Cash practical auditing solution manual

Chapter 3 Cash MULTIPLE CHOICE Problem 1 (a) Audit adjustments Cash Equivalents 3,000,000 Cash 3,000,000 Other Non-current Financial Assets 3,200,000 Cash 3,200,000 Cash 35,000 Accrued Salaries Expense 35,000 Other Non-current Financial Assets 900,000 Cash 900,000 Miscellaneous Expenses 6,800 Advances to Employees 1,200 Cash (Petty Cash Fund) 8,000 Cash 5,300 Accrued Utilities Expense 5,300 Accounts Receivable 25,000 Cash 25,000 (b) Cash and Cash Equivalents Savings account with Metrobank P1,500,000 Checking account with Metrobank 800,000 + 5,300 805,300 Certificates of deposit 3,000,000 Payroll fund 1,200,000 + 35,000 1,235,000

Tax fund 500,000 Petty cash fund 12,000 Undeposited collections 85,000 – 25,000 60,000 Correct cash and cash equivalents P7,112,300 Problem 2 (Sta. Monica, Inc.) Expenses 10,500 Petty Cash Fund 10,500 Correct balance of petty cash fund = P20,000 – P10,500 = P9,500 1. C 2. B 3. D 4. A 5. B 6. B 7. C 8. C 9. C 10. D 11. B 12. C 13. C 14. D 15. D Chapter 3 Cash 26 Problem 3 (Victor Company) (a) Correct amount of petty cash fund Currencies and coins P6,400 (b) Per count Currencies and coins P 6,400 Paid petty cash vouchers 2,250 Employee’s NSF check 1,200 Wedding gift contribution (with bills) 1,500 Total per count P11,350 Cashier’s accountability: Petty cash fund, per ledger P10,000

Wedding gift contribution 1,500 11,500 Cash shortage P 150 (b) Audit Adjusting Entries Delivery Expense 250 Office Supplies Expense 160 Employees Medicine 240 Transportation Expense 400 Repairs and Maintenance 400 Receivables from Employees 2,000 Cash Shortage (or Misc. Expenses or Receivables fr Employees) 150 Petty Cash Fund 3,600 Problem 4 (Rainbow Corporation) (a) Total per count P 35,000 Cashier’s Accountability Petty Cash Fund, per ledger P35,000 Unused postage stamps 1,800 Unused office supplies 1,200 Wedding gift contribution 1,000 39,000 Cash shortage P 4,000 (b). Telephone Expense 1,500 Water Expense 1,600 Office Supplies Expense (3,700 – 1,200) 2,500 Postage Expense (2,800 – 1,800) 1,000 Prepaid Expenses (1,200 + 1,800) 3,000 Receivables from Employees (3,900 + 4,000) 7,900

Petty Cash Fund 17,500 (c) Correct amount of petty cash fund = P35,000 – P17,500 = P17,500 Cash items in the petty cash fund: Bills and Coins P 2,500 Replenishment check 15,000 Total P17,500 Chapter 3 Cash 27 Problem 5 Bills and Coins (show details of denomination and pieces per denomination) P6,717.50 Checks: Date Maker Amount 12-28-12 Urquiola, employee P 3,000.00 12-29-12 Sta. Maria, employee 1,500.00 12-31-12 L. Chua, customer 2,500.00 01-02-13 A. Bobadilla, customer 3,200.00 01-12-13 C. German, employee (check received 12-28-12) 1,500.00 11,700.00 Vouchers Date Voucher No. Particulars Amount 12-13-12 151 Freight out P 500.00 12-28-12 183 Supplies 300.00 12-29-12 184 Freight In 394.20 12-31-12 189 Freight on cabinet 741.10

