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PRACTICAL ACCOUNTING 1 – REVIEW

CASH & CASH EQUIVALENTS

PROF. U.C. VALLADOLID

Multiple Choice
dentify the letter of the choice that best completes the statement or answers the question.

1. In connection with your audit of John Paul Corporation for the year ended December 31, 2020, you gathered the following:

Current account at Metrobank P2,000,000

Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account – restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P4,000 in currency and expense receipts for P6,000
) 10,000
Treasury bills, due 3/30/2021 (purchased 12/29/2020) 200,000
Treasury bills, due 1/31/2021 (purchased 2/1/2020) 300,000

Based on the above information and the result of your audit, compute for the cash and cash equivalents that will be reported on the
December 31, 2020 statement of financial position.
a. P2,784,000 c. P2,790,000
b. P3,084,000 d. P2,704,000

2. The controller Cooper Corporation, is attempting to determine the amount of cash to be reported on its December 31, 2020
statement of financial position. The following information is provided:

1. Commercial savings account of P1,200,000 and a commercial checking account balance of P1,800,000 are held at PS Bank.

2. Travel advances of P360,000 for executive travel for the first quarter of the next year (employee to reimburse through salary
deduction).

3. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a long term debt.

4. Petty cash fund of P10,000.

5. An I.O.U. from a company officer in the amount of P40,000.

6. A bank overdraft of P250,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the present
time, the company has no deposits at this bank.

7. The company has two certificates of deposit, each totaling P1,000,000. These certificates of deposit have maturity of 120 days.

8. Cooper has received a check dated January 2, 2021 in the amount of P150,000.

9. Cooper has agreed to maintain a cash balance of P200,000 at all times at PS Bank to ensure future credit availability.

10. Currency and coin on hand amounted to P15,000.

Based on the above data, how much will be reported as cash and cash equivalents at December 31, 2020?
a. P3,025,000 c. P2,575,000
b. P2,825,000 d. P5,025,000

3. In your cash count of the petty cash fund of Kaila Company as of July 4, 2020, you found the following composition of its petty cash
fund:

Bills and coins counted 2,450.00

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Approved and signed petty cash vouchers

Dated June 2020 3,300.00
Dated July 1-4, 2020 800.00
IOU from Joe Santos (Employee) 1,400.00
A check drawn by Juvy Victoria, an employee,
dated July 15, 2020 2,000.00

The petty cash fund has an imprest balance of 10,000. The company’s reporting period ends on June 30.
1. What is the correct balance of the petty cash fund?
a. 3,000.00 c. 3,250.00
b. 3200.00 d. 3,100.00
2. How much is the cash shortage or overage?
a. 100 shortage c. 100 overage
b. 50 shortage d. 50 overage

4. Jeff Incorporated established a petty cash fund of 5,000 for incidental expenses on June 1, 2020. At the end of the month, the
count of cash on hand indicated that 670.40 remained in the fund. A review of the petty cash vouchers disclosed the following
expenses had been incurred during the month:

Office supplies 341.60 Miscellaneous 837.60

Transportation 1,321.40 Representation 1,000.00
Postage 780.00
Question 1: What is the amount of cash shortage?
a. P 55.50 c. P 48.00
b. 45.00 d. P 49.00

5. On January 1, 2020, Kyle Corporation established a petty cash fund of P400. On December 31, 2020, the petty cash fund was
examined and found to have receipts and documents for miscellaneous expenses amounting to P364. In addition, there was cash
amounting to P44. What entry would be required to record replenishment of the petty cash fund on December 31, 2020?
a.  Petty Cash.................... 364
   Cash Short and Over......... 8
   Cash........................ 356
b.  Miscellaneous Expense......... 364
   Cash Short and Over......... 8
   Petty Cash.................. 356
c.  Miscellaneous Expense......... 364
   Cash Short and Over......... 8
   Cash........................ 356
d.  Miscellaneous Expense......... 356
   Cash Short and Over......... 8
   Cash........................                    364

