CHAPTER 2 - Audit of Cash &

Cash Equivalents
Problem 1
The “CASH” account of Don Corporation’s ledger on December 31, 2006 showed the
following:

a. Petty cash fund (including P7,500 unreplenished

voucher of which P2,400 is dated January 3, 2007) P 15,000
b. Redemption Fund Account – PNB 500,000
c. Traveler’s check 100,000
d. Money order 10,000
e. Treasury bill, purchased December 1, 2006 (due on Feb. 1, 2007) 50,000
f. Time deposit due on March 31, 2007 50,000
g. 180-day Treasury bill, due March 15, 2007 120,000
h. Note receivable in the possession of a collecting agency 20,000
i. PNB – Checking Account #211-009-091 325,900
j. Cash on hand, including customer postdated check of P15,000 23,000
k. Savings deposit, earmarked for acquisition of equipment 210,000
l. A check payable to San Ignacio Incorporated, dated January 5, 2007,
that was included in the December 31 PNB Checking Account
#211-009-091 50,000
m. Bond Sinking Fund (used to finance the maturing long-term obligation
on March 31, 2007) 150,000
n. Overdraft in PNB Checking Account #211-099-085 ( 50,000)
o. Check #801 in payment to Accounts Payable, dated Dec. 31, 2006
not mailed until January 5, 2007 20,000
p. Advances to Officers/Employees for Seminars (no liquidation is
required) 80,000
q. Money market placement (due June 30, 2007) 600,000
r. Listed stock held as temporary investment 100,000
s. Check #789 in payment to Suppliers, dated January 5, 2007 and
recorded December 31, 2006. 35,000
t. Customers’ certified checks 10,000
u. Pension Fund 150,000
TOTAL 2,568,900

Questions
1. The entry to correct/adjust item F is:
a. Investment 50,000
Cash 50,000
b. Other assets 50,000
Cash 50,000
c. Short-term investment 50,000
Cash 50,000
d. No adjustment

2. The entry to correct/adjust item L is:

a. Accounts payable 50,000
Cash 50,000
b. Cash 50,000
Other liabilities 50,000

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 c. Cash 50,000
Accounts payable 50,000
d. No adjustment

3. The entry to correct/adjust item M is:

a. Investment 150,000
Cash 150,000
b. Other assets 150,000
Cash 150,000
c. Short-tem investment 150,000
Cash 150,000
d. No adjustment

4. DON CORPORATION’S cash and cash equivalents balance at December 31, 2006 is:
a. Overstated by P1,950,100 c. Overstated by P 1,845,100
b. Overstated by P 1,895,100 d. Overstated by P 1,795,100

5. DON CORPORATION’S adjusted cash and cash equivalents balance at December 31,
2006 is:
a. P 618,800 b. P 623,800 c. P 673,800 d. P 723,800

Problem 2
The following items are found in the cash account of Ivie Company at December 31, 2006.
The company’s controller asks your opinion whether the items listed below should be
considered as part of cash account and come up with adjusting entry to adjust the cash
account.

1. Customers’ check dated December 25, 2006, P25,000.

2. Company’s check (P30,000) dated December 26, 2006 which was drawn in payment for
merchandise purchased on that date but not delivered until January 3, 2007. This check
was deducted in the cash balance.
3. A check worth P196,000 from customer who paid the account net of the 2% discount.
The company records the transaction as credit to Accounts Receivable for the proceeds.
4. Cash in closed bank (Urban Bank), P95,000.
5. Redemption fund, P100,000
6. Sinking fund, P100,000. This will be used on March 1, 2007 to redeem the bonds
payable.
7. Metro Bank Checking Account No. 0004568, P210,000.
8. RCBC Checking Account No. 0002347, P115,000.
9. Overdraft in PNB Checking Account No. 00011256, P50,000.
10. Company’s check dated January 3, 2007 in payment of account, P50,000. This was
recorded in the company’s disbursement ledger at December 31, 2006.
11. Overdraft in RCBC Checking Account No. 0056791, P15,000.
12. Postage stamps, P2,000.
13. 90-day Treasury Bills (purchase on November 1, 2006), P100,000
14. Treasury Bills that matures on February 1, 2007, P50,000.
15. Change fund, P10,000.
16. Customers’ certified check, P20,000.
17. Company’s certified check, P50,000. (This was included in the cash disbursement for
December).

