Cash

Question 1 Rommel Company keeps all its cash in a checking account. An examination of the company’s accounting records and bank statement for the month ended June 30, 2013 revealed the following information:

The cash balance per book on June 30 is P8,500,000. A deposit of P1,000,000 that was placed in the bank’s night depository on June 30does not appear on the bank statement. The bank statement shows on June 30, the bank collected note for Rommel and credited the proceeds of P950,000 to the Company’s account. Checks outstanding on June 30 amount to P300,000. Rommel discovered that a check written in June for P200,000 in payment of an account payable, had been recorded in the Company’s records as P20,000. Included with the June bank statement was NSF check for P250,000 that Rommel had received from a customer on June 26. The bank statement shows a P20,000 service charge for June. The cash in bank to be shown in the statement of financial position on June 30, 2013 is 9,000,000 8,300,000 9,360,000 9,180,000

SOLUTION: Balance per book Note collected by bank Book error (200,000 20,000) NSF check Service charge Adjusted book balance

8,500,000 950,000 (180,000) (250,000) (20,000) 9,000,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 2 Roger Company had the following bank reconciliation on June 30, 2013:

Balance per bank statement, June 30 Deposit in transit Outstanding check Balance per book, June 30

3,000,000 400,000 (900,000) 2,500,000

The bank statement for the month of July showed the following:

Deposits (including P200,000 note collected for Roger) Disbursements (including P140,000 NSF check and P10,000 service charge)

9,000,000 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. What is the cash balance per book on July 31? 5,400,000 5,350,000 5,550,000 4,500,000

SOLUTION: Balance per bank-June 30 July bank deposits July bank disbursements Balance per bank - July 31 July deposit in transit July outstanding checks Adjusted bank balance Balance per book (squeeze) Note collected by bank in July NSF check in July Service charge in July Adjusted book balance

3,000,000 9,000,000 (7,000,000) 5,000,000 1,000,000 (600,000) 5,400,000 5,350,000 200,000 (140,000) (10,000) 5,400,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 3

Kenny Company had the following bank reconciliation on June 30, 2013:

Balance per bank statement, June 30 Deposit in transit Outstanding check Balance per book, June 30

3,000,000 400,000 (900,000) 2,500,000

The bank statement for the month of July showed the following:

Deposits (including P200,000 note collected for Kenny) Disbursements (including P140,000 NSF check and P10,000 service charge)

9,000,000 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. What is the amount of cash receipts per book in July? 9,400,000 9,600,000 8,600,000 9,800,000

SOLUTION: Deposits per bank statement for July Note collected by bank Deposit in transit-June 30 Deposit in transit-July 31 Cash receipts per book for July

9,000,000 (200,000) (400,000) 1,000,000 9,400,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 4 Kareen Company had the following bank reconciliation on June 30, 2010:

Balance per bank statement, June 30 Deposit in transit Outstanding check

3,000,000 400,000 (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 Kareen) Disbursements (including P140,000 NSF check and P10,000 service charge)

9,000,000 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. What is the amount of cash disbursements per book in July? 6,550,000 6,700,000 7,300,000 6,850,000

SOLUTION: Disbursements per bank statement for July NSF check in July Service charge in July Outstanding checks-June 30 Outstanding checks-July 31 Cash disbursements per book for July

7,000,000 (140,000) (10,000) (900,000) 600,000 6,550,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 5 Reconciliation of Jam Company’s bank account at May 31 is:

Balance per bank statement Deposits outstanding Checks outstanding Correct cash balance

2,100,000

Balance per book Bank service charge

2,372,000 (2,000)

300,000 (30,000) 2,370,000

Correct cash balance

2,370,000

June data are as follows:

Checks recorded Deposits recorded Collection by bank (P400,000 note plus interest) NSF check returned with the June 30 statement Balances

