-Cash and Cash Equivalents Review

CASH AND CASH EQUIVALENTS 1.

On December 31, 2014, Xenia Company reported the following in its safe: Undeposited collections Cash in bank (Metrobank) – demand deposit Cash in bank (BPI) – demand deposit Cash in bank (BPI) – payroll fund Cash in bank (BPI) – time deposit ( 6 months) Customer’s check, dated Dec. 6, 2014, returned by bank marked ”DAIF” Customer’s check dated Jan. 3, 2015 Bank draft Traveler’s check Revolving (change) fund Petty cash fund ( invoices and receipts, P13,089, coins P789) Value added tax fund Money order Cash in bank (Banco Filipino) closed due to bankruptcy Cash in foreign bank, restricted for future equipment acquisition IOU’s from employees Overpayment to supplier due to purchase returns not recorded Cash in sinking fund – related liability is due currently BSP bills, purchased December 8, 2013 (maturity date February 28, 2015) Money Market in Chinabank – 90 days

P 346,780 67,530 (125,660) 180,010 500,000 67,950 120,000 23,470 11,770 890 14,000 67,890 15,660 25,880 89,760 12,060 28,670 110,450 350,090 1,000,000

Compute the amount to be reported as a. Cash P699,579 b. Cash equivalents. P1,000,000 The BSP bills did not qualify as Cash Equivalent because it was purchased more than 3 months before maturity. 2.

Czarina Company reported the following on December 31, 2014: Collections as of 5:00pm of Dec. 29, 2014, deposited Jan. 2, 2015 Petty cash fund BDO acct #10112 – checking BDO acct #10123 – savings (w/ 10% unrestricted compensating balance) BSP treasury bills – 150 days BPI time deposit – lock in period (Nov. 1, 2014 – Jan. 30, 2015) Land bank current account   

P 1,000,000 40,000 800,000 100,000 6,000,000 4,000,000 2,000,000

The collections on Dec. 29, 2014 includes a customer check dated Jan. 2, 2015 of P200,000 and money order of P80,000. The petty cash fund included unreplenished vouchers of P4,000 and employee check of P6,000 dated Jan. 28, 2015. 80% of the BPI account is set aside for building acquisition on January 31, 2015

Compute the total amount of cash and cash equivalents. Suggested Answer: Cash items Collections P1,000,000 – P200,000 P800,000 Petty cash fund P40,000 – P4,000 – P6,000 30,000 BDO (checking and savings) 900,000 Land Bank 1,000,000 Total P2,730,000 Cash equivalents BPI P4,000,000 x 20% Total Cash and cash equivalents

3.

800,000 P3,530,000

On December 31, 2014, Gerileen Company reported Cash on hand and Petty cash fund of P750,000 and P30,000, respectively. Also, it reported Cash in Metrobank of P3,000,000 and 30-day Time Deposit in BPI of P1,500,000. The cash on hand included customer’s check of P60,000. This check was returned by bank on December 23, 2014 and marked NSF. The check was redeposited and cleared on December 27, 2014. Included also in cash on hand are P90,000 customer’s check dated January 8, 2015 and postal money order of P75,000. By the closing time of December 31, 2014, a cash count was made on the petty cash found and only P1,500 bill was found. There were petty cash vouchers signed by employees stamped “vale”, P4,500; check drawn by Gerileen payable to petty cash custodian, P21,000; and envelope marked “Collections for deceased employee”, P3,000.

Two checks were charged from Cash in Metrobank account during December 27, 2014. One is payable to a vendor, P150,000, dated January 5, 2015. The other one is P225,000, dated December 30, 2014 but was not delivered to the payee until January 2, 2015. Compute the total cash on December 31, 2014. Suggested solution: Cash on hand 750,000 -60,000 (NSF) + 60,000 (deposited same month) – 90,000 660,000 Petty cash fund 1,500 + 21,000 22,500 Metrobank 3,000,000 +150,000 + 225,000 3,375,000 4,057,500 the time deposit is cash equivalent 4.

The auditor of Bernardita Company performed a surprise cash count and found the following items: Coins, currency and bills P 44,000 Gasoline vouchers 6,000 Medical supplies vouchers 2,000 Repairs vouchers 3,000 Employees’ vales 7,000 Check payable to the petty cash custodian (her 30,000 salary) Employee check returned by bank marked “DAIF” 6,000 Employees’ birthday party contribution 10,000 The imprest balance is P50,000. What amount of petty cash fund should be reported at yearend? Suggested solution 44,000 + 30,000 = 74,000

5.

