SEMINAR 1 MODULE 1: CASH & CASH EQUIVALENTS R.F.

RAMOS

COMPUTATIONAL 3. What is the correct cash balance at July 31?

A. P52,875
BERMAN COMPANY had the following transactions in B. P54,375
its first year of operations: C. P54,450
D. P54,825
Sales (90% collected in the first year) P750,000
Disbursements for costs and expenses 600,000
Purchases of equipment for cash 200,000 The August 31 bank statement of KELVIN COMPANY
Proceeds from issuance of common stock 250,000 showed a balance of P113,000. Deducted in arriving at
Payments on short-term borrowings 25,000 this amount was a customer's NSF check for P2,400 that
Proceeds from short-term borrowings 50,000 had been returned. Kelvin had received no prior notice
Depreciation on equipment 40,000 concerning this check. In addition to the bank statement,
Disbursements for income taxes 45,000 other records showed there were deposits in transit
Bad debt write-offs 30,000 totaling P17,200 and that outstanding checks totaled
P10,800.
1. What is the cash balance at December 31 of the first
year? 4. What is the cash balance per books at August 31
A. P75,000 (prior to adjustments)?
B. P85,000 A. P115,400
C. P105,000 B. P117,000
D. P140,000 C. P119,400
D. P121,800

JACKSON COMPANY had the following cash balances

at December 31, 2017: TRACK COMPANY's checkbook balance on December
31, 2017, was P8,000. In addition, Track held the
Cash in banks P375,000 following items in its safe on December 31:
Petty cash funds (all funds were
reimbursed on December 31, 2017) 5,000 Check payable to Track Company, dated
January 2, 2018, not included in
Cash in banks includes P125,000 of compensating December 31 checkbook balance P2,000
balances against short-term borrowing arrangements at Check payable to Track Company,
December 31, 2017. The compensating balances are deposited December 20, and included
legally restricted as to withdrawal by Jackson. in December 31 checkbook balance,
but returned by bank on December
2. In the current asset section of Jackson's December 30, stamped "NSF." The check was re-
31, 2017, balance sheet, what total amount should deposited January 2, 2018, and
400
be reported as Cash? cleared January 7
A. P250,000 Post-dated checks 150
B. P255,000 Check drawn on Track Company's
C. P375,000 account, payable to a vendor, dated
D. P380,000 and recorded December 31, but not
mailed until January 15, 2018 1,000

In preparing the bank reconciliation of CREWS 5. The proper amount to be shown as cash on Track's
COMPANY for the month of July, the following balance sheet at December 31, 2017, is
information is available: A. P7,600
B. P8,000
Balance per bank statement, 7/31 P54,075 C. P8,600
Deposits in transit, 7/31 9,375 D. P9,750
Outstanding checks, 7/31 8,625
Deposit erroneously recorded by bank
to Crews account, 7/18 375 In preparing its bank reconciliation for the month of
Bank service charges for July 75 February, JAMES COMPANY has available the
following information:

1
 Balance per bank statement, February 28 P18,025 C. P27,950
Deposit in transit, February 28 3,125 D. P28,400
Outstanding checks, February 28 2,875
Check erroneously deducted by bank
from James' account, February 10 125 CHARLES COMPANY has two checking accounts. A
Bank service charges for February 25 special account is used for the weekly payroll only, and
the general account is used for all other disbursements.
6. What is the corrected cash balance at February 28? Every week, a check in the amount of the net payroll is
A. P18,125 drawn on the general account and deposited in the
B. P18,150 payroll account. The company maintains a P5,000
C. P18,275 minimum balance in the payroll account.
D. P18,400
9. On a monthly bank reconciliation, the payroll
account should
RASMUSSEN COMPANY had the following bank A. reconcile to P5,000.
reconciliation at March 31: B. Show a zero balance per the bank statement.
Balance per bank statement, 3/31 P 93,000 C. Show a P5,000 balance per the bank statement.
Add: Deposit in transit 20,600 D. Be reconciled jointly with the general account
Total P113,600 in a single reconciliation.
Less: Outstanding checks (25,200)
Balance per books, 3/31 P 88,400
Items 10 and 11 are based on the following:
Data per bank statement for the month of April follow: GARNETT COMPANY is preparing its bank
Deposits P116,800 reconciliation. The following data are available:
Disbursements 99,400
March data Per bank Per books
All reconciling items at March 31 cleared through the Balance, February 28 P741,400 P719,400
bank in April. Outstanding checks at April 30 totaled March deposits reflected 476,000 490,000
P15,000. March checks reflected *(617,000) (610,000)
Note collected (including
7. What is the amount of cash disbursements per P2,000 interest) 202,000
books in April? Service charge (1,200) ________
A. P89,200 Balance, March 31 P801,200 P599,400
B. P99,400
C. P109,600 *Erroneously includes a check drawn by Garment
D. P114,400 Company for P15,000.