Bank 2,300,000 1,620,000 420,000

Book 2,360,000 1,800,000

10,000 1,830,000

1,810,000

The check outstanding on June 30 amounted to 30,000 90,000 60,000 0

SOLUTION: Check outstanding - May 31 Checks recorded in June Total Checks recorded by bank in June Check outstanding - June 30

30,000 2,360,000 2,390,000 (2,300,000) 90,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 6 Cash data related to Ron Company for the month of January of the current year are shown below:

Balance per book, January 31 Balance per bank statement, January 31 Collections on January 31 but undeposited NSF check received from a customer returned by the bank on February 5 with the January bank statement Checks outstanding on January 31

3,130,000 3,500,000 550,000 50,000 650,000

Bank debit memo for safety deposit box rental not recorded by the depositor A creditor’s check for P30,000 was incorrectly recorded in the depositor’s book as A customer’s check for P200,000 was recorded by the depositor as The depositor neglected to make an entry in its books for a check drawn in payment of an accounts payable

5,000 300,000 20,000 125,000

What is the adjusted cash in bank on January 31? 3,130,000 3,500,000 3,400,000 2,950,000

SOLUTION: Balance per book Overstatement of creditor’s check Understatement of customer’s check NSF check Bank debit memo for safety deposit box Unrecorded check Adjusted book balance

3,130,000 270,000 180,000 (50,000) (5,000)

Balance per bank Uneposited collections Checks outstanding Adjusted bank balance

3,500,000 550,000 (650,000) 3,400,000

(125,000) 3,400,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 7 Philip Company had the following account balances on December 31, 2013

Cash in bank-current account Cash in bank-payroll account Cash on hand

5,000,000 1,000,000 500,000

Cash in bank-restricted account for building construction expected to be finished in 2013 Time deposit purchased on December 15, 2013 and due on March 15, 2014

3,000,000 2,000,000

The cash on hand includes a P200,000 check payable to Philip, dated January 15, 2014. What amount should be reported as cash and cash equivalents on December 31, 2013. 6,300,000 8,300,000 6,500,000 8,700,000

SOLUTION: Cash in bank-current account Cash in bank - payroll account Cash on hand (500,000 200,000) Time deposit

5,000,000 1,000,000 300,000 2,000,000 8,300,000

The cash in bank set aside for payroll is included in cash because it is for the payment of current liability. Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 8 Daina Company provided the following information with respect to its cash and cash equivalents on December 31, 2013:

Checking account at First Bank Checking account at Second Bank Treasury bonds Payroll account Value added tax account Foreign bank account - restricted Postage stamps Employee’s postdated check IOU from president’s brother

(200,000) 3,500,000 1,000,000 500,000 400,000 2,000,000 50,000 300,000 750,000

Credit memo from a vendor for a purchase return Traveler’s check NSF check Petty cash (P20,000 in currency and expense receipts for P30,000) Money order

80,000 300,000 150,000 50,000 180,000

What amount should be reported as unrestricted cash on December 31, 2013: 5,900,000 4,600,000 4,900,000 6,900,000

SOLUTION: Checking account at Second Bank Payroll account value added tax account Traveler’s check Petty cash fund Money order

3,500,000 500,000 400,000 300,000 20,000 180,000 4,900,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 9 The following data pertain to the cash transactions and bank account of James Company for May of the current year:

Cash balance per accounting record Cash balance per bank statement Bank service charge Debit memo for the cost of printed checks delivered by the bank; the charge has not been recorded in the accounting record Outstanding checks Deposit of May 30 not recorded by bank until June 1

1,719,000 3,195,000 10,000 12,000 685,000 500,000

Proceeds of a bank loan on May 30, not recorded in the accounting record, net of interest of P30,000 Proceeds from a customer’s promissory notes, principal amount of P800,000 collected by the bank not taken up in the accounting record with interest Check no 1086 issued to a supplier entered in the accounting record as P210,000 but deducted in the bank statement at an erroneous amount of Stolen check lacking an authorized signature deducted from James’s account by bank in error Customer’s check returned by the bank marked NSF, indicating that the customer’s balance was not adequate to cover the check; no entry has been made in the accounting record to record the returned check. The adjusted cash in bank is 3,000,000 2,910,000 3,080,000 2,990,000