On July 3, 2014, the controller of Rauvic Company conducted a surprise count of its petty cash fund with imprest balance of P17,500, to test the honesty of its petty cash custodian. The following items were found. Bills and coins Vouchers dated June 2014 Vouchers dated July 2014 Employees IOUs dated June 2014 Employees IOUs dated July 2014 Envelope marked “paluwagan”. (The envelope was held open and no money was found inside)

P7,980.0 0 5.495.00 1,977.50 3,150.00 1,750.00 3,500.00

What amount of petty cash fund will be reported in the June 30, 2014 statement of financial position? Suggested solution: Coins and currency (7,980 – 3,500) 4,480.00 July vouchers 1,977.50 July IOUs 1,750.00 Total 8,207.50 The 3,500 was deducted from the bills and coins because it is not a company’s cash but was included in the count. July vouchers and IOUs were considered as cash items because as of June they are still cash. The money were spent in July.

6.

The BA Company’s cash accounts showed a balance of P170,000 on March 31, 2013. The following additional information is available concerning BA’s cash balance on March 31, 2013. a. A customers NSF check for P1,750 was returned with the bank statement. b. A note of P20,000 plus interest of P1,000 was collected for BA by the bank during march. The bank notified BA of this collection on the bank statement. c. The bank service charge for March was P150 d. A deposit of P12,500 mailed to the bank on March 31 did not appear on the bank statement. e. The following checks mailed to creditors had not been processed by the bank on March 31. Check # 429 P1,500 Check # 433 P2,500 Check # 432 2,200 Check # 434 3,000 f. A customer check for P1,495 in payment on his account and listed correctly for that amount on the bank statement had been incorrectly recorded on the accounting records as P1,945. How much is the adjusted cash balance to be reported by the Company? P188,650 How much is the balance per bank statement? P185,350 Suggested solution: Book Bank Unadj. 170,00 185,35 0 0 NSF (1,750) (9,200) OC CM 21,000 12,500 DIT SC (150) Error (450) 188,65 188,65 0 0

7.

In reconciling the Cash in bank of Inter Company with the bank statement balance for the month of November 2013, the following data are summarized:

Book debits for November including October credit memo for note collected, P60,000, P800,000; Book credits for November including NSF of P20,000 and service charge of P800 for October, P620,000. Bank credits for November including credit memo for November for bank loan of P100,000 and October deposit in transit for P80,000, P700,000. Bank debits for November including October outstanding checks of P170,800 and November service charge of P200, P600,000. What is the amount of outstanding checks as of November 30? How much deposit in transit as of November 30? Suggested solution OC Beg. 170,800 Book (620,000 – 20,800) 599,200 Bank (600,000 –200) (599,800) End. 170,200

DIT Beg. Book (800,000 – 60,000) Bank (700,000 – 100,000) End

80,000 740,000 (600,000) 220,000

To answer questions like this, here’s a clue. Example in Outstanding Check, our objective is to determine the ending balance of OC or those checks written by the bank which were not acknowledged by the bank. Therefore, all items not representing checks (Debit memos) credited to cash in bank account should be deducted. For Debit memos of previous month, deduct from Book disbursements. For Debit memos of current month, deduct from bank disbursements. 8.

You gathered the following November 30 bank reconciliation from the cash records of the Conrad Company in connection with your audit of the company’s financial statements for the year 2006: Balance per bank Deposits in transit Outstanding checks Balance per books

P 560,000 123,200 ( 160,000) P 523,200

Results for the month of December follow: Balance December 31 December deposits December checks December note collected (not included in deposits) December bank service charge December NSF check, returned by the bank (recorded by bank as a charge)

Bank P692,000 400,000 320,000

Books P740,000 464,800 248,000

80,000 1,200

-

26,800

-

Based on the above and the result of your audit, answer the of following: The deposits in transit as of December 31, 2006 is The outstanding checks as of December 31, 2006 is The adjusted cash balance as of December 31, 2006 is Suggested solution: DIT 123,200 + 464,800 – 400,000 OC 160,000 + 248,000 – 320,000 Adj. Cash 692,000 + 188,000 – 88,000 740,000 + 80,000 – 1,200 – 26,800 9.

