CASH AND CASH EQUIVALENT

THEORIES.

1. Which of the following should not considered cash?

a. Petty Cash Fund
b. Money Orders
c. Coin and Currency
d. IOUs
2. Which of the following is usually considered cash?
a. Certificate of Deposit
b. Checking Account
c. Money Market Saving Certificate
d. Postdated Check
3. A cash equivalent is a short-term, highly liquid investment that is readily
convertible into known amount of cash and
a. Is acceptable as a means to pay current liabilities
b. Has current market value that is greater than the original cost.
c. Bears an interest rate that is at least equal to the prime interest rate at the
date of liquidation
d. Is so near maturity that it presents insignificant risk of change in interest rate
4. All of the following can be classified as cash and cash equivalent, except
a. Redeemable preference shares acquired and due in 60 days
b. Commercial papers held and due for repayment in 90 days
c. Equity investments
d. A bank overdraft
5. Deposit in foreign bank which are subject to foreign exchange restriction should
be classified
a. Separately as current asset, with appropriate disclosure
b. Separately as noncurrent asset with appropriate disclosure
c. Be written off as loss
d. As part of cash and cash equivalents
6. Bank overdraft generally should be
a. Reported as deduction from current assets
b. Reported as a deduction from cash
c. Netted against cash and a net cash amount reported
d. Reported as a current liability
7. What is a compensating balance?
a. Saving account balance
b. Demand deposit account balance
c. Temporary investment serving as collateral for outstanding loan
 d. Minimum deposit required to be maintained in connection with borrowing
arrangement
8. If the cash balance shown in the accounting records is less than the correct cash
balance and neither the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the entity
b. Deposit in transit
c. Outstanding checks
d. Bank charges not yet recorded by the entity
9. Bank statements provide information about all of the following, except
a. Checks cleared during the period
b. NSF checks
c. Bank charges for the period
d. Errors made by the depositor
10. The internal control feature specific to petty cash is
a. Separation off duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest System

PROBLEMS.

11. Manny Ningil Company had the following balances on December 31, 2019:

Cash in checking account 350, 000

Cash in money market account 750, 000
Treasury bill, purchased November 1,
2019 maturing January 31, 2020 3, 500, 000
Time deposit purchased December 1,
2019 maturing March 31, 2020 4, 000, 000

What amount should be reported as cash and cash equivalent on December

31, 2019?
a. 1, 100, 000
b. 3, 850, 000
c. 4, 600, 000
d. 8, 600, 000
12. Welch Company had the following balance on December, 31 2019:

Cash in bank- current account 5, 000, 000

Cash in bank- payroll account 1, 000, 000
Cash on hand 500, 000
 Cash in bank- restricted account for
the building construction expected to
be disbursed in 2020 3, 000, 000
Time deposit, purchased December
15, 2019 and due March 15, 2020 2, 000, 000

The cash on hand included a P 200, 000 check payable to Welch, dated
January 15, 2020.

What total amount should be reported as cash and cash equivalents on

December 31, 2019?
a. 6, 300, 000
b. 8, 300, 000
c. 6, 500, 000
d. 8, 700, 000
13. Alla Din Company provided the following data on December 31, 2019:

Checkbook balance 4, 000, 000

Bank statement balance 5, 000, 000
Check drawn on Alla Din’s account,
payable to supplier, dated and
recorded on December 31, 2019, but
not mailed until January 15, 2020 500, 000
Cash in sinking fund 2, 000, 000

On December 31, 2019, what amount should be reported as “cash” under

current assets?

a. 4, 500, 000
b. 5, 000, 000
c. 3, 500, 000
d. 6, 500, 000
14. At year-end, Ah Sarado Company reported cash and cash equivalents which
comprised the following:

Cash on hand 500, 000

Demand deposit 4, 000, 000
Certificate of deposit 2, 000, 000
Postdated customer check 300, 000
Petty cash fund 50, 000
Traveler’s check 200, 000
Manager’s check 100, 000
 Money order 150, 000

What total amount should be reported as “cash” at year-end?

a. 7, 000, 000
b. 4, 800, 000
c. 6, 800, 000
d. 5, 000, 000
15. Mighty Company reported petty cash fund which comprised the following:

Coins and currency 3, 300

Paid vouchers:
Transportation 600
Gasoline 400
Office Supplies 500
Postage stamps 300
Due from employees 1, 200 3, 000
Manager’s check by bank marked “NSF” 1, 000
Check drawn by the entity to the order of petty cash
custodian 2, 700

What is the correct amount of petty cash fund for statement presentation
purposes?

a. 10, 000
b. 7, 000
c. 6, 000
d. 9, 000
16. Calatong 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- 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 1, 000, 000

The petty cash fund included unreplenished December 2019 petty cash
expensive vouchers P 10, 000 and employee IOU P 5, 000.
 The cash on hand included a P 100, 000 customer check payable to Calatong
dated January 15, 2020.

The sinking fund is set aside to settle a bond payable that is due on June 30,
2020.

What total amount should be reported as cash and cash equivalents on

December 31, 2019?
a. 7, 435, 000
b. 5, 435, 000
c. 4, 435, 000
d. 5, 535, 000
17. In preparing the August 31, 2019 bank reconciliation, Pellosis Company provided
the following information:

Balance per bank statement 1, 805, 000

Deposit in transit 325, 000
Return of customer’s check for
insufficient fund 60, 000
Outstanding checks 275, 000
Bank service charge for August 10, 000

On August 31, 2019, what is the adjusted cash in bank?

a. 1, 855, 000
b. 1, 795, 000
c. 1, 785, 000
d. 1, 755, 000
18. Rod Company reported a cash balance of P 1, 980, 000 on December 31, 2019,
which include the following;

Petty cash, including IOU from an

employee of P 1, 250 10, 000

Cash on hand, including a customer’s

check of P 17, 500, dated January 5,
2020 625, 000

Cash in bank, General Account, net

of 12, 500 bank overdraft in another
bank’s account 525, 000

Cash in bank, Payroll Account, net of

P 10, 000 check dated December 28,
 2019 but unreleased as of December 320, 000
31

Savings deposit, restricted for the

purchase and intended for plant
expansion 500, 000

What is the correct amount of cash that should be shown in Rod Company’s
statement of financial position at December 31, 2019?

a. 1, 483, 750
b. 1, 458, 750
c. 1, 448, 750
d. 1, 348, 750
19. Compute for the cash shortage.

Office supplies 341.60

Transportation 1, 321.40
Postage 780.00
Miscellaneous 837.60
Representation 1, 000.00

Imprest balance of P5, 000.

a. 49
b. 1, 499. 40
c. 50
d. 2, 000
20. BONUS!!!!

IF YOU CAN DREAM IT, YOU CAN DO IT.

-WALT DISNEY