SOLUTION: Balance per book Service charge Debit memo for printed checks Proceeds of bank loan Proceeds of customer’s note NSF check Adjusted book balance

1,719,000 (10,000) (12,000) 570,000 810,000 (77,000) 3,000,000

Balance per bank Outstanding checks Deposit in transit Bank error in recording check Stolen check deducted by bank in error Adjusted bank balance

3,195,000 (685,000) 500,000 (90,000) 80,000 3,000,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

570,000 810,000 120,000 80,000

77,000

Question 10 Michael Company reported the following information as of the end ofthe current year.

Investment securities of P1,000,000. These securities are share investments in entities that are traded in the Philippine Stock Exchange. As a result, the shares are very actively traded in the market. Investment securities of P2,000,000. These securities are government treasury bills. The treasury bills have a 10-year term and purchased on December 31 at which time they had two months to go until they mature. Cash of P3,400,000 in the form of coin, currency, saving account and checking account. Investment securities of P 1,500,000. These securities are commercial papers. The term of the papers is nine months and they were purchased on December 31 at which time they had three months to go until they mature. How much should be reported as cash and cash equivalents at the endof the current year? 5,400,000 6,400,000 6,900,000 7,900,000

SOLUTION: Government treasury bills Cash Commercial papers Total cash and cash equivalents

2,000,000 3,400,000 1,500,000 6,900,000

The share investments cannot qualify as cash equivalents because although they are very actively traded they do not have a maturity. The commercial papers are actually money market placements. Since the remaining term is three months from the date of acquisition, the commercial papers are considered cash equivalents Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 11

Jason Company provided the following information with respect to its cash and cash equivalents on December 31, 2009.

Checking account at First Bank Checking account at Second Bank Treasury bonds Payroll account Value added tax account Foreign bank account - restricted (in equivalent pesos) Postage stamps Employee's postdated check IOU from president's brother Credit memo from a vendor for a purchase return Traveler's check Not-sufficient-fund check Petty cash fund (P20,000 in currency and expense receipts for P30,000) Money order

( 200,000) 3,500,000 1,000,000 500,000 400,000 2,000,000 50,000 300,000 750,000 80,000 300,000 150,000 50,000 180,000

What amount would be reported as unrestricted cash on December 31, 2009? 5,900,000 4,600,000 4,900,000 6,900,000

SOLUTION: Checking account at Second Bank Payroll account Value added tax account Traveler's check Petty cash fund Money order Total unrestricted cash

3,500,000 500,000 400,000 300,000 20,000 180,000 4,900,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 12

The checkbook balance of JR Company on December 31, 2009was P4,000,000. Data about certain cash items follow: A customer check amounting to P200,000 dated January 2, 2010 was included in the December 31, 2009 checkbook balance. Another customer check for P500,000 deposited on December 22, 2009 was included in its checkbook balance but returned by the bank for insufficiency of fund. This check was redeposited on December 26, 2009 and cleared two days later. A P400,000 check payable to supplier dated and recorded on December 30, 2009 was mailed on January 16, 2010. A petty cash fund of P50,000 with the following summary on December 31, 2009:

Coins and currencies Petty cash vouchers Return value of 20 cases of soft drinks

5,000 43,000 2,000 50,000

A check of P43,000 was drawn on December 31, 2009 payable to Petty Cash. What is the "cash" balance on December 31, 2009? 4,248,000 4,200,000 4,205,000 3,748,000

SOLUTION: Checkbook balance Postdated customer check Undelivered check payable to supplier Adjusted cash in bank Petty cash: Coins and currencies Replenishment check Total