01-02-13 001 Freight in 244.70 2,180.00 IOUs 12-21-12 S. Dechavez 300.00 Unused office supplies 40.00 Total per count P20,937.50 Cashier’s accountability: Petty cash fund, per ledger P15,000.00 Unremitted cash sales Inv. # 118 December 30 P1,000.40 Inv. # 129 December 31 2,500.00 Inv. # 133 January 2 3,200.00 6,700.40 Unused office supplies 40.00 21,740.40 Cash shortage P 802.90 Audit Adjusting Entries: Receivables from Employees (1,500.00 + 300.00) 1,800 Freight out 500 Supplies Expense (100 – 40) 260 Prepaid Expenses 40 Furniture and Equipment 741.10 Freight in 394.20 Cash Shortage (Receivable from Employees) 802.90 Petty Cash Fund 4,538.20 Cash in Bank (1,000.40 + 2,500.00) 3,500.40 Sales 3,500.40 Correct balance of petty cash fund (P15,000 – 4,538.20) P10,461.80

Composed of the following cash items at December 31, 2009 Bills and coins P6,717.50 Checks dated December 7,000.00 Petty cash vouchers dated January (undisbursed as of December 31) 244.70 Total cash items as of December 31 P13,962.20 Unremitted cash sales as of December 31 ( 1,000.40 + 2,500) (3,500.40) Petty cash fund, per audit, December 31 P10,461.80 Chapter 3 Cash 28 Problem 6 (Da King Company) Bills and coins 500 x 1 P 500 100 x 8 800 50 x 3 150 10 x 4 40 5 x 2 10 1 x 3 3 P 1,503 Checks: 12/29/12 M. Roxas, employee P2,000 12/30/12 J. Madrigal Company 1.500 01/02/13 J. Estrada Junk Shop 2,450 01/15/13 F. Chavez, employee (received 12/27/12) 1,800 7,750

Paid petty cash vouchers: 12/16/12 Vo. No. 145 Freight on goods bought P500 12/26/12 164 Postage 200 12/29/12 165 Transportation of messenger 50 01/02/13 166 Repairs, completed Dec. 29, 2012 1,500 2,250 IOU Ed Gil, employee 1,200 Postage stamps 10 pcs x P12 120 Total per count P 12,823 Cashier’s accountability Petty cash fund P10,000 Unremitted collections 12/30/12 Refund for merchandise returned P 1,500 01/06/13 Sale of junk and scrap materials 2,450 3,950 Unused postage stamps 120 14,070 Cash shortage P1,247 Adjusting entries Receivable from Employees (1,800 + 1,200 + shortage of 1,247) 4,247 Freight in/Cost of Goods Sold 500 Transportation Expense 50 Postage Expense (200 – 120) 80 Prepaid Expenses 120 Petty Cash Fund 4,997 Repairs and Maintenance 1,500 Accrued Expenses 1,500

Cash in Bank 1,500 Purchase Returns and Allowances /Cost of Goods Sold 1,500 Correct Petty Cash Fund = P10,000 – P4,997 = P5,003 Cash items as of December 31: Bills and coins P1,503 Checks dated December 3,500 Petty cash voucher dated January 2013 1,500 Cash refund for purchase returns (1,500) Correct petty cash fund balance P5,003 Chapter 3 Cash 29 Problem 7 (Cisco Systems, Inc.) (1) Bank reconciliation: Per bank Per books Unadjusted balances P 1,463,212 P1,352,312* Outstanding checks (140,000) Undeposited receipts 59,500 Error in recording check issued for rental payment 1,800 Bank charge for payment of loan and interest (45,000) Bank service charges (1,400) Deposit of another company (87,500) Customer’s DAIF check (12,500) Adjusted balances P1,295,212 P1,295,212 (2) Adjusting entry:

Notes Payable – Bank 40,000 Interest Expense 5,000 Bank Service Charges 1,400 Accounts Receivable 12,500 Rent Expense 1,800 Cash in Bank 57,100 (3) Cash and cash equivalents: Petty cash fund P 20,000 Cash in bank 1,295,212 Treasury bills maturing in 2 months 500,000 Total cash and cash equivalents P1,815,212 Problem 8 (Sunshine Corporation) 1. Per Bank Per Books Unadjusted Balances P 424,000 P465,000 Outstanding checks (113,000) Undeposited collections 48,000 Customer’s note collected by bank 19,000 Bank service charge (1,500) Adjusted balances P359,000 P482,500 Cash shortage (123,500) Cash balance, December 31, per audit P359,000 P359,000 2. Understated book balance 456,000 – 465,000 P 9,000 Overstated bank balance 424,000 – 454,400 30,400 Omitted outstanding checks 183 4,500

