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Chapter 1 - Audit of Cash and Cash Equivalents

PROBLEM NO. 1 - Rev Justice Corporation


Requirement No. 1
Cash on hand, per trial balance
NSF check
Post dated check received
Cash on hand, as adjusted

372,000
(60,000)
(30,000)
282,000

Requirement No. 2
Petty cash fund per total
Employees' vales
Currency in envelope marked "collections for charity"
Unreplenished petty cash vouchers
Petty cash fund, as adjusted

10,300
(1,600)
(1,200)
(800)
6,700

Requirement No. 3
BPI current account, per trial balance
Unreleased check
Post dated check delivered
BPI current account, as adjusted
Requirement No. 4
Cash on hand (see no. 1)
Petty cash fund (see no. 2)
BPI current account (see no. 3)
Security Bank current account no. 1
Security Bank current account no. 2
PNB time deposit (assumed can be preterminated)
Cash and cash equivalents, as adjusted

950,000
50,000
86,000
1,086,000

282,000
6,700
1,086,000
1,280,000
(40,000)

1,240,000
300,000
2,914,700

Note: The P500,000 PNB savings account will be presented separately from
cash and cash equivalents since it has been earmarked for the acquisition
of a noncurrent asset.

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO. 2
BoomPanes COMPANY
Bank Reconciliation
December 31, 2014
BANK
106,000

Unadjusted balances, December 31


Add (deduct):
a) Customer's uncollectible check (NSF)
b) Dishonored note receivable
(including P2,000 protest fee)
c) Book error in recording collection (P15,400 - P14,500)
d) Book errors in recording disbursements
Check no. 142 (P12,425 - P12,245) - under
Check no. 156 (P3,290 - P32,900) - over
e) December bank service charges
f) Note collected by bank (including interest income
of P1,000 and net of service charge of P500)
g) Deposits in transit
24,000
h) Outstanding checks
(35,000)
I) Bank error in recording deposit
(20,000)
j) Petty cash fund
k) Stolen cash sales to be recovered from insurance co.
l) Double counted deposit - NSF
Adjusted balances, December 31

75,000

Adjusting Journal Entries


1) Accounts receivable
Cash in bank

30,000

2) Accounts receivable
Cash in bank

62,000

Notes receivable - discounted


Notes receivable
3) Cash in bank
Accounts receivable
4) Accounts payable
Cash in bank
5) Cash in bank
Accounts payable
6) Bank service charge
Cash in bank

30,000
62,000
60,000
60,000
900
900
180
180
29,610
29,610
1,830
1,830

7) Cash in bank
Bank service charge
Notes receivable
Interest income

25,500
500

8) Petty cash fund


Cash in bank

10,000

9) Claims from insurance co.


Cash in bank

60,000

10) Accounts receivable


Cash in bank

25,000
1,000
10,000
60,000
20,000
20,000

BOOKS
203,000
(30,000) AJE No. 1
(62,000) AJE No. 2
900 AJE No. 3
(180) AJE No. 4
29,610 AJE No. 5
(1,830) AJE No. 6
25,500

AJE No. 7

(10,000) AJE No. 8


(60,000) AJE No. 9
(20,000) AJE No. 10
75,000

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO. 3
Ngan Company
Proof of Cash
For the month of December, 2014
Beginning

Receipts

Unadjusted bank balances


Undeposited collections
November
December
Outstanding checks
November
December
Erroneous bank debits
November
December
Erroneous bank credits
November
December
NSF check redeposited

230,000

420,000

200,000

(200,000)
120,000

Adjusted bank balances

(80,000)

10,000

Disb
500,000

Ending
150,000

120,000
(80,000)
60,000

(60,000)

(20,000)

20,000

(10,000)

(40,000)

(40,000)
(30,000)
(10,000)

(10,000)

320,000

290,000

410,000

200,000

Unadjusted book balances


Customers' note collected by bank
November
December
Bank service charges
November
December
NSF checks
November
December

227,000

270,000

407,000

90,000

100,000

(100,000)
120,000

Adjusted book balances

320,000

(2,000)

(5,000)

290,000
-

(30,000)

120,000
(2,000)
3,000

(3,000) AJE No. 2

(5,000)
7,000

(7,000) AJE No. 3

410,000
-

200,000
-

Adjusting journal entries:


1) Cash in bank
Note receivable

AJE No. 1

120,000
120,000

2) Bank service charge


Cash in bank

3,000

3) Accounts receivable
Cash in bank

7,000

3,000

7,000

Chapter 1 - Audit of Cash and Cash Equivalents

AJE No. 1

AJE No. 2

AJE No. 3

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO. 4
Harthart Company
Proof of Cash
For the month of September, 2014
Beginning