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Questions

1. The entry to correct/adjust item number 3 is:

a. Accounts receivable 4,000
Sales discounts 4,000
b. Sales discounts 4,000
Accounts receivable 4,000
c. Accounts receivable 4,000
Sales 4,000
d. No adjustments

2. The entry to correct/adjust item number 10 is:

a. Accounts payable 50,000
Cash 50,000
b. Other liabilities 50,000
Cash 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustment

3. The entry to correct/adjust item number 17 is:

a. Accounts payable 50,000
Cash 50,000
b. Cash 50,000
Accounts receivable 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustments

4. The entry to correct/adjust item number 16 is:

a. Accounts receivable 20,000
Cash 20,000
b. Cash 20,000
Accounts payable 20,000
c. Cash 20,000
Accounts receivable 20,000
d. No adjustments

5. IVIE COMPANY’S adjusted cash and cash equivalents balance at December 31, 2006 is:
a. P 771,000 b. P 741,000 c. P 721,000s d. P 691,000

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Problem 3
Your audit of the December 31, 2006, financial statements of Mato Corporation reveals the
following:

1. Current account at PBCom P (35,000)

2. Current account at PNB 65,000
3. Treasury bills (acquired 3 months before maturity) 200,000
4. Treasury bills (maturity date is 12/31/07) 500,000
5. Payroll account 175,000
6. Foreign bank account - restricted (translated using the
12/31/06 exchange rate) 900,000
7. Postage stamps 600
8. Employees’ checks marked “DAIF” 10,000
9. IOU from the vice-president 50,000
10. Credit memo from a supplier for a purchase returns 25,000
11. Traveler’s check 60,000
12. Money order 10,000
13. Company’s check dated 12/30/06 but not mailed at year-end 30,000
14. Petty cash fund (P4,000 in currency and expense receipts for
(P6,000) 10,000

Questions

1. The entry to adjust the employees’ checks marked “DAIF” is:

a. Accounts receivable 10,000
Cash 10,000
b. Cash 10,000
Accounts receivable 10,000
c. Employees’ advances 10,000
Cash 10,000
d. Cash 10,000
Employees’ advances 10,000

2. MATO CORPORATION’S adjusted cash and cash equivalents balance at December 31,
2006 is:
a. P 560,000 b. P 544,000 c. P 514,000 d. P 509,000

Problem 4
The controller of Pacatang Company is attempting to determine the amount of cash to be
reported on its December 31, 2006 balance sheet. The following information is provided:

a. Commercial savings account of P1,000,000 and a commercial checking account balance

of P900,000 are held at Phil. Banking Corporation.
b. Money market fund account held at Allied Bank, P600,000
c. Travel advance of P180,000 for executive travel for the first quarter of next year
(employee to reimburse through salary reduction)
d. A separate fund in the amount of P1,500,000 is restricted for the retirement of long-
term debt.
e. Petty cash fund, P5,000
f. An IOU from David Santos, a company officer, in the amount of P10,000.

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g. A bank overdraft of P110,000 has occurred at one of the banks the company uses to
deposit its cash receipts. At the present time, the company has no other deposits at this
bank.
h. The company has two certificates of deposit, each totaling P500,000. These certificates
of deposit have a maturity of 120 days.
i. Pacatang Company has received a check that is dated January 12, 2007 in the amount
of P125,000.
j. Currency and coins on hand amounted to P5,300.

Questions

1. PACATANG COMPANY’S adjusted cash and cash equivalents balance at December 31,
2006 is:
a. P 1,910,300 b. P 2,400,300 c. P 2,510,300 d. P 3,510,300

2. The travel advance of P180,000 for executive travel should be classified as:
a. Accounts receivable c. Prepaid expenses
b. Travel expenses d. Advances to employees

Problem 5
Present journal entries to record the following transactions in the books of Marites
Corporation, which uses a calendar year as accounting period. Assume that the company is
using the imprest method in accounting for petty cash fund:

a. A petty cash fund was set up on November 1, 2006 in the amount of P2,400.