6. The following data pertaining to the cash transactions and bank account of Angel Company for May 2020 are available to you:
Cash balance, per accounting records, May 31, 2020 P 51,582
Cash balance, per bank statement, May 31, 2020 95,874
Bank service charge for May 327
Debit memo for the cost of printed checks delivered by the bank;
the charge has not been recorded in the accounting records 375
Outstanding checks, May 31, 2020 20,184
Deposit of May 30 not recorded by bank until June 1 14,610
Proceeds of bank loan on May 30, not recorded in the accounting
records, net of interest of P900 17,100
Proceeds from a customer’s promissory note; principal amount P24,000,
with interest collected by the bank 24,300
Check No. 1086 issued to a supplier entered in the accounting records
as P6,300 but deducted in the bank statement at an erroneous amount of 3,600
Stolen check lacking an authorized signature, deducted from Angel’s
account by the bank in error 2,400
Customer’s checks returned by the bank marked NSF, indicating that the
customer’s balance was not adequate to cover the checks; no entry has
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been made in the accounting records to record the returned check 2,280

1. The adjusted cash in bank balance at May 31, 2020 is:

a. P 87,570 b. P 90,000 c. P 90,570 d. P 90,900

2. The cash in bank balance of Angel COMPANY at May 31, 2020 is:
a. Understated by P39,318 c. Understated by P38,418
b. Understated by P38,988 d. Understated by P35,988
7. The books of JP's Service, Inc. disclosed a cash balance of P687,570 on December 31, 2020. The bank statement as of
December 31 showed a balance of P547,800. Additional information that might be useful in reconciling the two balances
follows:

(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.

(b) A customer's note dated September 25 was discounted on October 12. The note was dishonored on December 29 (maturity
date). The bank charged JP's account for P142,650, including a protest fee of P2,650.

(c) The deposit of December 24 was recorded on the books as P28,950, but it was actually a deposit of P27,000.

(d) Outstanding checks totaled P98,850 as of December 31.

(e) There were bank service charges for December of P2,100 not yet recorded on the books.

(f) JP's account had been charged on December 26 for a customer's NSF check for P12,960.

(g) JP properly deposited P6,000 on December 3 that was not recorded by the bank.

(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.

(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been collected on December 27, and the
bank charged a P360 collection fee.

Based on the above and the result of your audit, determine the following:

1. Adjusted cash in bank balance

a. P583,200 c. P589,200
b. P577,200 d. P512,400

2. Net adjustment to cash as of December 31, 2020

a. P104,370 c. P 98,370
b. P110,370 d. P175,170

8. On March 3, 2020, Jerome Company received its bank statement. However, the closing balance of the account was unreadable.
Attempts to contact the bank after hours did not secure the desired information. Thus, you had to prepare a bank reconciliation
from the available information summarized below:
February 28 book balance 1,460,000
Note collected by bank 100,000
Interest earned on note 10,000
NSF check of customer 130,000
Bank service charge on NSF check 2,000
Other bank service charges 3,000
Outstanding checks 202,000
Deposit of February 28 placed in night depository 85,000
Check issued by Axle Company charged to Jerome’s account 20,000
What was the cash balance per bank statement?
a. 1,435,000
b. 1,532,000
c. 1,338,000
d. 1,557,000

9. Information pertaining to Ana Company appears below.

Balance per bank statement July 31 1,240,000
Balance per ledger, July 31 750,000
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Deposit of July 30 not recorded by bank 280,000

Debit memo – service charge 10,000
Credit memo – collection of note by bank for Ana 300,000
Outstanding checks ?
An analysis of the canceled checks returned with the bank statement reveals the following:
? Check for purchases of supplies was drawn for P60,000 but was recorded as P90,000.
? The manager wrote a check for traveling expenses of P100,000 while out of town. The checks was not recorded.

What is the amount of outstanding checks on July 31?

a. 970,000 c. 270,000
b. 550,000 d. 610,000

10. Norman Company had the following bank reconciliation on June 30, 2020:
Balance per bank statement, June 30 3,000,000
Add: Deposit in transit 400,000
Total 3,400,000
Less: Outstanding checks 900,000
Balance per book, June 30 2,500,000
The bank statement for the month of July showed the following:
Deposits (including P200,000 note collected for Norman) 9,000,000
Disbursement (including P140,000 NSF check and
P10,000 service charge) 7,000,000

All reconciling items on June 30 cleared through the bank in July. The outstanding checks totaled P600,000 and the deposit in
transit amounted to P1,000,000 on July 31.

