Acctg102 Midtermq1 Cash 20684h

ING 102 CASH AND CASH EQUIVALENTS, BANK RECONCILIATION, PROOF OF CASH SUMMARY QUIZ INSTRUCTIONS:  The exam is thirteen 13 pages long with twenty 20 items for Test I Theories and 28 items for Test II Problems.  The exam is good for two (2) hours only so budget your time wisely.  Write your answers and solutions in one or two pieces of yellow paper (or any color so long as the same dimensions).  Indicate your complete name, class schedule, block number and date of exam on the first page of your answer sheet.  The first page of your answer sheet should contain a summary of all letter answers for both Test I Theories and Test II Problems.  Show your solutions for each problem question. The solutions may or may not be in good form so long as the amounts and the mathematical operations performed can be easily read and understood. Extra credit shall be given to solutions that are neat and organized.  Observe honesty. You got this. GOD BLESS! I.

Theories. Each correct answer is one point.

1.

To be reported as “cash and cash equivalent”, the cash and cash equivalent must be a. Unrestricted in use for current operations b. Available for the purchase of property, plant and equipment c. Set aside for the liquidation of long-term debt d. Deposited in bank

2.

All of the following can be classified as cash and cash equivalents, except? a. Redeemable preference shares acquired and due in 60 days b. Commercial papers held and due for repayment in 90 days c. Equity investments d. A bank overdraft

3.

Which is false concerning measurement of cash and cash equivalents? a. Cash is measured at face value. b. Cash in foreign currency is measured at current exchange rate. c. If a bank or financial institution holding the funds of the company is in bankruptcy or financial difficulty, cash should be written down to estimated realizable value. d. Cash equivalents should be measured at maturity value, meaning face value plus interest.

4.

5.

If material, deposits in foreign bank which are subject to foreign exchange restriction shall be classified 1. Separately as current asset, with appropriate disclosure. 2. Separately as noncurrent asset with appropriate disclosure. 3. Be written off as an extraordinary loss. 4. As part of cash and cash equivalents. A compensating balance a. Must be included in cash and cash equivalent. b. Which is legally restricted and related to long-term loan is classified as current asset. c. Which is legally restricted and related to a short-term loan is classified separately as current asset. d. Which is not legally restricted as to withdrawal is classified separately as current asset.

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6.

Which of the following is usually considered as “cash”? a. Certificate of deposit b. Checking c. Money market saving certificate d. Postdated check

7.

The petty cash fund under the imprest fund system is debited a. Only when the fund is created. b. When the fund is created and every time it is replenished. c. When the fund is created and when the size of the fund is increased. d. When the fund is created and when the fund is decreased.

8.

What is the major purpose of an imprest petty cash fund? a. To effectively plan cash inflows and outflows b. To ease the payment of cash to vendors c. To determine the honesty of the petty cashier d. To effectively control cash disbursements

9.

When a petty cash fund is used, which of the following is true? a. The balance of petty cash fund should be reported in the statement of financial position as a longterm investment. b. The petty cashier’s summary of petty cash payments serves as a journal entry that is posted to the appropriate general ledger . c. The reimbursement of the petty cash fund should be credited to the cash . d. Entries that include a credit to the cash should be recorded at the time the payments from the petty cash fund are made.

10.

A “Cash over and short” a. Is not generally accepted. b. Is debited when the petty cash fund proves out over, c. Is debited when the petty cash fund proves out short. d. Is a contra to cash.

11.

Which of the following statements in relation to cash short or over is true? a. It would be impossible to have cash shortage or overage if employees were paid in cash rather than by check. b. The entry to for daily cash sales for which a small amount of cash shortage existed would include a debit to cash short or over . c. If the cash short or over has a debit balance at the end of the period it must be debited to an expense . d. A credit balance in a cash short or over should be considered a liability because the short changed customer will demand return of this amount.

12.

Which of the following is not considered as a cash equivalent? a. A three-year treasury note maturing on May 30 of the current year purchased by the entity on April 15 of the current year. b. A three-year treasury note maturing on May 30 of the current year purchased by the entity on January 15 of the current year. c. A 90-day T-bill d. A 60-day money market placement

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13.

