ACT 143 - INTERMEDIATE ACCOUNTING 1 – SUMMER TERM

LONG EXAMINATION 1 – Cash and Cash Equivalents (SET A)

Direction: Satisfy the requirements for each problem. Present your solutions in good form.

PROBLEM 1: The controller of W Co. is attempting to determine the amount of cash and cash equivalents to be
reported on its December 31, 2018, balance sheet. The following information is provided.

1. Savings account of P600,000 and a commercial checking account balance of P800,000 are held at First
National Bank.
2. Money Market Fund account held at Raiko Company (a mutual fund organization) permits W to write
checks on this balance, P5,000,000.
3. Travel advances of P180,000 for executive travel for the first quarter of next year (employee to pay
through salary deductions).
4. A separate cash fund in the amount of P1,500,000 is restricted for the retirement of long term debt.
5. Petty Cash fund, P1000.
6. An IOU from Maddie Oh, company driver, on the amount of P15,000.
7. A bank overdraft of P110,000 has occurred at one of the banks the company uses to deposit its cash
receipts. At present, the company has no deposit at this bank.
8. The company has two certificates of deposit (CD), each totaling P500,000. These CDs have a maturity of
120 days.
9. W has received a check that is dated January 12, 2019, in the amount of P125,000.
10. W has agreed to maintain a cash balance of P 500,000 at all times at First National Bank to ensure credit
availability.
11. W has purchased P 2,100,000 of commercial paper of Lee Co. due in 60 days.
12. Bills and coins undeposited amounted to P 70,000.

REQUIRED:
(a) Compute the amount of cash to be reported on W Co.’s Balance Sheet at December 31, 2018.
(b) Indicate the proper classification of items that are not reported as Cash as of December 31, 2018.

PROBLEM 2: ABC Company has the following information:

Petty Cash
1) The petty cash fund was established on May 10, 2019 in the amount of P25000.
2) Expenditures from the fund by the custodian as of May 31, 2019, were evidenced by approved receipts for
the following:
Postage expenses P 330
Mailing labels and other supplies 650
IOU from employees 300
Shipping charges 575
Newspaper advertising 228
Miscellaneous expense 155

On May 31, 2019, the petty cash fund was replenished and increased to P30,000; currency and coin in the fund at
that time totaled, P24,600.

Bank reconciliation
Third National Bank – Bank Statement
Disbursements Receipts Balance
Balance, May 1, 2019 P87,690
Deposits 280,000
Note payment direct from customer 9,300
(interest of P300
Checks cleared during May P311,500
Bank Charges 270
Balance, May 31, 2019

ABC Company’s Cash Records:

Balance, May 1, 2019 P 88,500

Deposits during May 2019 310,000
Checks written during May 2019 (318,350)

Deposits in transit are determined to be P 30,000 and checks outstanding at May 31, 2019 total P 8,500. Cash on
hand (besides petty cash) at May 31, 2019 is P2460.
REQUIRED:
a) Prepare the journal entries to record the transactions related to the PCF for May.
b) Prepare a bank recon dated May 31, 2019, proceeding to a correct cash balance, and prepare the journal
entries necessary to make the books correct and complete.
c) Compute for the amount of Cash reported on May 31, 2019.

PROBLEM 3: The accountant of Golden Tree Company gathered the following data in his attempt to reconcile its
records with the data from the bank statements sent by BDP Bank for the month of March and April.

March April
Cash in BDP per ledger 2,055,300 3,002,500
Balances per bank statement 2,203,500 3,097,250
Credits to Cash in BDP account 4,619,800
Deposits and credit memos per bank statement 5,251,500
Outstanding checks 275,000 580,000
Deposit in transit 125, 000 670,000
Erroneous bank credit 20,000
Note collected by bank 17,000
Bank service charge 1,800 2,450

Golden Tree Company discounted its own note for P200,000 with the bank in April at the discount rate of 12%.
The note is due in 6 months. The net proceeds was credited by the bank in April but has not yet been recorded in
the books.

Book receipt for April is understated by P 4,500.

Book disbursement for April is overstated by P2,700.

Loan amortization for April amounting P45,000 was covered by a check payment but a debit memo for the same
amount was issued by the bank in April.

REQUIRED: Prepare a four-column reconciliation for Golden Tree Company.

PROBLEM 4: Oh Song Company has just received the August 31, 2019 bank statement which is summarized
below:

Balance, August 1 P 93,690

Deposits during August 320,000
Note collected for depositor, including P360 interest 10,360
Checks cleared during August (344,000)
Bank service charges ( 500)
Balance, August 31 P 79,550

The general ledger cash account had the following entries for the month of August 2019:

CASH
Balance, August 1 P 97,290 Cash disbursements in August P 349,000
Receipts during August 350,000

All outstanding checks as of July 31, 2019 amounting to P6,400 cleared the bank in August. Deposit in transit
at August 31, totaled P 40,000.

REQUIRED: Determine the following.

(a) Outstanding checks at August 31, 2019.
(b) Deposits in transit at July 31, 2019.

Problem 5
In comparing the balance per books of Weightlifting Fairy Co. with the bank statement obtained from the
bank, together with the canceled checks and other memoranda at December 31, 2019, you observed the
following:

a) Balance per bank statement P 892,346.30

b) Balance per books 590,884.60
c) Outstanding checks, 12/31/19 333,788.20
d) Receipts of 12/31/19 deposited on 1/02/20 53,172.00
e) Service charge for December 2019 225.00
f) Proceeds of bank loan, 12/15/19 omitted from company records
(net of 12% interest for 3 months) 97,000.00
g) Deposit of 12/23/19 omitted from the bank statement 28,924.10
h) Check of Kimchi Co. charged back on 12/22/19 for lack of
Counter signature, redeposited on 01/01/20. No entry was
made for the charge back of the redeposit. 8,737.40
i) Error on bank statement in entering deposit of 12/16/19
Correct amount P 31,824.00
Entered in statement 31,814.00 10.00
j) Check #3917 of Weightlifting Fancy Co. charged in error
to the company’s account 26,900.00
k) Proceeds of note of Kim Bok Joo Co. collected by bank on
12/01/19 not entered in the books:
Principal P20,000.00
Interest 400.00
Collection charge ( 50.00) 20,350.00
l) Erroneous debit memo of 12/23/19 to charge company’s
account with settlement of bank loan which was paid
by check #4020 on same date 50,000.00
m) Error on bank statement in entering deposit on 12/04/19
Entered as P48,171.00
Correct amount 48,071.00 100.00
n) Deposit of Weightlifting Fancy Co. erroneously credited in
The company’s account 18,192.00

REQUIRED: Determine the correct cash balance of Weightlifting Fairy Co. at December 31, 2019 by
presenting a bank reconciliation using the adjusted balance method.