Chapter 2 Cash and Cash Equivalents

CHAPTER 2
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:
Travelers check
Managers 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:
Customers post dated check included in the balance
Customers 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: Customers 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 2 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

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. 1

Petty Cash Fund

Transportation Expense
Office Supplies

1,740

Jan. 1-8

No entry

Jan. 9

Transportation Expense
Office Supplies
Representation Expense
Cash in Bank

460
2,700
1,800

Petty Cash Fund

Cash in Bank

3,000

Jan. 9
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 2 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 2 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 1

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
30,000

89,000

69,500

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

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

P90,000
( 1,000)
P119,000
P80,000
500)
(10,000)

Chapter 2 Cash and Cash Equivalents

Outstanding checks at May 31
49,500
2-11

(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
P312,000

12,000

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)
Customers 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)
Customers check returned by bank
( 22,000)
Outstanding checks at December 31 (see above)
(172,000)
Correct cash balance
P328,000
P328,000

Chapter 2 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 customers 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
Customers 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: Customers NSF check returned by bank
P42,040
Customers check for P29,040 erroneously

Chapter 2 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

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: Customers NSF check returned
Customers 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 2 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
0

P1,065,620.0
0

21,270.00

(21,270.00)
32,925.00

December
Disbursemen
ts
P1,211,405.0
0

P148,986.0
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
0

P1,077,275.0
0
P1,072,850.0
0

P1,205,446.5
0
P1,195,536.5
0

(35,191.50)
_____625.0
0
P147,344.5
0
P147,624.5
0

(295.00)
158.00

(158.00)

Bank service charges

November 30
December 31
Interest credit by bank
November 30
December 31
Uncollectible customers 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
0

P1,077,275.0
0

P1,205,446.5
0

4,925.00
(5,947.00)

_____900.0
0
P147,344.5
0

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 2 Cash and Cash Equivalents

MC32
MC33

c
d

MC34
MC35

a
a

MC36

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+78,00086,000 + 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+1,300,0001,100,000 = 850,000 + 150,00084,000+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