Q1. What is the cash balance per book on July 31, 2020?
a. 5,400,000
b. 5,350,000
c. 5,550,000
d. 4,500,000

Q2. What is the amount of cash receipts per book in July 2020?
a. 9,400,000
b. 9,600,000
c. 8,600,000
d. 9,800,000

Q3. What is the amount of cash disbursements per book in July 2020?
a. 6,550,000
b. 6,700,000
c. 7,300,000
d. 6,850,000

11.The following information is shown in the accounting records of a company:

Balances as of January 1, 2020

Cash P93,000
Merchandise inventory 129,000
Accounts Receivable 100,500
Accounts payable 79,500
Balances as of December 31, 2020
Merchandise Inventory P117,000
Accounts receivable 136,500
Accounts payable 72,000

Total sales and cost of goods sold for 2020 were P1,197,000 and P874,500, respectively. All sales and all merchandise purchases
were made on credit. Various operating expenses of P160,500 were paid in cash. Assume that there were no other pertinent
transactions. The cash balance on December 31, 2020 would be
a. 162,500
b. 223,500
c. 384,000
d. 457,500
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12. On October 31, year 2, Dingo, Inc. had cash accounts at three different banks. One account balance is segregated solely for a
November 15, year 2 payment into a bond sinking fund. A second account, used for branch operations, is overdrawn. The third
account, used for regular corporate operations, has a positive balance. How should these accounts be reported in Dingo’s October
31, year 2 classified balance sheet?
a. The segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset,
and the overdraft should be reported as a current liability.
b. The segregated and regular accounts should be reported as current assets, and the overdraft should be reported as a current
liability.
c. The segregated account should be reported as a noncurrent asset, and the regular account should be reported as a current asset
net of the overdraft.
d. The segregated and regular accounts should be reported as current assets net of the overdraft.

13. During the year, Jerome issued the following checks pertaining to its petty cash fund:
*P5,000 check issued to established the petty cash fund
*P2,000 checks issued to replenish the petty cash fund
*P2,000 check to increase the pety cash fund
All the above checks were correctly recorded.

At balance sheet date, the petty cash fund is consisting of the following:
*P2,200 paper currencies and coins
*P4,300 paid, but unreplenished vouchers

To record the adjustment of petty cash fund balance as of balance sheet date, the adjusting entry would have a
a. debit to petty cash shortage of P500 c. credit to overage of P1,500
b. debit to petty cash of P500 d. credit to petty cash of P4, 300

14. Jerome Co. was organized on January 2, 2020. The following items are from the company’s trial balance on December 31, 2020.
Common stock P1,200,000
Additional paid-in-capital 50,000
Merchandise inventory 69,000
Land 1,000,000
Building 1,400,000
Furniture and fixtures 367,000
Accounts receivable 165,400
Accounts payable 389,650
Notes payable-bank 500,000
Sales 6,235,200
Operating expenses (including depreciation of P400,000) 1,005,150

Additional information is as follows:

1. Deposits in transit, December 31 P45,167
2. Service charge for December 2,000
3. Outstanding checks, December 31 163,666
4. Bank balance, December 31 520,159
5. Jerome Co.’s mark up on sales is 30%.

1. What is the total collection from sales?

a. P6,114,967 c. P6,235,200
b. P4,119,240 d. P6,069,800
2. What is the total payment for merchandise purchases?
a. P3,905,990 c. P4,043,990
b. P4,649,140 d. P5,914,550

3. What is the total cash receipts per books?

a. P7,819,800 c. P7,985,200
b. P7,769,800 d. P5,869,240

4. What is the total cash disbursements per books?

a. P7,816,140 c. P8,021,290
b. P7,416,140 d. P7,278,140

5. What is the cash balance per books on December 31?

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a. P403,660 c. P569,060
b. P541,660 d. P707,060

6. What is the adjusted cash balance on December 31?

a. P638,568 c. P401,660
b. P705,060 d. P539,660

15. The bookkeeper of Jostin Company recently prepared the following bank reconciliation on December 31, 2020:

Balance per bank statement 20,000,000

Add: Deposit in transit 1,500,000
Checkbook and other bank charge 50,000
Error made by Jostin in recording check No.
1005 (issued in December) 150,000
Customer check marked DAIF 500,000 2,200,000
Total 22,200,000
Deduct: Outstanding checks 1,900,000
Note collected by bank (includes P200,000 interest) 2,300,000 4,200,000
Balance per book 18,000,000

Jostin has P1,000,000 cash on hand on December 31, 2020. The amount to be reported as cash on the balance sheet as of
December 31, 2020 should be
a. P19,600,000 c. P20,600,000
b. P18,600,000 d. P19,750,000

16. You were able to gather the following from the December 31, 2020 trial balance of JP Corporation in connection with your audit of
the company:

Cash on hand P 500,000

Petty cash fund 10,000
BPI current account 1,000,000
Security Bank current account No. 01 1,080,000
Security Bank current account No. 02 (80,000)
PNB savings account 1,200,000
PNB time deposit 500,000

Cash on hand includes the following items:

a. Customer’s check for P40,000 returned by bank on December 26, 2020 due to insufficient fund but subsequently
redeposited and cleared by the bank on January 8, 2021.
b. Customer’s check for P20,000 dated January 2, 2021, received on December 29, 2020.
c. Postal money orders received from customers, P30,000.