Receipts

Disb

Unadjusted bank balances


Deposits in transit
August 31
September 30
Outstanding checks
August 31
September 30
Certified check
Bank error - Check of Yin Company
Cash receipts used for payment

14,010

281,070

275,450

Adjusted bank balances

12,490

282,190

273,100

21,580

Unadjusted book balances


Bank collections not in books
August 31
September 30
Bank service charges not in books
August 31
September 30
NSF checks
Returned in Sept., not recorded
Returned in Aug., recorded in Sept.
Returned and recorded in Sept.
Book errors
Customer check (P465-P165)
Disb check (P3,250-P325)

13,290

279,540

274,635

18,195

Adjusted book balances

12,490

2,740

(2,740)
3,110

(4,260)

750

1,200

(1,050)

1,050
900

(4,260)
3,870
(700)
(2,010)
750

(640) AJE No. 2

800

(800) AJE No. 3

900

273,100
-

300
2,925
21,580
-

Adjusting journal entries:


1) Cash in bank
Accounts/Notes receivable

1,600
1,600

2) Bank service charge


Cash in bank

640

3) Accounts receivable
Cash in bank

800

4) Cash in bank
Accounts receivable

300

5) Cash in bank
Accounts payable

AJE No. 1

(950)
640

(2,925)

(3,870)
700
2,010

1,600

300

282,190

19,630

3,110

(1,200)
1,600

(950)

Ending

640

800

300
2,925
2,925

AJE No. 4
AJE No. 5

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO. 5
Ubirhed Company
Proof of Cash
For the month of December, 2014
Unadjusted bank balances
Add (deduct) adjustments:
Undeposited collections
November
December
Outstanding checks
November
December
Erroneous bank debit-November

Beginning

Receipts

76,500

104,000

20,000

(20,000)
54,900

(42,500)

Disb

Ending

51,000

129,500

54,900
(42,500)
90,490

(90,490)
-

10,000

(10,000)

Adjusted bank balances

64,000

128,900

98,990

93,910

Unadjusted book balances


Add (deduct) adjustments:
Bank service charges
November
December
NSF checks
December
Customers' note collected by bank
November
Book errors in December

39,300

183,900

101,800

121,400

(300)

25,000

Uncollected customer's note treated as receipts


Error in recording a check (SB P990, AR P9,900)

Adjusted book balances

64,000
(3)

(300)
400

(400)

6,000

(6,000)

(8,910)

(30,000)
8,910

98,990
(5)

93,910
(6)

(25,000)
(30,000)
128,900
(4)

Undeposited collections, December 31:


Deposit in transit, Nov. 30
Add collections in December:
December book receipts
Less receipts not representing collections in December:
Customers' note collected by bank, Nov. 30
25,000
Note with the bank treated as receipts
30,000
Total
Less deposits credited by the bank in December:
December bank receipts
Less receipts not representing deposits:
Erroneous bank debit, Nov.; corrected Dec.

20,000
183,900

55,000

128,900
148,900

104,000
10,000

94,000
54,900 (1)

Outstanding checks, December 31:


Outstanding checks, Nov. 30
Add checks issued in December:
December book disbursements
Less disbursements not representing checks for December:
Book error (SB P990, AR P9,900)
8,910
Bank service charge, Nov.; recorded Dec.
300
Total
Less checks paid by the bank in December:
December bank disbursements

42,500
101,800

9,210

51,000

92,590
135,090

Chapter 1 - Audit of Cash and Cash Equivalents


Less disbursements not representing checks:
NSF checks, Dec.
Bank service charge, Dec.

Answers: B, B, B, B, B, B

6,000
400

6,400

44,600
90,490 (2)

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO. 6
FourTwo Company
Proof of Cash
For the month of December, 2014
11/30/14

Receipts

Disb

12/31/14

96,800

842,400

131,200

808,000

18,000

(18,000)
88,800

Unadjusted bank balances


Deposits in transit
November 30
December 31
Outstanding checks
November 30
December 31

88,800

(16,000)

(16,000)
216,800

(No. 276,284,285,286,288,290,292,293,294)

Adjusted bank balances

98,800

913,200

Unadjusted book balances


58,640
Unrecorded CMs
November 30
40,320
December 31 (CM84)
Bank service charges
November 30
(160)
December 31 (DM98)
NSF check - December (DM 97)
Book errors
Understatement of OR no. 419
(P72,400 - 72,000)
Underfooting of CRJ (P448,800-P440,800)
Overfooting of CDJ (P288,000-P304,000)

881,120

Adjusted book balances

913,200
-

* (P40,320+P400,000+P440,800)

