = 52,000 55,000 – 52,000 = 3,000 180,500 + 32,500 – 27,500 = 185,500 682,250 – 6,000 – 25,000 – 10,500 – 127,500 – 4,950 – 6,450 = 501,850 or 3,600 + (336,750-6,000) + (178,000-10,500) = 501,850 677,600 – 580 + 900 = 677,920 or 653,230 – 98,760 + 123,450 = 677,920 95,000 + (10,000 – 4,500) = 100,500 17,000 + 490,000 – 476,000 = 31,000 39,000 + 610,000 – (617,000 – 15,000) = 47,000 768,370 – 132,274 + 20,750 = 656,846 450,000 + 9,400 – 3,200 - 900 + 180 = 455,480 67,000 + 798,000 – 91,000 = 774,000 collections from sales; 583,000+78,000–86,000 + 53,000 – 48,000 = 580,000 payments to trade creditors; 62,000 + 774,000 – 580,000 – 107,000 =149,000 1,500 + 5,000 + 486,000 + 12,000 = 504,500 96,000 – 4,000 + 7,000 = 99,000 650,000+1,300,000–1,100,000 = 850,000 + 150,000–84,000+7,500 = 923,500 1,154,800 + 180,000 + 2,700 = 1,337,500 1,123,500 – 4,500 + 6,000 – 56,000 + 48,000 = 1,117,000 70,000 – 2,000 + 290,000 + 50,000 – 50,000 – 280,000 + 80,000 – 35,000 – 83,500 = 39,500 25,000 + 224,200 – 78,200 = 171,000 261,000 – 41,500 – 15,000 = 204,500 217,200 – 25,000 – 192,200 40,000 + 10,000 = 50,000; 6,000 + 100 + 3,600 = 9,700 negative amount 50,000 + 9,700 = 59,700 10 ... Problems MC27 c MC28 d MC29 b MC30 d MC31 b MC10 MC11 MC 12 MC13 MC14 MC15 MC16 MC17 MC18 c b a c c b d b b MC19 MC20 MC21 MC 22 MC23 MC24 MC25 MC26 d d c d d b c a 2, 250,000 + 125 ,000 = 2, 375,000... 70,000 – 2, 000 + 29 0,000 + 50,000 – 50,000 – 28 0,000 + 80,000 – 35,000 – 83,500 = 39,500 25 ,000 + 22 4 ,20 0 – 78 ,20 0 = 171,000 26 1,000 – 41,500 – 15,000 = 20 4,500 21 7 ,20 0 – 25 ,000 – 1 92, 200 40,000... Receipts P294,771.0 P1,065, 620 .0 21 ,27 0.00 (21 ,27 0.00) 32, 925 .00 December Disbursemen ts P1 ,21 1,405.0 P148,986.0 32, 925 .00 (40, 525 .00 ) December 31 Erroneous charge by bank Dec 31 (40, 525 .00)