4,000,000 ( 200,000) 400,000 4,200,000 5,000 43,000

48,000 4,248,000

The return value of the soft drink bottles is shown as refundable deposit as a current asset. The NSF check is redeposited and cleared before December 31, 2009. Thus, the same is not deducted anymore from the checkbook balance Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 13 On December 31, 2009, Ally Company's "cash account" balance per ledger of P3,600,000 includes the following:

Demand deposit Time deposit - 30 days NSF check of customer Money market placement due on June 30, 2010 Saving deposit IOU from an employee Pension fund Petty cash fund Customer check dated January 31, 2010 Customer check outstanding for 18 months

1,500,000 500,000 20,000 1,000,000 50,000 30,000 400,000 10,000 60,000 30,000 3,600,000

Check of P 100,000 in payment of accounts payable was dated and recorded on December 31, 2009 but mailed to creditors on January 15, 2010. Check of P50,000 dated January 31, 2010 in payment of accounts payable was recorded and mailed December 31, 2009. The entity uses the calendar year. The cash receipts journal was held open until January 15, 2010, during which time P200,000 was collected and recorded on December 31, 2009. The "cash and cash equivalents" on December 31, 2009 should be 2,010,000 1,960,000 1,860,000 1,510,000

SOLUTION:

Demand deposit Time deposit - 30 days Saving deposit Petty cash fund Total cash and cash equivalents Demand deposit per book Undelivered check Postdated check delivered Window dressing of collection Adjusted balance

1,450,000 500,000 50,000 10,000 2,010,000 1,500,000 100,000 50,000 ( 200,000) 1,450,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 14 The December 31, 2009 trial balance of Fernandez Company includes the following accounts:

Cash on hand Petty cash fund Security Bank current account PNB Current account No. 1 PNB Current account No. 2 BSP treasury bill - 60 days BPI time deposit - 30 days

500,000 20,000 1,000,000 400,000 ( 50,000) 3,000,000 2,000,000

The cash on hand includes a customer postdated check of P 1 00,000 and postal money order of P40,000. The petty cash fund includes unreplenished petty cash vouchers for P2,000 and an employee check for P3,000 dated January 31, 2010. A check for P200,000 was drawn against Security Bank account, dated January 15, 2010, delivered to the payee and recorded December 31, 2009. The BPI time deposit is set aside for acquisition of land to be used as a factory site. The statement of financial position on December 31, 2009 shouldshow cash and cash equivalents at 4,965,000 6,965,000 4,765,000

1,965,000

SOLUTION: Cash on hand (500,000 - 100,000) Petty cash fund (20,000 - 2,000 - 3,000) Security Bank current account (1,000,000 + 200,000) PNB current account No. 1 PNB current account No. 2 BSP treasury bill - 60 days Total cash and cash equivalents

400,000 15,000 1,200,000 400,000 ( 50,000) 3,000,000 4,965,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)

Question 15 Jason Company provided the following information with respect to its cash and cash equivalents on December 31, 2009.

Checking account at First Bank Checking account at Second Bank Treasury bonds Payroll account Value added tax account Foreign bank account - restricted (in equivalent pesos) Postage stamps Employee's postdated check IOU from president's brother Credit memo from a vendor for a purchase return Traveler's check Not-sufficient-fund check Petty cash fund (P20,000 in currency and expense receipts for P30,000) Money order

( 200,000) 3,500,000 1,000,000 500,000 400,000 2,000,000 50,000 300,000 750,000 80,000 300,000 150,000 50,000 180,000

What amount would be reported as unrestricted cash on December 31, 2009? 5,900,000 4,600,000 6,900,000 4,900,000

SOLUTION: Checking account at Second Bank

3,500,000

Payroll account Value added tax account Traveler's check Petty cash fund Money order Total unrestricted cash

500,000 400,000 300,000 20,000 180,000 4,900,000

Practical Accounting 1 - Cash and Cash Equivalents (Difficult)