1. C
2. C
3. C
4. C
5. D

98,800
-

332,000

680,000

304,000

635,760

(40,320)
64,000

64,000

4,000
40,000

(160)
(4,000)
(40,000)

(16,000)

400
8,000
16,000

332,000
-

680,000
-

400
8,000

(2)

(216,800) (1)

(3)

(4)

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO. 7 - Submarine Company
Requirements No. 1 and 2
Bills and coins
Denomination
Quantity
P100.00
10
50.00
80
20.00
70
10.00
54
1.00
410
0.50
324
0.25
64
Checks
Date
Drawer
Dec. 30 Ms. Au
Dec. 30 Emong De Leon
Dec. 31 Apol Boba
Dec. 31 Datu Macmod
Dec. 31 Tom Guts
Unreplenished vouchers
Date
Account
Dec. 23 Advances
Dec. 27 Postage
Dec. 29 Transportation
Dec. 29 Repairs
Total cash and cash items counted
Less accountabilities:
Petty cash
Unclaimed salaries
Excess travel advance returned
Collections per offical receipts
Unreceipted collection from Emong De Leon
Cash shortage
Requirement No. 3
Petty cash fund per GL
Unreplenished vouchers
Excess travel advance
Petty cash fund balance, 12/31/14

Amount
1,000
4,000
1,400
540
410
162
16

7,528

Amount
2,400
28,000
3,360
35,600
16,600

85,960

Amount
14,000
3,240
300
1,600

20,000
15,000
3,360
86,600
28,000

Total

19,140
112,628

AJE 3
AJE 4
152,960 AJE 5
(40,332) AJE 6

20,000
(19,140)
3,360
4,220

Requirement No. 4
1 Advances to officers and employees
Postage expense
Transportation expense
Repairs and maintenance
Petty cash fund
2 Unused postage
Postage expense
3 Cash
Salaries payable

AJE 1

14,000
3,240
300
1,600
19,140
730
730
15,000
15,000

Chapter 1 - Audit of Cash and Cash Equivalents


4 Travel expense [P9,000+P800+(P600-P240)]
Petty cash fund (personal check of sales manager)
Advances to officers and employees

10,160
3,360

5 Cash
Accounts receivable

28,000

6 Receivable from custodian


Cash

40,332

13,520

28,000

40,332

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO. 9 - Napoles Company
Requirement a:
BANK
20,000

Unadjusted balances, December 31


Add (deduct):
Underfooting of cash receipts journal
Unrecorded loan proceeds
Overfooting of cash disbursements journal
Bank charge - dishonored note guaranteed
December bank service charges
Outstanding checks
Deposit in transit (P5,200-P1,800+P2,900)
Total
Cash shortage - actual
Adjusted balances

(1,200)
(5,600)
6,300
19,500
19,500

BOOKS
61,000
6,400
8,000
500
(5,000)
(1,200)

69,700
(50,200)
19,500
-

Requirement b:
Actual cash shortage (see above)
GL/SL discrepancy on collections (credits to AR):
Amount per individual credits to AR sl
Less amount per general ledger, corrected
Maximum probable shortage

50,200
70,400
66,400

4,000
54,200

PROBLEM NO. 10 - Dinar Company

Unadjusted balances
Petty cash fund
Outstanding checks
Deposit in transit
Total
Cash shortage
Adjusted balances
Cash receipts:
Owners' investment
Proceeds from loan
Collections from customers (see below)
Total
Cash disbursements:
Purchases (P250,000 - P15,000)
Store fixtures (P50,000 - P5,000)
Loan payment
Expenses paid
Cash balance per books, 12/31
Collections from customers:
Purchases
Less merchandise inventory, 12/31
Cost of sales
Add gross profit (P220,000 x 120%)
Sales
Less AR, 13/31

BANK
30,200
(4,500)
5,000
30,700
30,700
-

BOOKS
122,000 (see below)
(1,300)

120,700
(90,000)
30,700

150,000
98,000
414,000
662,000
235,000
45,000
80,000
180,000

250,000
30,000
220,000
264,000
484,000
70,000
414,000

540,000
122,000

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO. 10 - CPAR Company
Nov. 30
Unadjusted bank balances
Undeposited receipts:
November
December
Outstanding checks:
November
December
Erroneous bank debit
Payment to creditor in cash
Adjusted bank balances
Unadjusted book balances
NSF checks:
Returned, recorded in December
Returned, recorded in January
Unrecorded bank collections:
November
December
Bank service charges:
November
December
Book error in December
Adjusted book balances

1. B
2. B
3. C
4. D
5. D

107,800
45,300

December
Receipts
Disb
1,102,250

1,094,850

(45,300)
50,600

(13,375)