From the February 28 bank reconciliation:

STINGER COMPANY’s checkbook balance on  Deposits in transit, P17,000
December 31, 2017 was P27,200. In addition, Stinger  Outstanding checks, P39,000
held the following items in its safe on December 31.
10. The amount of deposits in transit at March 31 is
a. A check for P450 from Peters, Inc. received A. P3,000
December 30, 2017, which was not included in the B. P14,000
checkbook balance. C. P31,000
b. An NSF check from Garner Company in the D. P45,000
amount of P700 that had been deposited at the
bank, but was returned for lack of sufficient funds 11. The amount of outstanding checks at March 31 is
on December 29. The check was to be re-deposited A. P7,000
on January 3, 2018. The original deposit has been B. P8,000
included in the December 31 checkbook balance. C. P15,000
c. Coin and currency on hand amounted to P1,450. D. P47,000

8. The proper amount to be reported on Stinger's

balance sheet for cash at December 31, 2017 is KHAKI COMPANY had the following account balances
A. P26,950 on December 31, 2017:
B. P27,500

2
Petty cash fund P 50,000 COMPANY includes the following accounts:
Cash in bank – current account 4,000,000
Cash in bank - sinking fund 2,000,000 Petty cash fund P 50,000
Cash on hand 500,000 Current account – First Bank 4,000,000
Cash in bank – restricted account for Current account – Second Bank
plant additions, expected to be 1,500,000 (overdraft) (250,000)
disbursed in 2018 Money market placement – Third Bank 1,000,000
Money market placement 1,000,000 Time deposit – Fourth Bank 2,000,000

 The petty cash fund includes unreplenished Additional information:

December 31, 2017 petty cash expense vouchers of
P10,000 and employee IOUs of P5,000.
 The cash on hand includes a P100,000 check
payable to Khaki dated January 15, 2018.
 In exchange for a guaranteed line of credit, Khaki
has agreed to maintain a minimum balance of
P200,000 in its unrestricted current bank account.
 The sinking fund is set aside to settle a bond
payable that is due on June 30, 2018.
 The petty cash fund includes unreplenished
December 31, 2017 petty cash expense vouchers of
P15,000 and an employee check of P5,000 dated
January 31, 2018..
 A check for P100,000 was drawn against First Bank
current account dated and recorded December 29,
2017 but delivered to payee on January 15, 2018.
 The Fourth Bank time deposit is set aside for land
acquisition in early January 2018.

12. What should be reported as “cash and cash 14. The December 31, 2017 statement of financial
equivalents” on December 31, 2017? position shall report “cash and cash equivalents” at
A. P4,435,000 A. P4,130,000
B. P5,435,000 B. P4,880,000
C. P5,535,000 C. P5,130,000
D. P7,435,000 D. P5,150,000

EVERLASTING COMPANY reported the following CROSSWIND COMPANY provided the following
information at the end of the current year: information with respect to its cash and cash equivalents
 Investment securities of P1 million. These securities on December 31, 2017.
are share investments that are traded in the
Philippine Stock Exchange. As a result, the shares Checking account at First Bank P (200,000)
are very actively traded in the market. Checking account at Second Bank 3,500,000
 Investment securities of P2 million. These securities Treasury bonds 1,000,000
are government treasury bills. The treasury bills Payroll account 500,000
have a 10-year term and purchased on December 31 Value-added tax account 400,000
at which time they had two months to go until they Foreign bank account, in equivalent
mature. pesos - restricted 2,000,000
 Cash of P3.4 million in the form of coins, bills, Postage stamps 50,000
savings account and current account. Employee’s post-dated check 300,000
 Investment securities of P1.5 million. These IOU from company president’s brother 750,000
securities are commercial papers (short-term IOUs Credit memo from a vendor for a
from other entities). The term of the commercial purchase return 80,000
papers is 9 months and they were purchased on Traveler’s check 300,000
December 31 at which time they had 4 months to go No-sufficient fund check 150,000
until they mature. Petty cash fund (P20,000 in currency
and P30,000 in expense receipts) 50,000
13. How much should be reported as cash and cash Money order 180,000
equivalents at the end of the current year?
A. P5,400,000 15. What amount would be reported as unrestricted
B. P6,400,000 cash on December 31, 2017?
C. P6,900,000 A. P4,600,000
D. P7,900,000 B. P4,900,000
C. P5,900,000
D. P6,900,000
The December 31, 2017 trial balance of JASMINE

