PROBLEM 1.

Your audit of the cash account of Leila Corporation reveals the following information:
(1) Savings account of P1,500,000 and commercial checking account of P800,000
with Metropolitan Bank and Trust Company. Balances were taken from Leila’s
general ledger.
(2) Three certificates of deposit with Metro Bank, each totaling P1,000,000, with
maturity dated of 90 days and less.
(3) Money market placements with Axa Group of Companies, not intended to be
terminated until 2019, P3,000,000 face amount. Last value date was December
29, 2019 on which date, cumulative income earned on the instrument is
P200,000.
(4) Checking account with Allied Bank for payroll fund, P1,200,000 and another
checking account for tax fund, P500,000.
(5) A check for P35,000 for salaries of an employee on leave was recorded as
disbursed on December 15; the employee has not claimed the check as of
December 31.
(6) Savings account with Allied Bank, P900,000 as equipment acquisition fund,
P480,000 of which was earmarked for an equipment to be delivered in March
2020. You were able to verify that this amount was actually disbursed in March
2020.
(7) Petty cash fund with imprest balance of P20,000. Your count of the fund on
January 4, 2020 revealed the following fund composition: Bills and coins,
P12,000; paid petty cash vouchers, all dated December 2019, P6,800; IOUs from
employees, with no supporting petty cash vouchers, P1,200; and a check drawn
against MetroBank checking account in the amount of P5,300 covering Meralco
bill for the period November 29 to December 30, 2019.
(8) Checks from customers in settlement of account, both on sales invoices for the
month of December 2019, totaling P85,000. The checks were verified to have
been recorded in the December cash receipts journal, although one check for
P25,000 was dated January 8, 2020. All the checks proved to be good when
subsequently deposited.

REQUIRED:
(a) Prepare all the necessary audit adjusting entries as a result of the
foregoing.
(b) Determine the amount that will be reported as “Cash and Cash
Equivalents” on the December 31, 2019 statement of financial position.

PROBLEM 2
You are making an audit of the San Rafael Company for the year ended December 31,
2019. The balance of the petty cash account on December 31, 2019 was P15,000.
Your count of the imprest cash fund made at 9 am on January 3, 2020, in the presence
of Ms. G. Gonzaga revealed:
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Bills and coins

Denomination Quantity
1,000 2
500 4
100 14
50 16
20 10
10 19
5 17
1 25
0.50 21
0.25 28

Checks
Date Maker Bank Amount
12/28/201 Urquiola, employee PNB P3,000.00
9
12/29/201 Sta. Maria, employee Security 1,500.00
9 Bank
12/31/201 L. Chua, customer Asia Trust 2,500.00
9
01/02/202 a. Bobadilla, customer FEBTC 3,200.00
0
01/10/202 C. German, employee Union Bank 1,500.00
0 (check received 12/28/2017)

(These checks were all considered good when deposited after dates shown on the
checks. The first four checks were actually deposited January 3; the German check
was deposited January 13; all five checks proved to be good.)

Vouche
Date Particulars Amount
r No.
12/11/201 151 Freight bill on merchandise sold P500.00
9
12/28/201 183 Supplies 300.00
9
12/29/201 184 Freight bill on merchandise 394.20
9 purchased
12/31/201 185 Freight bill on furniture purchased 741.10
9
01/02/202 001 Freight bill on merchandise 244.70
0 purchased (purchase was made in
December)
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IOU:

Date Particular Amount

12/21/201 S. Dechavez, employee P300.00
9

Sales Invoices (for cash sales, collections handled by Ms. G. Gonzaga)

Invoice No. Particular Amount
118 December 30 P1,000.40
129 December 31 2,500.00
133 January 2 3,200.00

(As a general rule, the petty cashier endeavoured to turn over the proceeds of cash
sales to the general cashier every Friday. Proceeds on these sales were recorded and
deposited by the general cashier.)

Unusused office supplies – P40.00

(These supplies represent the unused portion of those purchased on Voucher No. 183.)

REQUIRED:
1. Prepare a cash count sheet on January 3, 2020.
2. Prepare the necessary audit adjusting entries as at December 31, 2019.

PROBLEM 3.
The Sunshine Corporation engaged your service to audit its accounts. In your
examination of cash, you find that the cash account represents both cash on hand and
cash in bank. You further noted that there is very poor internal control over cash.

Your audit covers the period ended December 31, 2019. You made a cash count on
January 15, 2020, and cash on hand on this date was determined to be P52,000.
Examination of the cashbooks and other evidences of transaction disclosed the
following:

1. January 1 through 15, 2020 collections per duplicate receipts, P199,000.

2. Total of duplicate deposit slips, all dated January 2 through 15, P110,000,
includes a deposit representing collections of December 31.
3. Cash book balance on December 31, 2017 is P465,000, representing both cash
on hand and cash in bank.
4. Bank statement for December shows a balance of P424,000.
5. Outstanding checks at December 31:

Check No. Check Amount

November checks:
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183 4,500
198 12,500
December checks:
252 6,000
254 4,000
280 52,000
301 9,000
319 25,000

6. Undeposited collections at December 31, P48,000

7. An amount of P19,000 representing proceeds of a customer’s note was credited
by bank, but is not yet taken up in the company’s books.
8. Bank service charge for December, P1,500.

The company cashier presented to you the following reconciliation statement at

December 2019, which he prepared:

Balance per books, December 31, 2019 456,000

Add: outstanding checks
Ck # Ck Amount
252 6,000
254 4,000
280 25,000
301 900
319 15,000 50,900
Total 506,900
Bank charges (1,500)
Undeposited collections (51,000)
Balance per bank 454,400

REQUIRED:
1. Determine the amount of cash shortage as of December 31, 2019
2. Prepare a schedule showing how the cashier attempted to conceal his
shortage
3. Determine the amount of additional shortage in January 2020
4. Prepare the necessary audit adjusting entries at December 31, 2019.

PROBLEM 4.
The treasurer of STARR COMPANY prepared the following correct bank reconciliation
as of April 30, 2019:

Balance per bank statement, April 30 P570,360

Add: Deposit in transit 29,360
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499,720
Less: Outstanding checks (144,800)
Adjusted balance P454,920

Balance per ledger, April 30 P463,040

Less:
Customer’s DAIF check (8,000)
Service charge (120)
Adjusted balance P454,920

The bank statement for May shows:

Balance, May 1, 2019 P570,360
Deposits 883,200
1,353,560
Checks cleared (1,320,320)
Service charges (280)
Balance, May 31, 2019 P132,960

The STARR Company deposits shown on the bank statement include the proceeds of a
P240,000 note payable drawn by the treasurer of Starr Company payable to the bank in
60 days. No entry was made for the note in the company’s books. The total cash
receipts as shown by Starr Company records amount to P654,400, and the total checks
recorded amount to P613,120. This latter total does not include one check drawn and
signed by the treasurer payable to himself. The treasurer has disappeared. No record
of this check appears anywhere in the company’s records. Checks outstanding on May
31, 2019, total P133,600. The DAIF check and the service charge for April were
recorded by the company in May.

REQUIRED:
1. By preparing a proof of cash, determine the following:
a. The unadjusted cash balance as of May 31 in the company’s records;
b. The undeposited receipts, if any, as of May 31;
c. The amount of the check drawn payable to the cashier; and
d. The adjusted cash balance as of May 31.

2. Prepare the necessary audit adjusting entries.