Which item should be excluded from cash and cash equivalents in the current year-end statement of financial position? a. The minimum cash balance of the entity’s current which is maintained to avoid service charges. b. A check issued by the entity on December 27 of the current year but dated January 15 of next year. c. Time deposit which matures in one year. d. A customer’s check denominated in a foreign currency.

14.

Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation which ends with adjusted cash balance? a. Note receivable collected by bank in favor of the depositor and credited to the of the depositor b. NSF customer check c. Service charge d. Erroneous bank credit

15.

If the balance shown on an entity’s bank statement is less than the correct cash balance and neither the entity nor the bank has made any errors, there must be a. Deposits credited by the bank but not yet recorded by the entity b. Outstanding checks c. Deposits in transit d. Bank charges not yet recorded by the entity

16.

If the cash balance shown on entity’s ing records is less than the correct cash balance and neither the entity nor the bank has made any errors, there must be a. Deposits credited by the bank but not yet recorded by the entity b. Outstanding checks c. Deposits in transit d. Bank charges not yet recorded by the entity

17.

Which of the following will not require an adjusting entry on the depositor’s books? a. NSF check from customer b. Check in payment of payable as recorded by the depositor is overstated c. Deposit of another entity is credited by the bank to the of the depositor d. Bank service charge

18.

Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in the depositor’s records and to identify bank errors. Adjustments on the part of the depositor should be recorded for a. Bank errors, outstanding checks and deposits in transit. b. All items except bank errors, outstanding checks and deposits in transit. c. Book errors, bank errors, deposits in transit and outstanding checks. d. Outstanding checks and deposits in transit.

19.

Which of the following statement is false? a. A certified check is a liability of the bank certifying it. b. A certified check will be accepted by many persons who would not otherwise accept a personal check. c. A certified check is one drawn by a bank upon itself. d. A certified check should not be included in the outstanding checks.

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20.

A proof of cash would be useful for a. Discovering cash receipts that have not been recorded in the journal. b. Discovering time lag in making deposits. c. Discovering cash receipts that have been recorded but have not been deposited. d. Discovering an inadequate separation of incompatible duties of employees.

II.

Problems. Each correct answer is 2 points. Teacher has the discretion to give extra credit to solutions.

Problem 1 In connection with your audit of Caloocan Corporation for the year ended December 31, 2018, you gathered the following: Current at Metrobank Current at BPI Payroll Foreign bank – restricted (in equivalent pesos) Postage stamps Employee’s postdated check IOU from controller’s sister Credit memo from a vendor for a purchase return Traveler’s check Not-sufficient-funds check Money order Petty cash fund (P4,000 in currency and expense receipts for P6,000) Treasury bills, due 3/30/19 (purchased 12/29/18) Treasury bulls, due 1/31/19 (purchased 2/1/18) 1.

P2,000,000 (100,000) 500,000 1,000,000 1,000 4,000 10,000 20,000 50,000 15,000 30,000 10,000 200,000 300,000

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, 2018 statement of financial position. a. P2,784,000 b. P3,084,000 c. P2,790,000 d. P2,704,000

Problem 2 In the course of your audit of the Las Pinas Corporation, its controller is attempting to determine the amount of cash to be reported on its December 31, 2018 statement of financial position. The following information is provided: a. Commercial savings of P1,200,000 and a commercial checking balance of P1,800,000 are held at PSB Bank. b. Travel advances of P360,000 for executive travel for the first quarter of the next year (employee to reimburse through salary deduction). c. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a long term debt. d. Petty cash fund of P10,000. e. An I.O.U. from a company officer in the amount of P40,000. f. A bank overdraft of P250,000 has occurred at one of the bank the company uses to deposit its cash receipts. At the present time, the company has no deposits at this bank. g. The company has two certificates of deposit, each totaling P1,000,000. These certificates of deposit have maturity of 120 days. h. Las Pinas has received a check dated January 2, 2019 in the amount of P150,000. i. Las Pinas has agreed to maintain a cash balance of P200,000 at all times at PS Bank to ensure future credit availability. j. Currency and coin on hand amounted to P15,000. 4

2.

