Question 1

Rommel Company keeps all its cash in a checking account. An examination of the companys
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 banks 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 Companys 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 Companys 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 Companys 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 creditors check for P30,000 was incorrectly recorded in
the depositors book as
A customers 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 creditors check
Understatement of customers 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
Employees postdated check
IOU from presidents 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
Travelers 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
Travelers 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 customers 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
Jamess account by bank in error
Customers check returned by the bank marked NSF, indicating
that the customers 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 customers 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)