Dec. 31
115,200

50,600

139,725

6,050
1,113,600

(13,375)
7,150
(4,750)
6,050
1,089,925

163,400

82,725

1,110,950

1,080,275

113,400

5,200

5,200
4,300

60,750

(60,750)
58,200

(3,750)

139,725
(1)

1,113,600
(2)

(7,150)
4,750

(4,300)

58,200
(3,750)
2,100
1,800
1,089,925
(3)

(2,100)
(1,800)
163,400
(4)

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO.11 - ReSA Company
Franc Company
Proof of Cash
For the month of August, 2014
July 31

August
Receipts
Disb

Unadjusted bank balances


Deposits in transit:
July
August
Outstanding checks
July
August (check nos. 436, 457 and 460)
Erroneous bank debit, corrected
NSF check redeposited

52,000

Adjusted bank balances

48,900

33,400

9,100

73,200

Unadjusted book balances


Note collected by bank, July
Unrecorded deposit in July
Bank service charges
July
August
NSF check not redeposited

40,000
8,000
1,000

42,400
(8,000)
(1,000)

8,460

73,940

Adjusted book balances

48,900
-

900

25,140

9,740

August 31

(900)
9,400

(4,000)
(100)
(140)

(100)

9,400
(4,000)
3,600
(100)
(140)

(100)
440
300
33,400
-

Unadjusted book receipts for August:


August collections credited by bank (P10,000 + P14,000)
Deposit in transit, August 31
Unrecorded deposit in July recorded in August
Note collected by bank in July recorded in August

67,400

9,100
-

(3,600)

(440)
(300)
73,200
-

24,000
9,400
1,000
8,000
42,400

1B

Chapter 1 - Audit of Cash and Cash Equivalents


Unadjusted book disbursements for August:
Checks drawn in August (checks no. 455 to 460)
BSC for July recorded in August
Note: Nos. 1 and 2 can alternatively be solved by working back
from the adjusted bank balances.
3. D (P33,400)
4. A (P9,100)
5. D (P73,200)

8,360
100
8,460

2A

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO.12 - PRTC Company
Nov. 30

December
Receipts
Disb

Dec. 31

Unadjusted bank balances


742,800
Outstanding checks:
November 30
(254,096)
December 31
Erroneous bank debit
Deposits with loan payment (P4.8M x 80%)
Undeposited collections:
December 31

5,401,800

5,369,904

774,696

(300,184)
9,292

3,840,000

(254,096)
300,184
(9,292)
3,840,000

Adjusted bank balances

488,704

9,370,240

9,246,700

612,244

Unadjusted book balances


NSF checks:

619,304

9,341,780

9,290,692

670,392

(1,000)

Returned in Nov., recorded in Dec.


Returned and recorded in Dec.
Returned in Dec., recorded in Jan.

Unrecorded bank collection in Dec.

128,440

1,000
25,000

128,440

25,000
9,200

8,060

(9,200)
8,060

Anticipated loan proceeds from AR hypothecation

Nov. 30 sales (P162,000 x 80%)


Dec. 31 sales (P169,000 x 80%)

(129,600)

129,600
(135,200)

(135,200)

Anticipated loan payment from undeposited collections

(P128,440 x 80%)
Interest charge for bank loan in Dec.
Adjusted book balances

1. C
2. B
3. B
4. B
5. D

(102,752)
24,560
488,704
(1)

9,370,240
(2)

9,246,700
(3)

102,752
(24,560)
612,244
(4)

Chapter 1 - Audit of Cash and Cash Equivalents


PROBLEM NO.13 - CRC-Ace Corporation
1D
Sales
Less: Accounts receivable, 11/15
Collections from sales

1,615,040
426,900
1,188,140

2D
Cost of sales (P1,615,040/1.4)
Add: Merchandise inventory, 11/15
Purchases
Less: Accounts payable, 11/15
Payments for purchases

1,153,600
469,600
1,623,200
231,420
1,391,780

3C
4B
Cash receipts:
Issuance of common stock for cash
Mortgage note payable
Notes payable - bank
Collections from sales (see no. 1)
Total
Cash disbursements:
Purchase of real estate
Furniture and fixtures (P145,000 - P30,000)
Expenses paid
Payments for purchases (see no. 2)
Cash balance per books, 11/15

1,600,000
400,000
160,000
1,188,140
3,348,140
1,000,000
115,000
303,780
1,391,780

2,810,560
537,580

5A
Unadjusted balances
Deposit in transit
Outstanding checks
Balances
Shortage
Adjusted balances

Per bank
Per books
131,640
537,580
25,700
(9,260)
148,080
537,580
(389,500)
148,080
148,080

(3)
(4)