b. On November 29, 2006, a check was issued to replenish the fund, the composition of
which was as follows:
Currency – bills and coins 166
Vouchers showing expenditures for:
Office supplies 270
Charges from purchased of supplies 124
Repairs and maintenance 350
Wages paid to casual employees 950
Charges from purchased of goods to be sold 400

c. On December 18, 2006, the fund was replenished and correspondingly increased to
P3,000; its composition included the following:
Currency – bills and coins 158
Vouchers showing expenditures for:
Store supplies 304
Accounts payable 914
Charges from purchased of goods to be sold 242
Miscellaneous expenses 782

d. An examination on December 31, 2006, disclosed the following composition of the fund,
although it was not replenished on this date:
Currency – bills and coins 958
Check of office manager, dated January 5, 2007 1,000
Vouchers showing expenditures for:
Office supplies 126
Miscellaneous expenses 90
Accounts payable 800

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e. On January 5, 2007, the check of office manager was cashed and the proceeds were
added to the petty cash fund.

f. On January 6, 2007, replenished disbursement from December 18, 2006 to January 5,

2007.

Questions
1. The entry to record the November 29 replenishment of petty cash fund is:
a. Operating expenses 1,694
Freight-in 400
Cash short/over 140
Cash 2,234
b. Operating expenses 2,234
Petty cash fun d 2,234
c. Operating expenses 1,694
Freight-in 400
Cash short/(over) 140
Petty cash fund 2,234
d. No entry since the company is using an impress fund system.

2. The adjusted Petty Cash Fund balance of MARITES CORPORATION at December 31,
2006 is:
a. P 3,000 b. P 1,958 c. P 984 d. P 958

3. The entry to record the December 31, 2006 adjustment of petty cash fund is:
a. Operating expenses 216
Accounts payable 800
Cash short/over 26
Petty cash fund 1,042
b. Operating expenses 216
Accounts payable 800
Cash short/over 26
Cash 1,042
c. Operating expenses 216
Accounts payable 800
Advances – employees 1,000
Cash short/(over) 26
Petty cash fund 2,042
d. No entry since there is no replenishment yet.

4. The entry to record the January 6, 2004 replenishment of petty cash fund is:
a. Operating expenses 216
Accounts payable 800
Cash short/over 26
Petty cash fund 1,042

b. Operating expenses 216

Accounts payable 800
Cash short/over 26
Cash 1,042

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 c. Operating expenses 216
Accounts payable 800
Advances – employees 1,000
Cash short/(over) 26
Cash 2,042

d. No entry since the account has been adjusted on December 31.

Problem 6
Your audit of the petty cash (P10,000) of Juliet Company as of December 31, 2006 revealed
the following: (cash count date is January 3, 2007 at 5:00 pm)

Bills: 10 - P500 bill 15 - P100 bill 18 - P50 15 - P20 5 - P10

Coins: P180 in P5 pieces; P42 in P1.00 pieces; P23 in P0.25 pieces.
IOU’s submitted were:
Dec. 18 Nap R. - P 750
Dec. 28 Ruel R. 125
Dec. 30 Sonny S. 500
Cashed checks:
Dec. 28, 2006 check drawn by the manager P 1,125
Dec. 28, 2006 check drawn by an employee 500
Dec. 30, 2006 check drawn by a customer 350
Jan 1, 2007 check drawn by an employee 1,250

The cashier informed you that owing to the lack of cash it was necessary for him to open
certain payroll envelopes unclaimed by employees and use the cash found herein. They
were as follows:
Dec. 15, 2006 - Ed A. P 1,250
Dec. 30, 2006 - Andoy 1,750
Dec. 30, 2006 - Macky 650
Dec. 30, 2006 - Paz 1,000

The cashier also informed you that all cash sales receipts were passed through his fund
and that cash sales tickets Nos. 2059 to 2061 under dates of Dec. 30, Jan. 3 and Jan. 4
for P350, 500 and P545, respectively, had not yet been turned over to the general
cashier.

The petty cash vouchers found in the petty cash box were as follows:
Dec. 30, 2006 Transportation P515
Dec. 30, 2006 Token gifts to visitors 650
Dec. 30, 2006 Freight for office supplies purchase 215
Jan. 1, 2007 Freight for mdse. purchased 125
Jan. 2, 2007 Freight for mdse. sold 575
Questions

1. JULIET COMPANY’S cash shortage at December 31, 2006 is:

a. P 2,072.75 b. P 1,370.00 c. P 1,027.75 d. P 327.75

2. The adjusted petty cash balance of JULIET COMPANY at December 31, 2006 is:
a. P 10,000 b. P 9,625 c. P 5,975 d. P 4,625

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3. The entry to adjust the unclaimed payroll at December 31, 2006 is:
a. Petty Cash Fund c. Cash
Salaries expense Accrued salaries
b. Salaries expense d. Accrued salaries
Petty cash fund Cash

4. The cashed check dated January 1, 2007

a. Should be adjusted since it was dated January 1, 2007, hence a postdated check.
b. Should be adjusted since it was received December 31, 2006 but the check is dated
January 1, 2007, hence a postdated check.
c. Should not be adjusted since the check is dated January 1, 2007.
d. Should not be adjusted since the check was received December 31, 2007.