188,000 88,000 792,000 or 792,000

Magnolia Company provided the following information for the bank reconciliation. Checks and charges per bank in March, inclusive of P25,000 March service charges March disbursements per book Outstanding checks as of February 29, 2014 February service charges recorded by book in March Customer’s NSF check returned as bank charge in March ( no entry made in the books) Customer’s NSF check returned in February and redeposited in March (no entry made in books in either February or March)

P4,000,00 0 4,500,00 0 1,500,00 0 50,000 500,000 250,000

How much is the outstanding checks on March 31? Beg. 1,500,000 Book (4,500,000 – 50,000) 4,450,000 Bank (4,000,000 – 25,000 – 500,000) (3,475,000) End 2,475,000 10. Roseadel Company presented the following in relation to its bank reconciliation for August 2014: Balance per book, August 31 P 200,000 Receipts per book 440,000 Disbursements per book 360,000 Balance per bank, August 31 186,000 Receipts per bank 500,000 Disbursements per bank 394,000 August collection of P20,000 recorded in the books as 2,000 August check of P60,000 recorded in the books as 6,000

Deposit of Rosebel Company credited by bank to Roseadel Check of Roadel Company charged by bank against Roseadel

Debit memos Credit memos DITs OCs a. How much is b. How much is c. How much is d. How much is

July P 10,000 20,000 60,000 10,000 the adjusted the adjusted the adjusted the adjusted

20,000 40,000

August P 5,000 30,000 48,000 65,000 cash balance as July 30? 130,000 cash balance as August 31? 189,000 August receipts? 468,000 August disbursements? 409,000

Suggested solution: BEG

RECEIPTS

BOOK

120,000

DM

(10,000)

DISBURSEME NTS

440,000

360,000 5,000

20,000

200,000

(10,000)

DM CM

END

(5,000)

(20,000)

CM

30,000

30,000

ERROR

18,000

18,000

ERROR a. 130,000

b. 468,000

54,000 c. 409,000

(54,000) d. 189,000

BANK

80,000

500,000

394,000

186,000

DIT

60,000

(60,000)

DIT

48,000

OC

(10,000)

48,000 (10,000)

OC

65,000

ERROR

(20,000)

ERROR 130,000

468,000

(65,000) (20,000)

(40,000)

40,000

409,000

189,000

11. Edrea Company provided the following information: Bank disbursement for November including check of Andrea Company, P400,000 November bank receipts including an erroneous credit of P200,000

P3,940,00 0 5,000,00 0 800,000 600,000 1,860,00 0 3,600,00 0 4,400,00 0 1,200,00 0

November 30 outstanding checks October 31 deposit in transit November 30 bank statement balance November book disbursements (check of P600,000 recorded in error as 60,000) November book receipts (collection of P200,000 recorded as P20,000) October 31 book balance Suggested solution (in thousands) BOO K OCT 31 REC. DISB. 1,200

4,400

3,600

NOV 30

BANK

2,000

DM

DIT

DM

DIT

CM

OC

How How How How How

REC. 5,000

600

(600)

DISB. 3,940

380 (200)

380 800

(540)

(200) 180

(400)

180

much much much much much

is is is is is

4,580 the the the the the

(800)

(200)

540

1,200

1,860

(200)

OC

CM ERR OR ERR OR NSF

NOV 30 OCT 31 800

400 4,140

1,640

DIT on November 30? 380,000 OC on October 31? 200,000 adjusted cash balance as October 31? 1,200,000 adjusted cash balance as November 30? 4,580,000 adjusted November receipts? 4,140,000

1,200

4580

4140

1640

How much is the adjusted November disbursements? 1,640,000 12. Quennie Company presented the following items related to its bank reconciliation for the month of May: April 30, 2014 May 31, 2014 Balance as presented in the bank statement P 368,463.75 P 186,232.50 Cash in night depositary 26,587.50 41,156.25 Checks written by Quennie not acknowledged by bank 50,656.25 43,989.38 Charges by bank unknown to Quennie 368.75 197.50 Customer’s check returned by bank marked “DAUD” 7,433.75 Collection by bank in favour of Quennie 6,875.00 6,156.25 Cash balance per Quennie’s book 337,888.75 215,105.63  

The cash receipts book showed a balance of P1,341,062.50. While bank statement showed P1,332,025.00 total credits. Quennie’s accountant erroneously recorded a check of P1,125 twice.



A P6,250 customer’s check was returned by bank on May 22 due to insufficiency of funds. The customer notified Quennie that they will fund the check in 3 days time. On May 25, the check was redeposited and was cleared. Quennie’s accountant did not make any entry on the return and redeposit of the said check. A check worth P781.25 was erroneously charged by the bank against Quennie’s account.