Based on the above and the result of your audit, how much will be reported as cash and cash equivalents at December 31, 2018? a. P3,025,000 b. P2,825,000 c. P2,575,000 d. P5,025,000

Problem 3 The cash of the Makati Corporation as of December 31, 2018 consists of the following: On deposit in current with Real Bank Cash collection not yet deposited to the bank A customer’s check returned by the bank for insufficient fund A check drawn by the Vice-President of the Corporation dated January 15, 2019 A check drawn by a supplier dated December 28, 2018 for goods returned by the Corporation A check dated May 31, 2018 drawn by the Corporation against the Piggy Bank in payment of customs duties. since the importation did not materialize, the check was returned by the customs broker. This check was an outstanding check in the reconciliation of the Piggy Bank Petty Cash fund of which P5,000 is in currency; P3,600 in form of employee’s I.O.U.s; and P1,400 is ed by approved petty cash vouchers for expenses all dated prior to closing of the books on December 31, 2018 Total Less: Overdraft with Piggy Bank secured by a Chattel mortgage on the inventories Balance per ledger 3.

P900,000 350,000 150,000 70,000 60,000

410,000

10,000 1,950,000 300,000 1,650,000

At what amount will the “Cash” appear on the December 31, 2018 statement of financial position? a. P1,315,000 b. P1,425,000 c. P1,495,000 d. P1,725,000

Problem 4 You noted the following composition of Malabon Company’s “cash ” as of December 31, 2018 in connection with our audit: Demand deposit Time deposit – 30 days NSF check of customer Money market placement (due June 30, 2019) Savings deposit in a closed bank IOU from employee Pension fund Petty cash fund Customer’s check dated January 1, 2019 Customer’s check outstanding for 18 months Total

P2,000,000 1,000,000 40,000 1,500,000 100,000 20,000 3,000,000 10,000 50,000 40,000 P7,760,000

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Additional information follows: a. Check of P200,000 in payment of s payable was recorded on December 31, 2018 but mailed to suppliers on January 5, 2019. b. Check of P100,000 dated January 15, 2019 in payment of payable was recorded and mailed on December 31, 2018. c. The company uses the calendar year. The cash receipts journal was held open until January 15, 2019, during which time P400,000 was collected and recorded on December 31, 2018. 4.

The cash and cash equivalents to be shown on the December 31, 2018 statement of financial position is a. P3,310,000 b. P1,910,000 c. P2,910,000 d. P4,410,000

Problem 5 The Cash in the ledger of Pateros Company had a balance of P844,800 at December 31, 2018. An examination of the , however, disclosed the following: a. The sales book was left open up to January 5, 2019, and cash sales totaling P120,000 were considered as sales in December. b. Checks of P74,400 in payment of liabilities were prepared before December 31, 2018, recorded in the books, but not mailed or delivered to payees. c. Post-dated checks totaling P62,400 are being held by the Cashier as part of Cash. The company’s experience shows that post-dated checks are eventually realized. d. Customer’s check for P12,000 deposited with but returned by Bank, “NSF” on December 27, 2018. e. The Cash includes P320,000 earmarked for the purchase of personal computers which will soon be delivered. 5.

The cash balance to be shown on the statement of financial position at December 31, 2018 should be a. P799,200 b. P724,800 c. P404,800 d. P416,800

Problem 6 You were able to gather the following from the December 31, 2018 trial balance of Mandaluyong Corporation in connection with your audit of the company: Cash on hand Petty cash fund BPI current Security Bank current No. 01 Security Bank current No. 02 PNB savings PNB time deposit

P500,000 10,100 1,000,000 1,080,000 (80,000) 1,200,000 500,000

Cash on hand includes the following items: a. Customer’s check for P40,000 returned by bank on December 26, 2018 due to insufficient fund but subsequently redeposited and cleared by the bank on January 8, 2019. b. Customer’s check for P20,000 dated January 2, 2011, received on December 29, 2018. c. Postal money orders received from customers, P30,000. 6

The petty cash fund consisted of the following items as of December 31, 2018. Currency and coins Employees’ vales Currency in an envelope marked “collections for charity” with names attached Unreplenished petty cash vouchers Check drawn by Mandaluyong Corporation, payable to the petty cashier

P2,000 1,600 1,200 1,300 4,000 P10,100

Included among the checks drawn by Mandaluyong Corporation against the BPI current and recorded in December 2018 are the following:  

Check written and dated December 29, 2018 and delivered to payee on January 2, 2018, P80,000. Check written on December 27, 2018, dated January 2, 2019, delivered to payee on December 29, 2019, P40,000.