5. The Cash account (excluding PCF) of JULIET COMPANY is understated at December 31,
2006 by:
a. P 4,650 b. P 4,900 c. P 6,045 d. P 6,370

Problem 7
You are making an audit of the Darwin Corporation for the past calendar year. The balance
of the Petty Cash account at December 31, 2006 was P1,300. Your count of the imprest
cash count made at 8:30 am on January 3, 2007, in the presence of the petty cash
custodian, revealed:

Currency and coins 571.38

Checks:
Date Maker Bank
12/28/06 Macky, vice-president PNB 360.00
12/29/06 Andy, employee DBP 60.00
12/31/06 Bobot, customer RCBC 153.80
01/02/07 Neil, customer PNB 121.36
01/10/07 Jeff, employee PNB 60.00
(check received Dec. 29)
(These checks were all considered good when deposited after dates shown on the
checks. The first four checks were actually deposited Jan. 3; the last check was
deposited Jan. 11; all five checks proved to be good.)

Vouchers:
Dec. 11 #261 Richard, shipping clerk – temporary advance for the use of the
receiving department. Your count of Mr. Richard’s fund revealed:
currency – P28.80; merchandise freight bills, P31.20. P 60.00
Dec. 28 # 301 Postage 12.00
Dec. 29 # 302 Freight bill on merchandise purchases 47.30
Dec. 31 # 305 Freight bill on office supplies 88.93
Jan. 2 # 500 Freight bill on merchandise purchases 29.36

IOU Dec. 21 Mabel, employee 36.00

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 Sales Invoices (for cash sales, collections handled by the petty cashier):
Invoice # 315 Dec. 30 P 120.00
328 Dec. 31 153.80
334 Jan. 2 121.36
(As a general rule, the petty cashier endeavored to turn over the proceeds of
cash sales to the general cashier on the 10 th, 20th and last days of each month.
Proceeds on these sales were recorded and deposited by the general cashier.)

Postage Stamps:
Three one-peso stamps. The petty cashier handled postage stamps. These
stamps represent the unused stamps purchased on Voucher # 301.

Questions
1. The petty cash fund shortage at December 31, 2006 is:
a. P 216.39 b. P 123.83 c. P 98.03 d. P 95.03

2. The adjusted petty cash fund balance of DARWIN CORPORATION at December 31, 2006
is:
a. P 900.74 b. P 960.74 c. P 1,174.54 d. P 1,234.54

3. DARWIN CORPORATION’S operating expenses found in the petty cash fund at December
31, 2006 is:
a. P 208.23 b. P 205.75 c. P 174.03 d. P 97.93

4. The Cash account (excluding PCF) of DARWIN CORPORATION is understated at

December 31, 2006 by:
a. P 395.16 b. P 273.80 c. P 153.80 d. P 120.00

Problem 8
In your year-end audit of Angela Corp., the cashier showed a cash accountability of
P1,100,000 as at December 31, 2006. The following transactions were extracted in the
books of the company, in summary form:

Accounts receivable, beginning P 275,000

Accounts receivable, end 385,000
Sales (80% on credit) 1,850,000
Accounts written-off 25,000
Recovery of accounts written-off, included in the collection
of account receivable 15,000
Depreciation of fixed assets 150,000
Inventory, end 185,000
Inventory, beg 203,000
Cost of sales 960,000
Income tax accrued 18,500
Payment of bank loan 200,000
Subscription receivable 250,000
Subscribed capital stock 950,000
Purchases of fixed assets 320,000
Proceeds from short-term bank loan 300,000
Accounts payable, end 425,000
Accounts payable, beg. 200,000

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Questions

1. The correct cashier’s accountability at December 31, 2006 is:

a. P 1,493,000 b. P 1,123,000 c. P 793,000 d. P 423,000

2. ANGELA CORPORATION’S cash account at December31, 2006 is:

a. Understated by P 307,000 c. Overstated by P 693,000
b. Understated by P 393,000 d. Overstated by P 677,000

Problem 9
The following data are gathered from the cash books and bank statement received from
Davao Bank by Grace Company:

The cash in bank ledger account shows a debit balance of P290,438.50 as of May 31.