3
The checkbook balance of DIVINE COMPANY on
December 31, 2017 was P4 million. Data about certain While checking the accounts of GABRIEL COMPANY
cash items follow: on December 31, 2017, the following information is
available:
 A customer’s check amounting to P200,000 dated
January 2, 2018 was included in the December 31, Balance per books P 6,500,000
2017 checkbook balance. Balance in checking account
 Another customer check for P500,000 deposited on (outstanding checks per books of 7,000,000
December 22, 2017 was included in its checkbook P1,660,000)
balance but returned by the bank for insufficiency Deposit in bank closed by BSP 1,500,000
of funds. This check was re-deposited on December Deposit in transit 1,200,000
26, 2017 and cleared two days later. Currency and coins on hand 400,000
 A P400,000 check payable to a supplier dated and Petty cash fund 50,000
recorded on December 31, 2017 was mailed on Bank charges not yet taken up in the
January 16, 2018. books 10,000
 A petty cash fund of P50,000 with the following Bond sinking fund cash 1,000,000
summary on December 31, 2017: Receivable from employees 100,000
Coins and paper bills P 5,000 Error in recording a check in the books
Petty cash vouchers 43,000 (Note: The correct amount as paid by
Deposit value of 20 cases of soft drink __2,000 the bank is P100,000 instead of
Total P 50,000 P150,000 as recorded in the books) 50,000
 A check of P43,000 was drawn on December 31,
2017 payable to Petty Cash. 18. The correct cash balance under current assets on
December 31, 2017 is
16. What is the cash balance on December 31, 2017? A. P6,540,000
A. P3,748,000 B. P6,990,000
B. P4,200,000 C. P7,990,000
C. P4,205,000 D. P8,490,000
D. P4,248,000

The petty cash fund of ZEBU COMPANY is composed

The following information pertains to BACCARAT of the following:
COMPANY as of December 31, 2017:
Paper bills and coins P2,000
Cash balance per bank statement P 4,000,000 Paid vouchers
Checks outstanding (including one Transportation P 600
certified check for P100,000) 500,000 Gasoline 400
Customer note collected by the bank Office supplies 500
for Baccarat 150,000 Postage stamps 300
NSF checks of customers returned by Due from employees 1,200 3,000
the bank 200,000 Employee’s check returned by bank 1,000
Bank service charges shown in the marked NSF
December bank statement 20,000 Check drawn by the entity to the 4,000
Error made by Baccarat in recording a order of the petty cash custodian
check that cleared the bank in
December (Note: The check was 19. What is the correct amount of the petty cash fund at
drawn in December for P100,000 July 31, 2018?
but recorded at P10,000) 90,000 A. P6,000
Deposit in transit 1,300,000 B. P7,000
C. P9,000
17. What is the cash balance per ledger on December D. P10,000
31, 2017?
A. P4,880,000
B. P4,900,000 On April 1, MARIE COMPANY established an imprest
C. P4,970,000 petty cash fund for P10,000 by writing a check drawn
D. P5,060,000 against its general checking account. On April 30, the

