CASH AND CASH EQUIVALENTS

1. On December 31, 2014, Xenia Company reported the following in its safe:Undeposited collections P

346,780Cash in bank (Metrobank) – demand deposit 67,530Cash in bank (BPI) – demand deposit (125,660)Cash in bank (BPI) – payroll fund 180,010Cash in bank (BPI) – time deposit ( 6 months) 500,000Customer’s check, dated Dec. 6, 2014, returned by bank marked ”DAIF”

67,950

Customer’s check dated Jan. 3, 2015 120,000Bank draft 23,470Traveler’s check 11,770Revolving (change) fund 890Petty cash fund ( invoices and receipts, P13,089, coins P789) 14,000Value added tax fund 67,890Money order 15,660Cash in bank (Banco Filipino) closed due to bankruptcy 25,880Cash in foreign bank, restricted for future equipment acquisition 89,760IOU’s from employees 12,060Overpayment to supplier due to purchase returns not recorded 28,670Cash in sinking fund – related liability is due currently 110,450BSP bills, purchased December 8, 2013 (maturity date February 28, 2015)

350,090

Money Market in Chinabank – 90 days 1,000,000

Compute the amount to be reported as a. Cash P699,579b. Cash equivalents. P1,000,000The 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 P

1,000,000Petty cash fund 40,000BDO acct #10112 – checking 800,000BDO acct #10123 – savings (w/ 10% unrestricted compensating balance)

100,000

BSP treasury bills – 150 days 6,000,000BPI time deposit – lock in period (Nov. 1, 2014 – Jan. 30, 2015) 4,000,000Land bank current account 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 itemsCollections P1,000,000 – P200,000 P800,000Petty cash fund P40,000 – P4,000 – P6,000 30,000BDO (checking and savings) 900,000Land Bank 1,000,000Total P2,730,000

Cash equivalentsBPI P4,000,000 x 20% 800,000

Total Cash and cash equivalents P3,530,000

3. 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

660,000Petty cash fund 1,500 + 21,000 22,500Metrobank 3,000,000 +150,000 + 225,000

3,375,0004,057,500

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

44,000Gasoline vouchers 6,000Medical supplies vouchers 2,000Repairs vouchers 3,000Employees’ vales 7,000Check payable to the petty cash custodian (her salary)

30,000

Employee check returned by bank marked “DAIF” 6,000Employees’ 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 P7,980.00

Vouchers dated June 2014 5.495.00Vouchers dated July 2014 1,977.50Employees IOUs dated June 2014 3,150.00Employees IOUs dated July 2014 1,750.00Envelope marked “paluwagan”. (The envelope was held open and no money was found inside)

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) 4,480.00July vouchers 1,977.50July IOUs 1,750.00Total 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 P150d. 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 P2,500Check # 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? P188,650How much is the balance per bank statement? P185,350Suggested solution:

Book BankUnadj. 170,00

0185,35

0NSF (1,750) (9,200) OCCM 21,000 12,500 DITSC (150)Error (450)

188,650

188,650

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 solutionOC DITBeg. 170,800 Beg. 80,000Book (620,000 – 20,800) 599,200 Book (800,000 – 60,000) 740,000Bank (600,000 –200) (599,800) Bank (700,000 – 100,000) (600,000)End. 170,200 End 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 P 560,000Deposits in transit 123,200Outstanding checks ( 160,000)Balance per books P 523,200

Results for the month of December follow:

Bank BooksBalance December 31 P692,000 P740,000December deposits 400,000 464,800December checks 320,000 248,000December note collected (not included in

deposits) 80,000 -December bank service charge 1,200 -December NSF check, returned by the

bank (recorded by bank as a charge) 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 – 400,000 188,000OC 160,000 + 248,000 – 320,000 88,000Adj. Cash 692,000 + 188,000 – 88,000 792,000 or

740,000 + 80,000 – 1,200 – 26,800 792,000

9. Magnolia Company provided the following information for the bank reconciliation.Checks and charges per bank in March, inclusive of P25,000 March service charges P4,000,0

00March disbursements per book 4,500,00

0Outstanding checks as of February 29, 2014 1,500,00

0February service charges recorded by book in March 50,000Customer’s NSF check returned as bank charge in March ( no entry made in the books) 500,000Customer’s NSF check returned in February and redeposited in March (no entry made in books in either February or March) 250,000

How much is the outstanding checks on March 31? Beg. 1,500,000Book (4,500,000 – 50,000) 4,450,000Bank (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 200,000Receipts per book 440,000Disbursements per book 360,000Balance per bank, August 31 186,000Receipts per bank 500,000Disbursements per bank 394,000August collection of P20,000 recorded in the books as 2,000August check of P60,000 recorded in the books as 6,000