The bank statement shows a credit balance of P318,560 as of May 31.

An examination of the checks encashed by the bank shows that the following checks are not
presented for payment:
No. 187, P3,608; No. 189, P15,499; No. 191, P4,400;
No. 192, P1,545.50, No. 193, P23,001

A certified check for P24,750 payable to creditor, was encashed by the bank during May.

The bank statement shows a deduction of P10,802 for check No. 184. The check was
actually made out at P10,208.

A check deposited on May 27 for P34,100 was returned by the bank on May 28 marked
Refer to Maker.

A non-interest bearing note for P44,000 was collected by the bank for the account Grace
Company. Collection fee deducted by the bank is P330.

A deposit for P20,900 was recorded in the books twice.

Check No. 179 for P26,400 was erroneously recorded in the books as P46,200.

Interest on an outstanding loan payable, deducted by the bank on May 31, P1,320.
Collections on May 31 to be deposited on June 1, P26,488.
Questions

1. GRACE COMPANY’S adjusted cash balance at May 31, 2006 is:

a. P 341,939.50 b. P 283,288.50 c. P 297,588.50 d. P 273,168.50

2. The recorded cash of GRACE COMPANY at May 31 is:

a. Understated by P 17,270 c. Overstated by P 7,150
b. Understated by P 7,150 d. Overstated by P 17,270

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Problem 10
The following data pertaining to the cash transactions and bank account of Abiso Company
for May 2006 are available to you:

Cash balance, per accounting records, May 31, 2006 P 51,582

Cash balance, per bank statement, May 31, 2006 95,874
Bank service charge for May 327
Debit memo for the cost of printed checks delivered by the bank;
the charge has not been recorded in the accounting records 375
Outstanding checks, May 31, 2006 20,184
Deposit of May 30 not recorded by bank until June 1 14,610
Proceeds of bank loan on May 30, not recorded in the accounting
records, net of interest of P900 17,100
Proceeds from a customer’s promissory note; principal amount P24,000,
collected by the bank, taken up in the books with interest 24,300
Check No. 1086 issued to a supplier entered in the accounting records
as P6,300 but deducted in the bank statement at an erroneous amount
of 3,600
Stolen check lacking an authorized signature, deducted from Abiso’s
account by the bank in error 2,400

Customer’s checks returned by the bank marked NSF, indicating that the
customer’s balance was not adequate to cover the checks; no entry has
been made in the accounting records to record the returned check 2,280

Questions

1. The adjusted cash in bank balance of ABISO COMPANY at May 31, 2006 is:
a. P 87,570 b. P 90,000 c. P 90,570 d. P 90,900

2. The cash in bank balance of ABISO COMPANY at May 31, 2006 is:
a. Understated by P39,318 c. Understated by P38,418
b. Understated by P38,988 d. Understated by P35,988

Problem 11
In connection with an audit, you are given the following bank reconciliation.

BANK RECONCILIATION
December 31, 2006
Balance per ledger, 12/31/03 P 34,349.72
Add: Collections received on the last day of
December and charged to “Cash in Bank”
on books but not deposited 5,324.50
Debit memo for customer’s checks returned
unpaid (check is on hand but no entry has been
made on the books) 4,000.00
Debit memo for bank service charge for December 1,000.00
P 46,674.22
Deduct:
Outstanding checks P 18,625
(see details below)

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 Credit memo for proceeds of a note receivable
which had been left at the bank for collection
but which has not been recorded as collected 8,000
Check for an account payable entered on books
as P12,625 but drawn and paid by bank as
16,225 3,600 32,225.00
Computed balance P 14,449.22
Unlocated difference 36,601.00
Balance per bank (check to confirmation) P 51,050.22

LIST OF OUTSTANDING CHECKS

December 31, 2006
Check No. Amount
14344 P 5,820
14358 1,295
14367 3,543
14399 2,001
14401 4,892
14407 5,074
P 18,625

Questions:

1. The adjusted cash balance at December 31, 2006 is:

a. P 33,749.72 b. P 34,949.72 c. P 37,749.72 d.P40,949.72

2. A check for an account payable entered on books as P12,625 but drawn and paid by
bank as 16,225
a. Should not be included in the reconciliation since the bank already gave the money
to the payee.
b. Should not be included in the reconciliation since bank’s record is always followed.
c. Should be included as deduction in the book reconciliation since this is considered as
book error, thus a reconciling item.
d. Should be included as addition in the book reconciliation since this is considered as
book error, thus a reconciling item.