198 12,500 Understated outstanding checks 52,000 – 25000 27,000 9,000 – 900 8,100 25,000 – 15,000 10,000 Overstated undeposited collections 3,000 Omission of bank credit memo 19,000 Total cash shortage P123,500 Chapter 3 Cash 30 3. Undeposited collections, December 31 P 48,000 Collections, January 1 – 15 199,000 Total amount available for deposit P247,000 Amount deposited, per deposit slips (110,000) Undeposited collections, January 15 P137,000 Cash on hand, January 15 (52,000) Additional cash shortage in January P 85,000 .4. Adjusting Entries Bank Charges 1,500 Receivable from Employees (or Loss) 123,500 Cash 106,000 Notes Receivable 19,000 Problem 9 (Pamela Manufacturing Company) Nov. 30 Receipts Disbursements. Dec. 31

Unadjusted bank balance 876,750 9,153,760 8,526,550 1,503,960 Outstanding checks November 30 (254,720) (254,720) December 31 335,610 (335,610) Deposits in transit November 30 164,220 (164,220) December 31 209,180 209,180 Check of Pamplona Company (5,830) 5,830 Adjusted Balances 786,250 9,198,720 8,601,610 1,383,360 Nov. 30 Receipts Disbursements Dec. 31 Balance per books 821,950 9,198,720 8,613,010 1,407,660 Error in recording check no. 359 2,700 2,700 Bank service charge November (3,500) (3,500) December 2,250 (2,250) NSF check returned in November (34,900) (34,900) Interest charged by the bank 24,750 (24,750) Adjusted Balances 786,250 9,198,720 8,601,610 1,383,360 Audit adjusting entries: Cash in Bank 2,700 Office Furniture 2,700 Bank Service Charge 2,250 Cash in Bank 2,250

Interest Expense 24,750 Cash in Bank 24,750 Chapter 3 Cash 31 Problem 10 (Golden Bells Company) Nov. 30 Receipts Disbursements Dec. 31 Unadjusted bank balance 2,500,000 2,300,000 1,700,000 3,100,000 Deposits in transit November 30 58,000 (58,000) December 31 47,000 47,000 Outstanding checks November 30 (97,000) (97,000) December 31 46,000 (46,000) Erroneous bank charges November 30 25,000 (25,000) December 31 (37,000) 37,000 Erroneous bank credit November 30 (45,000) (45,000) December 31 (50,000) (50,000) Adjusted balances 2,441,000 2,214,000 1,567,000 3,088,000 Nov. 30 Receipts Disbursements Dec. 31 Unadjusted book balances (squeezed) 2,390,000 2,206,000 1,549,000 3,047,000 NSF checks returned by bank November 30 (15,000) (15,000)

December 31 25,000 (25,000) Bank service charges November (10,000) (10,000) December 18,000 (18,000) Note collected by bank November 76,000 (76,000) December 84,000 84,000 Adjusted balances 2,441,000 2,214,000 1,567,000 3,088,000 Accounts Receivable 25,000 Cash in Bank 25,000 Bank Service Charges / Miscellaneous Expenses 18,000 Cash in Bank 18,000 Cash in Bank 84,000 Notes Receivable 84,000 Chapter 3 Cash 32 Problem 11 (Starr Company) May 1-31 Apr. 30 Receipts Disb. May 31 Unadjusted bank balance 470,360 883,200 1,320,600 32,960 Deposits in transit April 30 29,360 (29,360) May 31 (squeezed) 40,560 40,560 Outstanding checks

April 30 (144,800) (144,800) May 31 133,600 (133,600) Adjusted balances 354,920 894,400 1,309,400 (60,080) May 1-31 Apr. 30 Receipts Disb. May 31 Unadjusted book balances (squeezed) 363,040 654,400 621,240* 396,200 DAIF checks returned by bank April 30 (8,000) (8,000) May 31 Bank service charges April (120) (120) May 280 (280) Check issued by the treasurer to himself 696,000 (696,000) Proceeds of loan granted by bank May 240,000 240,000 Adjusted balances 354,920 894,400 1,309,400 (60,080) *621,240 = 613,120 + 8,000 + 120 (a) 1. P363,040 2. P40,560 3. P696,000 4. P(60,080) (b) Adjusting entries: Bank Service Charges 280 Cash in Bank 280 Loss from Theft/Receivable from Officers 696,000