The petty cash fund consisted of the following items as of December 31, 2020.

Currency and coins P 2,000

Employees’ vales 1,600
Currency in an envelope marked “collections for charity” with names
attached 1,200
Unreplenished petty cash vouchers 1,300
Check drawn by JP Corporation, payable to the petty cashier
4,000
P10,100

Included among the checks drawn by JP Corporation against the BPI current account and recorded in December 2020 are the
following:
a. Check written and dated December 29, 2020 and delivered to payee on January 2, 2021, P80,000.
b. Check written on December 27, 2020, dated January 2, 2021, delivered to payee on December 29, 2020, P40,000.

The credit balance in the Security Bank current account No. 2 represents checks drawn in excess of the deposit balance. These
checks were still outstanding at December 31, 2020.
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The savings account deposit in PNB has been set aside by the board of directors for acquisition of new equipment. This account is
expected to be disbursed in the next 3 months after the end of the reporting period.

Based on the above and the result of your audit, determine the adjusted balances of following:
1. Cash on hand
a. P410,000 c. P470,000
b. P530,000 d. P440,000

2. Petty cash fund

a. P6,000 c. P2,000
b. P7,200 d. P4,900

3. BPI current account

a. P1,000,000 c. P1,080,000
b. P1,120,000 d. P1,040,000

4. Cash and cash equivalents

a. P2,917,200 c. P3,052,000
b. P3,074,900 d. P3,066,000

17. You are attempting to determine an apparent cash shortage that you believe resulted from an employee’s theft.
You have assembled the following information for the month of March:

Cash balance per books, March 1 115,963.70

Cash receipts for March, per books 246,475.00

Cash disbursements for March, per books 334,709.10
Cash balance, per bank statement, March 31 15,341.40
Deposit in transit, March 31 9,000.00
Outstanding checks, March 31 2,703.80
Bank service charge for March 92.00

What is the amount of the suspected ash shortage?

a. 5,800
b. 6,350
c. 6,000
d. 5,500

18. You are auditing the cash in bank account of Pamela Manufacturing Company as of December 31, 2020.

Your examination revealed the following:

From the bank statement:

Balance, December 1, 2020 P 876,750
Deposits (20) 9,153,760
Check (64) plus debit memos (8,524,300)
Service charges for new checks ( 2,250)
Balance, December 31, 2020 P 1,503,960

From the company’s records:

CASH
Nov. 1 652,070 Nov. 30 CD 6,654,410
Nov. 30 CR 6,824,290 Dec. 1 – Bank reconciliation 38,400
Dec. 31 CR 9,198,720 Dec. 31 CD 8,574,610
CD – Cash disbursements
CR – Cash receipts
Your review of last month’s bank reconciliation and the current bank statement reveals the following.
1. Outstanding checks: November 30, 2020 P254,720
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December 31, 2020 335,610

2. Deposit in transit: November 30, 2020 164,220
December 31, 2020 209,180
3. Check no 359 for Office Repairs was written for P6,950 but recorded in the cash disbursements journal as P9,650.
The bank deducted the check as P6,950. The error happened in November and is not yet recorded as of December 31.
4. A check written on the account of the Pamplona Company for P5,830 was deducted by the bank from the Pamela’s
account.
5. Included with the bank statement was debit memorandum dated December 31 for P24,750 for interest on a note taken
out by the Pamela Manufacturing Company on November 30.
6. The service charge for the new checks has not been recorded.
7. The November 30 bank reconciliation showed as reconciling items a service charge of P3,500 and a customer’s DAIF
check for P34,900.

1. How much is the audit adjusted balance of Receipts as of December 31?

a) 9,198,720 b) 9,918,270 c) 9,891,720 d) 9,189,270 e) none of the above

2. How much is the audit adjusted balance of Disbursements as of December 31?

a) 8,601,610 b) 8,610,601 c) 8,601,601 d) 8,610,610 e) none of the above

3. Which is to be included in the audit adjusting entries?

a) Dr: Cash in Bank 27,000 b) Cr: Cash in bank 2,200 c) Dr: Interest expense 24,750 d) None of
the above