4
fund contained the following:
Currency and coins P3,000
Receipts for office supplies 4,000
Receipts for postage unused 2,000
Receipts for transportation 600
20. On April 30, the company wrote a check to
replenish the fund. What is the amount of the
replenishment check?
A. P3,000
B. P6,600
C. P7,000
D. P10,000
The petty cash fund is established in the amount of
P5,000 and contains P4,000 in cash and P950 in receipts
for disbursements when it is replenished.
21. The journal entry to record replenishment should
include credit /credits to the following account /
accounts:
A. Petty cash, P750
B. Petty cash, P1,000
C. Cash in bank, P1,000
D. Cash in bank, P950 and Cash over or short, P50
THEORETICAL
22. Which of the following is considered cash?
A. 30-day certificate of deposit
B. customer’s post-dated checks
C. money market checking accounts
D. 6-month money market savings certificates
23. Deposits held as compensating balances
A. usually do not earn interest.
B. if legally restricted and held against short-term
credit may be included in cash.
C. if legally restricted and held against long-term
credit may be included among current assets.
D. if legally restricted and held against short-term
credit should not be included in the cash
balance but is reported among current assets.
24. A bank overdraft should be
A. reported as a deduction from cash.
B. reported as a deduction from the current assets
section.
C. netted against cash and a net cash amounted
reported.
D. reported as a current liability, when there is no
valid basis for offsetting against another bank
account.
25. On July 31, 2018, Aqua Company had cash accounts
at three different banks. One account balance is
segregated solely for a November 15, 2018 payment
into a bond sinking fund. A second account, used
for branch operations is overdrawn. The third
account, used for regular corporate operations, has
a positive balance. How should these accounts be
reported in Aqua’s statement of financial position
as of July 31, 2018?
A. The segregated and regular accounts should be
reported as current assets net of the overdraft.
B. The segregated account should be reported as a
non-current asset; the regular account, as a
current asset; and the overdraft account, a
current liability.
C. The segregated and regular accounts should be
reported as current assets; and the overdraft
account, a current liability.
D. The segregated account should be reported as a
non-current asset; and the regular account, a
current asset net of the overdraft.
26. Cash on hand and in bank on the statement of
financial position excludes
A. time deposits.
B. cash reserved for the acquisition of assets.
C. US dollars deposited in a foreign currency
depository accounts.
D. checks drawn before the reporting date but
held for later delivery to creditors.
27. As of December 31, 2017, DEF Corporation had
various checks and papers in its safe. Which item
should not be included in its cash account on its
statement of financial position?
A. US$15,000 cash
B. XYZ Company’s December 5, 2017, P15,000
check payable to DEF.
C. ABC Companys’ January 31, 2018, P20,000
check payable to DEF
D. DEF’s December 28, 2017, P50,000 check
payable to LMN, a DEF supplier.
28. In most situations, the petty cash fund is
reimbursed just prior to the year-end and an
adjusting entry is made to avoid
A. the misstatement of revenues.
B. the understatement of cash and the
overstatement of expenses.
C. the overstatement of cash and the
understatement of expenses.
D. the understatement of cash with the
appropriate statement of expenses.
5
29. Which of the following is not true?
A. The Petty Cash account is debited when the
fund is replenished.
B. The imprest petty cash system in effect adheres
to the rule of disbursement by check.
C. The account “Cash Short/Over” if debit
balance, is presented as part of operating
expenses.
D. Entries are made to the Petty Cash account
only to establish, increase or decrease the size
of the fund or to adjust the balance if not
replenished at year-end.
30. Seldom does the balance of cash in bank account in
the depositor’s books agree with the balance
appearing in the bank statement at a particular date
because of
A. time-lapse differences.
B. a tax avoidance scheme.
C. bank secrecy requirements.
D. negligence of the bookkeeper.
31. Bank reconciliations are normally prepared on a
monthly basis to identify adjustments needed in the
depositor’s records and to identify bank errors.
Adjustments should be recorded for
A. outstanding checks and deposits in transit.
B. bank errors, outstanding checks and deposits
in transit.
C. book errors, bank errors, deposits in transit and
outstanding checks.
D. all items except bank errors, outstanding
checks and deposits in transit.
32. If the cash balance shown in a company’s
accounting records is less than the correct cash
balance, and neither the company nor the bank has
made any errors, there must be
A. deposits in transit.
B. outstanding checks.
C. bank charges not yet recorded by the company.
D. deposits credited by the bank but not yet
recorded by the company.
33. In a bank reconciliation that attempts to reconcile
the bank balance to the correct cash balance, the
following items would affect reconciliation in what
way?
Outstanding checks Deposits in transit
A. Added Added
B. Deducted Added
C. Added Deducted
D. Deducted Deducted
34. A proof of cash is
A. a proof of a company’s liquidity position.
B. a proof of the existence of a cash deposit in a
bank.
C. a reconciliation of the cash receipts and
payments during the previous period, together
with the beginning and ending balances of
cash.
D. a reconciliation of the cash receipts and
payments during the current period, together
with the beginning and ending balances of
cash.
35. Which of the following is not a basic characteristic
of a system of internal control?
A. Use of a voucher system
B. Daily deposit of all cash received
C. Internal audits at regular intervals
D. Combined responsibility for recording and
handling cash
End of Handouts