Cash in Bank 696,000 Cash in Bank 240,000 Notes Payable – Bank 240,000 Chapter 3 Cash 33 Problem 12 (Rocky Mountain High) Nov. 30 Receipts Disbursements Dec. 6 Unadjusted bank balance P888,800 P555,500 P666,600 Deposits in transit November 30 148,900 (148,900) December 31 (102,000 – 12,000) 90,000 90,000 Payment from collections 12,000 12,000 Outstanding checks November 30 (116,200) (116,200) December 31 = 62,000 + 105,000 + 30,000 + 40,000 237,000 (237,000) Adjusted balances 921,500 508,600 799,400 630,700 Nov. 30 Receipts Disbursements Dec. 6 Unadjusted book balances (squeezed) 921,500 508,600 571,400 858,700 Bank charges in December (200,000 + 28,000) 228,000 (228,000) Adjusted balances 921,500 508,600 799,400 630,700 Answers:

(a) P148,900 (b) P116,200 (c) P921,500 (d) P630,700 Problem 13 1. A,D 6. M, P 11. D, F 16. I, L 2. C, G. 7. I, L 12. A, D 17. Not a reconciling item 3. B, F 8. K, O 13. F, G 18. J, N 4. E, H 9. D, H 14. D, F 19. L, N 5. J, N 10. B, F 15. J, N 20. N, O Problem 14 (Contronics Company) Petty Cash Fund Purchasing Fund Cash in Bank Total Balances, per ledger P 15,000 P 35,000 P134,500 P184,500 Disbursed in 2012 (6,000) (20,000) (26,000) Bank credit memo 58,000 58,000 Balances per audit P9,000 P15,000 192,500 P216,500 Adjusting entries Gasoline Expense 4,500 Miscellaneous Expenses 500 Transportation Expense 1,000 Petty Cash Fund 6,000

Purchases or Inventory 20,000 Purchasing Fund 20,000 Cash in Bank 58,000 Notes Receivable 58,000 Chapter 3 Cash 34 Problem 15 (Fortune Company) (a) Audit Adjustments Sales 285,200 Cash 285,200 Cash 19,300 Utilities Payable 19,300 Accounts Receivable 57,800 Cash 57,800 Accounts Receivable 32,500 Cash 32,500 No entry, dividend fund is part of cash. Accounts Receivable 3,500 Cash 3,500 Cash Shortage/ Receivable from Employees 550 Cash 550 No entry, payroll fund is part of cash. Cash Shortage / Receivable from Employees 300 Miscellaneous Expenses 5,500

Cash 5,800 Cash 13,500 Miscellaneous Income 13,500 (b) Correct amount of cash Cash balance, per ledger P1,640,000 Cash sales of 2013 (285,200) Unreleased check for utilities 19,300 Postdated checks received (57,800) Customers’ NSF checks (32,500) Stale check (3,500) Shortage in the change fund (550) 2012 vouchers in petty cash fund (5,500) Cash shortage in the petty cash fund (300) Unrecorded deposits (sale of scrap) 13,500 Cash balance, per audit 1,287,450 Supply the Answers Note to the Teacher: Please supply the petty cash imprest balance of P50,000 in problem B. (You may supply another figure for variation in your other classes.) Summary of Answers: 1. 308.40 2. 4,606.60 Chapter 3 Cash 35 3. 5,000 shortage

4. 35,000 5. 800 6. 5,700 7. 400 8. 5,300 9. 53,800 10. 838,600 11. 157,950 12. 780,650 or 761,650 (NSF checks may be treated as deduction from receipts) 13. 625,700 or 606,700 (NSF checks may be treated as deduction from receipts) 14. 3,000 15. 92,000 16. 145,600 17. 71,950 18. 1,828,212 19. imprest system – deposit of collections intact to the bank 20. segregation of duties of custodial function and bookkeeping function 21. 125,250 22. 194,550 23. 255,700 24. 55,000 SUPPORTING COMPUTATIONS A. 1. Total per count P 10,761.60 Cashier’s accountability Petty cash fund P 10,500