The credit balance in the Security Bank current No. 2 represents checks drawn in excess of the deposit balance. These checks were still outstanding at December 31, 2018. The savings deposit in PNB has been set aside by the board of directors for acquisition of new equipment. This is expected to be disbursed in the next 3 months after the end of the reporting period. 6.

Cash on hand a. P410,000 b. P530,000 c. P470,000 d. P440,000

7.

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

8.

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

9.

Cash and cash equivalents a. P2,917,200 b. P3,074,900 c. P3,052,000 d. P3,066,000

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Problem 7 The books of Manila’s Service, Inc. disclosed a cash balance of P687,570 on December 31, 2018. 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 Manila’s 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. Manila’s had been charged on December 26 for a customer’s NSF check for P12,960. g. Manila 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: 10.

Adjusted cash in bank balance a. P583,200 b. P577,200 c. P589,200 d. P512,400

11.

Net adjustment to cash as of December 31, 2018 a. P104,370 b. P110,370 c. P98,370 d. P175,170

Problem 8 Stark Industry’s ant is preparing its October bank reconciliation and has collected the following data: Per Books P11,600 24,600 27,800 0 0 8,400

Oct. 1 balance Oct. deposits Oct. checks Note Collected (plus 10% interest) Oct. service charge Oct. 31 balance

Per Bank P10,000 21,200 29,000 4,400 20 6,580

Additionally, deposits in transit and outstanding checks from September reconciliation were P4,400 and P2,800, respectively. 12.

The correct cash balance at October 31 should be: a. P10,960 b. P12,780 c. P11,180 d. P 3,980 8

Problem 9 Samsung Inc. uses four-column bank reconciliation. The bank reconciliation for March shows outstanding checks for P300. During April, the company wrote check totaling P23,600. The bank statement for April shows P23,010 of checks clearing the company’s . 13.

The amount of outstanding checks on April bank reconciliation must be: a. P 890 b. P 600 c. P 300 d. P 1,200

Problem 10 Nitendo Co. reported a balance of P14,300 in its cash at the end of the month. There were P12,000 deposits in transit and P11,500 of checks outstanding. The bank statement showed a balance of P15,000. Service charge of P600, and the collection of a note plus interest. The note had a face value of P1500. 14.

How much interest did the company collect? a. P 1,800 b. P 300 c. P 2,400 d. P 1,200

Problem 11 Sony uses four-column bank reconciliation. The bank statement for May shows payments of P13,150, including service charge of P200. At the beginning of May, there were P900 of checks outstanding. At the end of May, there were P1,200 of checks outstanding. 15.

Before recording the bank service charge, Sony must have recorded May payments of: a. P13,250 b. P12,650 c. P13,050 d. P13,650

Problem 12 A company received its monthly bank statement, which showed an ending balance of P150,000. Adjustment on the bank reconciliation included a deposit in transit of P20,000; outstanding checks of P30,000; NSF check of P5,000; bank service charge of P300; proceeds of a note collected by the bank of P40,000. 16.

What was the correct cash balance to be shown in the statement of financial position? a. P134,700 b. P105,300 c. P140,000 d. P174,700

17.

Using the same information in no. 18, how much is the unadjusted cash balance per books? a. P134,700 b. P105,300 c. P140,000 d. P174,700

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Problem 13 GIC Enterprise’s cash had a balance of P96,200 on August 31. This included a bank deposit of P8,700 that was in transit on the 31st. The August 31 bank statement contained the following information: Bank statement balance Bank service charge 18.