Deposit of Rosebel Company credited by bank to Roseadel 20,000Check of Roadel Company charged by bank against Roseadel 40,000

July AugustDebit memos P 10,000 P 5,000Credit memos 20,000 30,000DITs 60,000 48,000OCs 10,000 65,000

a. How much is the adjusted cash balance as July 30? 130,000b. How much is the adjusted cash balance as August 31? 189,000c. How much is the adjusted August receipts? 468,000d. How much is the adjusted August disbursements? 409,000

Suggested solution:

BEG RECEIPTSDISBURSEME

NTS END

BOOK 120,000 440,000 360,000 200,000

DM (10,000) (10,000)

DM 5,000 (5,000)

CM 20,000 (20,000)

CM 30,000 30,000

ERROR 18,000 18,000

ERROR 54,000 (54,000)

a. 130,000 b. 468,000 c. 409,000 d. 189,000

BANK 80,000 500,000 394,000 186,000

DIT 60,000 (60,000)

DIT 48,000 48,000

OC (10,000) (10,000)

OC 65,000 (65,000)

ERROR (20,000) (20,000)

ERROR (40,000) 40,000

130,000 468,000 409,000 189,000

11. Edrea Company provided the following information:Bank disbursement for November including check of Andrea Company, P400,000

P3,940,000

November bank receipts including an erroneous credit of P200,000 5,000,000

November 30 outstanding checks 800,000October 31 deposit in transit 600,000November 30 bank statement balance 1,860,00

0November book disbursements (check of P600,000 recorded in error as 60,000)

3,600,000

November book receipts (collection of P200,000 recorded as P20,000) 4,400,000

October 31 book balance 1,200,000

Suggested solution (in thousands)BOOK OCT 31 REC. DISB.

NOV 30 BANKOCT 31 REC. DISB.

NOV 30

1,200 4,400 3,600 2,000 800 5,000 3,940 1,860

DM DIT 600 (600)

DM DIT 380 380

CM OC (200) (200)

CM OC 800 (800)ERROR 540

(540) (200)(200)

ERROR 180

180 (400)400

NSF 1,200 4,580 4,140 1,640 1,200 4580 4140 1640

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

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 186,232.50Cash in night depositary 26,587.50 41,156.25Checks written by Quennie not acknowledged by bank 50,656.25 43,989.38Charges by bank unknown to Quennie 368.75 197.50Customer’s check returned by bank marked “DAUD” - 7,433.75Collection by bank in favour of Quennie 6,875.00 6,156.25Cash 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 much is the adjusted cash balance as April 30? 344,395.00How much is the adjusted cash balance as May 31? 184,180.62How much is the adjusted April receipts? 1,346,593.75How much is the adjusted April disbursements? 1,506,808.13

BEG RECEIPTSDISBURSEME

NTS END

BOOK337,888.7

5 1,341,062.

50 1,494,420.63 184,530.6

2

DM (368.75) (368.75)

DM 197.50 (197.50)

CM 6,875.00 (6,875.00)

CM 6,156.25 6,156.25

ERROR (1,125.00) 1,125.00

NSF 6,250.00 6,250.00

NSF 7,433.75 (7,433.75)344,395.0

0 1,346,593.

75 1,506,808.13 184,180.6

2

BANK368,463.7

5 1,332,025.

00 1,514,256.25 186,232.5

0

DIT 26,587.50 (26,587.5

0)

DIT 41,156.25 41,156.25

OC(50,656.2

5) (50,656.25)

OC 43,989.38 (43,989.3

8)

(781.25) 781.25 344,395.0

0 1,346,593.

75 1,506,808.13 184,180.6

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 Bank

Unadj. 826,000

1,045,000

NSF (1,000) (295,000)

OC

75,000 DIT825,00

0825,00

0

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? P3,450,000What is the amount of cash receipts per book in May? P3,350,000What 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.

BOOK BEG REC. DISB. END BANK BEG REC. DISB. END

4,400 3,350 4,300 3,450 4,900 3,250 4,500 3,650DIT 200 (200)

DIT 300 300OC (700) (700)

OC 500 (500)

ADJ. 3,900 3,350 4,300 3,450 ADJ. 3,900 3,350 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? P11,750,000What 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.BOOK BEG REC. DISB. END BANK BEG REC. DISB. END

3,125 11,750 8,187.5 6,687.5 3,750 11,250 8,750 6,250

CM 250 250 DIT 500 (500)

DAIF 175 (175) DIT 1,250 1,250

BC 12.5 (12.5) OC (1,125) (1,125)

OC 750 (750)3,125 12,000 8,375 6,750 3,125 12,000 8,375 6,750

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

adjusted balances