3. The outstanding checks at December 31, 2006 is:

a. P 15,025 b. P 18,625 c. P 19,025 d. P 22,625

4. The cash balance of the company per record at December 31, 2006 is:
a. Overstated by P600 c. Understated by P 3,400
b. Overstated by P1,200 d. Overstated by P 6,600

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Problem 12
The cash books of Grace Corporation show the following entries during the month of June
2006.
Cash Receipts Journal Check Register
Date Amount Date Check No. Amount
June 1Balance 762,000 June2 801 15,625
4Deposit 113,000 3 802 7,526
4Deposit 811,000 5 803 229,205
7Deposit 152,200 7 804 169,555
10 Deposit 11,300 8 805 74,936
10 Deposit 12,700 10 806 274,600
11 Deposit 73,000 11 807 34,842
17 Deposit 110,075 13 808 250,000
18 Deposit 3,725 14 809 1,070,000
18 Deposit 65,000 17 810 167,300
19 Deposit 26,463 19 811 3,130
20 Deposit 133,037 21 812 82,730
27 Deposit 273,628 23 813 127,200
30 Deposit 92,400 25 814 93,080
30 815 720

The bank statement for the month of June 2006 shows:

Checks No. Deposits Date Amount

Balance May 31 798,000
924,000 June 5 1,722,000
800 36,000 6 1,686,000
804 169,555 7 1,516,445
805 74,936 217,200 8 1,658,709
801 16,525
803 229,205 9 1,412,979
807 34,842 97,000 12 1,475,137
924 75,000
200 40,400 CM 13 1,440,337
(collection charge)
809 1,070,000 14 370,337
808 250,000 15 120,337
198,000 CM 16 318,337
810 167,300 113,800 19 264,837
812 82,730 159,500 21 341,607
806 274,600 24 67,007
273,628 28 340,635
811 3,130
DM 300 30 337,205

Upon investigation, the following are discovered:

CM - Represents a 60-day, 6% note for P40,000 collected by the bank for the account of
Grace Company.
CM - Represents a 60-day, 6% own note for P200,000 discounted by Grace Corporation with
the bank and not yet recorded in the books.
DM - Represents bank service charge for the month.
Check No. 924 represents a check signed by Graciele Company.

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Collection charge – represents collection fee charged by the bank.

Questions

1. The unadjusted cash ledger balance of GRACE CORPORATION at June 30, 2006 is:
a. P 114,079 b. P 113,179 c. P 39,079 d. P 38,179

2. The unadjusted cash bank balance of GRACE CORPORATION at June 30, 2006 is:
a. P 261,305 b. P 336,305 c. P 337,205s d. P 412,205

3. The deposit in transit of GRACE CORPORATION at June 30, 2006 is:

a. P 92,400 b. P 104,500 c. P 182,000 d. P 0

4. The outstanding checks of GRACE CORPORATION at June 30, 2006 is:

a. P 302,806 b. P 228,526 c. P 227,806 d. P 153,526

5. The adjusted cash balance of GRACE CORPORATION at June 30, 2006 is:
a. P 277,879 b. P 276,079 c. P 261,305 d. P 201,079

6. The error made in check number 801 is known as:

a. Fundamental error c. Transplacement error
b. Balance sheet error d. Transposition error

7. In the discounting of P200,000 note, the company should credit

a. Notes receivable discounting c. Notes payable
b. Notes Receivable d. Notes discounting

Problem 13
The bank portion of the bank reconciliation for Angelo Company at October 31, 2006 was as
follows:
Angelo Company
Bank Reconciliation
October 31, 2006
Cash Balance per Bank P 12,367.90
Add: Deposit in transit 1,530.20
P 13,898.10
Less: Outstanding checks

Check Number Check Amount

2451 P 1,260.40
2470 720.10
2471 844.50
2472 426.80
2474 1,050.00 4,301.80

Adjusted cash balance per bank P 9,596.30

The adjusted cash balance per bank agreed with the cash balance per books at October 31.

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The November bank statement showed the following checks and deposits.