Postage stamps 220 Other collections 350 11,070 Cash shortage P308.40 2. Correct petty cash fund = 1,156.60 + 3,450 P4,606.60 B. 3. Total per count P 53,500 Cashier’s accountability Petty cash fund P 50,000 Check payable to Meralco 3,500 Birthday gift contribution 4,500 Unused postage 500 58,500 Cash shortage P 5,000 4. Correct petty cash fund = P17,000 + P18,000 P35,000 C. 5. Total per count P19,700 Cashier’s accountability Petty cash fund P 15,000.00 Undeposited collections 5,500.00 20,500 Cash shortage P 800 6. Bills and coins P6,400 Customers’ checks 4,800 Undeposited collections (5,500) Petty cash fund, per audit P5,700 Chapter 3 Cash 36 D. 7. Total per count (exclude the unsigned pay envelope with no contents) P 19,600

Cashier’s accountability Petty cash fund P15,000 Unreleased payroll 5,000 20,000 Cash shortage P 400 8. Bills and coins P7,300 Vouchers with January 2013 dates 200 Employee’s check dated December 2012 2,800 Total cash items as of December 31 P10,300 Unreleased payroll (5,000) Correct petty cash balance on December 31 P5,300 E. Bank Books 9. Unadjusted balances P850,000 P750,500 Bank credit memo 150,000 Bank debit memo (4,500) Outstanding checks (120,400) Check of Kin 21,000 Error in recording check (3,600) Cash on hand 88,000 Balances before cash shortage P838,600 P892,400 Cash shortage ( 53,800) 10. Cash balance, per audit P838,600 P838,600 F. January 31 Receipts Disbursements Feb. 28 Unadjusted balances per bank 13,500 790,450 647,700 156,250 Outstanding checks January 31 (65,000) (65,000)

February 28 43,000 (43,000) Deposits in transit January 31 54,500 (54,500) February 28 44,700 44,700 Adjusted balances 3,000 780,650 625,700 157,950 January 31 Receipts Disbursements Feb. 28 Unadjusted balances, per books (92,250) 805,350 630,300 82,800 Bank credit memo January 123,500 (123,500) February 98,800 98,800 Bank service charges January (3,250) (3,250) February 4,650 (4,650) NSF checks returned by bank January (25,000) (25,000) February 19,000 (19,000) Adjusted balances 3,000 780,650 625,700 157,950 Chapter 3 Cash 37 G. December Disbursements Per bank Per books 15. Unadjusted disbursements P195,000 P190,400 Outstanding checks, November 30 (90,000) Customers’ NSF checks

November (6,000) December 12,000 Bank service charges November (2,400) December 3,000 Balances before outstanding checks, December 31 P105,000 P197,000 105,000 Outstanding checks, December 31 P92,000 H. June Receipts Per bank Per books 16. Unadjusted receipts in June P310,000 420,000 Collections made directly by bank in May (30,300) Deposits in transit, May 31 (15,000) Loans granted by bank in June 50,000 Error in recording deposit 900 Balances before deposits in transit, June 30 P295,000 P440,600 295,000 Deposits in transit, June 30 P145,600 I. Per bank Per books Unadjusted balances 1,555,000 1,890,162 Credit memo for collections by bank 10,000 Outstanding checks (106,229) Undeposited receipts 379,441 Balances before shortage P1,828,212 P1,900,162 17. Amount stolen (71,950)

18. Actual cash existing P1,828,212 P1,828,212 19. and 20. Features of internal control missing: Imprest system and segregation of duties J. Per bank Per books Unadjusted balances P350,000 P293,500 Erroneous bank credit (25,000) 22. Outstanding checks (246,750 – 15,000 – 37,200) (194,550) Unreleased checks 15,000 Postdated checks issued and recorded as disbursements 37,200 Customer’s postdated check (50,000) 21. Deposits in transit (175,250 – 50,000) 125,250 Note collected by bank 15,000 Balances before cash shortage P255,700 P310,700 24. Cash shortage (55,000) 23. Actual cash existing P255,700 P255,700