How How How How

BOOK DM

much much much much

is is is is

the the the the

adjusted adjusted adjusted adjusted

cash balance as April 30? 344,395.00 cash balance as May 31? 184,180.62 April receipts? 1,346,593.75 April disbursements? 1,506,808.13

BEG

RECEIPTS

DISBURSEME NTS

337,888.7 5

1,341,062 .50

1,494,420.6 3

(368.75)

197.50 6,875.00

(197.50)

(6,875.00)

CM

6,156.25

ERROR

6,156.25 (1,125.00)

NSF

6,250.00

NSF 344,395.0 0

1,346,593 .75

BANK

368,463.7 5

DIT

26,587.50

1,332,025 .00 (26,587.5 0)

DIT OC

184,530.6 2

(368.75)

DM CM

END

6,250.00 7,433.75 1,506,808.1 3

(7,433.75) 184,180.6 2

1,514,256.2 5

186,232.5 0

41,156.25 (50,656.2 5)

41,156.25 (50,656.25)

OC 344,395.0 0

1,125.00

1,346,593 .75

43,989.38

(43,989.3 8)

(781.25) 1,506,808.1 3

781.25 184,180.6 2

13. Suzzaine Company reported that its cash balance on September 30 is P826,000. However, the bank statement showed P1,045,000 at the same date. While examining the bank statement, Suzzaine found out that checks #1129, #1132 and #1133 totalled P295,000 issued by the end of September were not yet encashed by the bank. Suzzaine also found out that bank charges of P1,000 were charged by the bank against the Company’s account. If the bank charge was the only book reconciling item, how much were the deposits in transit? P75,000 Suggested solution: Book Unadj. 826,00 0 NSF (1,000) 825,00 0

Bank 1,045,0 00 (295,00 0) 75,000 825,00 0

OC DIT

14. Jailan Inc., in its attempt to reconcile the April 30 cash in bank account, presented P4,900,000 balance per bank, P200,000 deposit in transit, P700,000 outstanding check, and P4,400 balance per book. The May bank statement showed P3,250,000 credits and P4,500,000 debits. All reconciling items on April 30 cleared through the bank on May. Book deposits which were not acknowledged by the bank totalled P300,000. While checks written by the book which were not yet presented in the bank for encashment totalled P500,000.

What is the cash balance per book on May 31? P3,450,000 What is the amount of cash receipts per book in May? P3,350,000 What is the amount of cash disbursements per book in May? P4,300,000 Suggested solution (In thousands) Prepare first the bank proof of cash because it has more details than the book. BOO K

BEG 4,400

REC. 3,350

DISB. 4,300

END 3,450

BANK

BEG 4,900

DIT

200

DIT

No book reconciling items, therefore the adjusted balances are equal to the adjusted balances ADJ.

3,900

3,350

4,300

OC

REC. 3,250 (200)

ADJ.

4,500

300 (700)

3,900

END 3,650 300

(700)

OC 3,450

DISB.

3,350

500

(500)

4,300

3,450

15. Czamira Inc.,while preparing the June 30 bank reconciliation using the bank to book method, presented P3,750,000 balance per bank, P500,000 deposit in transit, and P1,125,000 outstanding check. The July bank statement which was made available by the bank early August, showed P11,250,000 total deposits which included a P250,000 note collected by the bank for Czamira, and disbursements of P8,750,000 (including DAIF customer’s checks of P175,000 and P12,500 bank charges). All June 30 reconciling items were already cleared in July. In comparing its books with the bank statement, Czamira noticed that there were deposits in transit worth P1,250,000 and outstanding checks of P750,000. What is the cash balance per book on July 31? P6,687,500 What is the amount of cash receipts per book in July? P11,750,000 What is the amount of cash disbursements per book in July? P8,187,500 Suggested solution: The June 30, reconciliation used Bank to book method. P3,750,000 (bank) + (500,000 (DIT) – (1,125,000) OC = P3,125,000 (Book balance). The problem did not mention any reconciling items in June therefore it is assumed that P3,125,000 is already the book balance as of June 30. Prepare first the bank proof of cash because it has more details than the book. BOO K BEG REC. DISB. END BANK BEG REC. 6,687.5 3,750 3,125 11,750 8,187.5 11,250 CM

250

DIT

175

(175)

DIT

12.5

(12.5)

OC

250

DAIF BC

500

12,000

8,375

6,750

8,750

1,250 (1,125) 3,125

END 6,250

(500) 1,250 (1,125)

OC 3,125

DISB.

12,000

750

(750)

8,375

6,750