Bank Statement
Checks Deposits
Date Number Amount Date Amount
11-1 2470 720.10 11-1 1,530.20
11-2 2471 844.50 11-4 1,211.60
11-5 2474 1,050.00 11-8 990.10
11-4 2475 1,640.70 11-13 2,575.00
11-8 2476 2,830.00 11-18 1,472.70
11-10 2477 600.00 11-21 2,945.00
11-15 2479 1,750.00 11-25 2,567.30
11-18 2480 1,330.00 11-28 1,650.00
11-27 2481 695.40 11-30 1,186.00
11-30 2483 575.50 Total 16,127.90
11-29 2486 900.00
Total 12,936.20
The cash records per books for November showed the following:

Cash Receipts
Cash Payments Journal Journal____
Date Number Amount Date Number Amount Date Amount
11-1 2475 1,640.70 11-20 2483 575.50 11-3 1,211.60
11-2 2476 2,830.00 11-22 2484 829.50 11-7 990.10
11-2 2477 600.00 11-23 2485 974.80 11-12 2,575.00
11-4 2478 538.20 11-24 2486 900.00 11-17 1,472.70
11-8 2479 1,570.00 11-29 2487 398.00 11-20 2,954.00
11-10 2480 1,330.00 11-30 2488 800.00 11-24 2,567.30
11-15 2481 695.40 Total 14,294.10 11-27 1,650.00
11-18 2482 612.00 11-29 1,186.00
11-30 1,225.00
Total 15,831.70

The bank statement contained two bank memoranda:

1. A credit of P2,105.00 for the collection of a P2,000 note for Angelo Company plus
interest of P120 and less a collection fee of P15. Angelo company has not accrued any
interest on the note.

2. A debit for the printing of additional company checks, P50.

At November 30, the cash balance per books was P11,123.90, and the cash balance per the
bank statement was P17,604.60. The bank did not make any errors, but Angelo Company
made two errors.

Note: The correction of any errors pertaining to recording checks should be made to
Accounts Payable. The correction of any errors relating to recording cash receipts should be
made to Accounts Receivable

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Questions

1. The unadjusted cash ledger balance of ANGELO COMPANY at November 30, 2006 is:
a. P 11,133.90 b. P 12,990.90 c. P 13,188.90 d. P 13,377.90

2. The unadjusted bank balance of ANGELO COMPANY at November 30, 2006 is:
a. P 12,828.90 b. P 13,008.90 c. P 13,188.90 d. P 17,614.60

3. The outstanding checks of ANGELO COMPANY at November 30, 2006 is:

a. P 5,659.70 b. P 5,830.70 c. P 5,839.70 d. P 6,028.70

1. The deposit in transit of ANGELO COMPANY at November 30, 2006 is:

a. P 1,225 b. P 1,216 c. P 1,234 d. P 1,396

5. The adjusted book balance of ANGELO COMPANY at November 30, 2006 is:
a. P 11,133.90 b. P 12,990.90 c. P 13,188.90 d. P 13,377.90

Problem 13
The following information pertains to the cash of Jenny Company:

Nov 31 Dec. 31
Balance shown on bank statement P 27,380 P 26,960
Balance shown in general ledger before
reconciling the bank account 25,780 25,000
Outstanding checks 8,630 10,150
Deposits in transit 6,850 12,450

For Dec.
Deposits shown in bank statement P 55,880
Charges shown on bank statement 56,300
Cash receipts shown in company’s books 53,980
Cash payments shown in company’s books 54,760

The bank service charge was P180 in November (recorded by the company during
December) and P240 in December (not yet recorded by the company).

Included with the December bank statement was a check for P5,000 that had been received
on December 25 from a customer on account. The returned check marked “NSF” by the
bank, has not yet been recorded on the company’s books.

During December the bank collected P7,500 of bond interest for the company and credited
the proceeds to the company’s account. The company earned the interest during the
current accounting period but has not yet recorded it.

During December the company issued a check for P6,960 for equipment. The check, which
cleared the bank during December, was incorrectly recorded by the company for P8,960.
Questions

1. The adjusted cash receipts of JENNY COMPANY at December 31 is:

a. P 61,480 b. P 53,980 c. P 50,280 d. P 46,480

2. The adjusted cash disbursements of JENNY COMPANY at December 31 is:

a. P 63,980 b. P 61,980 c. P 57,820 d. P 54,780

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3. In a proof of cash, the NSF check:
a. Should be added in the December 31 column since this was returned back by the
bank.
b. Should be deducted in the December 31 column since this was returned back by the
bank.
c. Should be deducted in the December 31 column since this was returned back and
not paid by the bank, thus not considered as receipts.
d. Should be added in the December 31 column since this was returned back and not
paid by the bank, thus not considered as receipts.