P108,900 1,700

NSF check Collection of note

P1,600 8,600

GIC also had an outstanding check of P16,100. What is GIC’s reconciled balance? a. P92,900 b. P96,200 c. P104,700 d. P101,500

Problem 14 Your audit senior instructed you to prepare a four column proof of cash receipts and disbursements for the month of December, 2018. The bank reconciliation provided by Cubao Company at November 30 is reproduced below: Unadjusted bank Balance Add: deposit in transit Total Less outstanding checks: No. 276 282 284 285 Adjusted balance

P96,800 18,000 114,800

P2,400 7,200 4,800 1,600

16,000 P98,800

Unadjusted book balance Add: CM – Note collected Total Less: DM bank charges

Adjusted balance

P58,640 40,320 98,960 160

P98,800

The December bank statement, which has a beginning balance of P96,800, is reproduced below: May Bank Name: Cubao Company Date Debits December 01 December 02 P7,200 December 04 24,000 December 06 December 08 December 10 40,000 DM97 December 11 December 16 20,000 December 18 December 21 December 28 36,000 December 31 4,000 DM98 Totals DM97 – Customer’s DAIF check DM98 – Service Charges

Credits P18,000 40,000 48,000 400,000 CM83 56,000 64,000 72,400 80,000 64,000 CM84 CM83 – Note collected by the bank CM84 – Amount collected by the bank

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The company’s cash receipts and cash disbursements journals for the month of December 2018 are provided below: Date Dec. 01 05 10 17 20 27 31

Total

Cash Receipts Journal OR No. 415 416 417 418 419 420 421

Amount Date P40,000 Dec. 01 48,000 03 56,000 10 64,000 14 72,000 20 80,000 23 88,800 26 28 31 P440,800 Total

Cash Disbursements Journal Check No. Amount 286 P16,000 287 24,000 288 32,000 289 20,000 290 28,000 291 36,000 292 40,000 293 44,000 294 48,000 P304,000

The company’s Cash in Bank ledger appears below: Cash in Bank Balance P58,640 12/31/18 CDJ P304,000 12/01/18 GJ 40,320 12/10/18 GJ (CM83) 400,000 12/31/18 CRJ 440,800 Based on the application of the necessary audit procedures and appreciation of the above data, you are to provide the answers to the following: 19.

How much is the outstanding checks as of December 31, 2018? a. P208,000 b. P232,800 c. P216,800 d. P224,000

20.

How much is the adjusted book receipts for December, 2018? a. P913,200 b. P985,200 c. P904,800 d. P771,600

21.

How much is the adjusted book disbursements for December, 2018? a. P347,840 b. P332,000 c. P348,000 d. P339,200

22.

How much is the adjusted cash balance as of December 31, 2018? a. P664,000 b. P680,000 c. P688,800 d. P672,800

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Problem 15 You obtained the following information on the current of Paranaque Company during your examination of its financial statements for the year ended December 31, 2018. The bank statement on November 30, 2018 showed a balance of P306,000. Among the bank credits in November was customer’s notes for P100,000 collected for the of the company which the company recognized in December among its receipts. Included in the bank debits were cost of checkbooks amounting to P1,200 and a P40,000 check which was charged by the bank in error against Paranaque Co. . Also in November you ascertained that there were deposits in transit amounting to P80,000 and outstanding checks totaling P170,000. The bank statement for the month of December showed total credits of P416,000 and total charges of P204,000.The company’s books for December showed total debits of P735,600, total credits of P407,200 and a balance of P485,600. Bank debit memos for December were: No. 121 for service charges, P1,600 and No. 122 on a customer’s returned check marked “Refer to Drawer” for P24,000. On December 31, 2018 the company placed with the bank a customer’s promissory note with a face value of P120,000 for collection. The company treated this note as part of its receipts although the bank was able to collect on the note only on January, 2019. A check for P3,960 was recorded in the company cash payments books in December as P39,600. Based on the application of the necessary audit procedures and appreciation of the above data, you are to provide the answers to the following: 23.

How much is the undeposited collections as of December 31, 2018? a. P339,600 b. P179,600 c. P219,600 d. P139,600

24.

How much is the outstanding checks as of December 31, 2018? a. P191,960 b. P397,600 c. P361,960 d. P363,160

25.

How much is the adjusted cash balance as of November 30, 2018? a. P216,000 b. P256,000 c. P176,000 d. P157,200

26.

How much is the adjusted bank receipts for December? a. 635,600 b. 515,600 c. 475,600 d. 435,600

27.

How much is the adjusted book disbursements for December? a. P395,960 b. P431,600 c. P225,960 d. P397,160

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28.

How much is the adjusted cash balance as of December 31, 2018? a. P625,640 b. P195,640 c. P220,000 d. P375,640

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