4. The adjusted December 31 cash balance of JENNY COMPANY is:

a. P 29,760 b. P 29,260 c. P 27,260 d. P 25,600

5. The adjusted November 31 cash balance of JENNY COMPANY is:

a. P 29,160 b. P 27,260 c. P 26,160 d. P 25,600

6. The check issued but was incorrectly recorded as P8,960 should be adjusted by:
a. Accounts payable 2,000 c. Cash 2,000
Cash 2,000 Accounts payable 2,000
b. Equipment 2,000 d. Cash 2,000
Cash 2,000 Equipment 2,000

Problem 14
ELEFANTE’s check register shows the following entries for the month of December

Date Checks Deposits Balance

2006
Dec 1 Beginning Balance P 83,900
5 Deposit P 65,000
7 Check # 14344 32,500 120,800
11 Check # 14345 14,000 106,800
26 Deposit 49,000
29 Check #14346 8,600 147,200

ELEFANTE’s bank reconciliation for November revealed one outstanding check (No.14343)
for P12,000 (written on November 28), and one deposit in transit for P5,550 (made
November 29).

The following is from Elefante’s bank statement for December 2006:

Date Checks Deposits Balance

2006
Dec. 1 Beginning balance P 95,970
1 Deposit P 5,550 101,300
4 Check No. 14344 P 32,500 68,800
5 Deposit 56,000 124,800
14 Check No. 14345 14,000 110,800
15 Loan Proceeds 500,000 610,800
20 NSF check 7,600 603,200
29 Service charge 1,000 602,200
31 Interest 3,600 605,800

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Note: All errors noted in this problem were committed by the Elefante, not the bank. It is
also noted that the company failed to record one deposit in the book.

Questions

1. The unadjusted cash receipts per ledger of ELEFANTE COMPANY for the month of
December is:
a. P 119,620 b. P 114,000 c. P 110,620 d. P 105,000

2. The unadjusted cash receipts per bank of ELEFANTE COMPANY for the month of
December is:
a. P 574,150 b. P 568,600 c. P 565,150 d. P 559,600

3. The adjusted December 1 cash ledger balance of ELEFANTE COMPANY is:

a. P 95,970 b. P 89,520 c. P 83,900 d. P 78,280

4. The adjusted December31 cash bank balance of ELEFANTE COMPANY is:

a. P 634,420 b. P 628,800 c. P 623,180 d. P 577,620

5. The overstatement of deposit should be:

a. Deducted in the bank December 31 column.
b. Added in the bank December 31 column.
c. Deducted in the book December 31 column.
d. Added in the book December 31 column.

Problem 15
Juliet Company maintains a checking account at the Davao Bank. At July 31, selected data
from the ledger balance and the bank statement are as follows:

Cash in Bank
Per Books Per Bank

Balance, July 1 P 17,600 P 19,200

July Receipts 82,000
July Credits 80,070
July Disbursement 76,900
July Debits . 74,740
P 22,700 P 24,530

Analysis of the bank data reveals that the credits consist of P78,000 of July deposits and a
credit memorandum of P2,070 for collection of a P2,000 note plus interest revenue of P70.
The July debits per bank consist of checks cleared, P74,700 and a debit memorandum of
P40 for printing additional company checks.

You also discover the following errors involving July checks: (1) a check for P230 to a
creditor on account that cleared the bank in July was journalized and posted as P320, and
(2) a salary check to an employee for P255 was recorded by the bank for P155.

The June 30 bank reconciliation contained only two reconciling items: deposits in transit,
P1,000 and outstanding checks, P2,600.

Assume that the interest on the note has been accrued.

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Questions

1. The deposit in transit of JULIET COMPANY at July 31 is

a. P 5,000 c. P 1,000
b. P 2,930 d. Cannot be determined

2. The outstanding check of JULIET COMPANY at July 31 is:

a. P 4,700 b. P 4,660 c. P 4,610 d. P 4,520

3. The adjusted cash ledger balance of JULIET COMPANY at July 31 is:

a. P 25,020 b. P 24,820 c. P 24,730 d. P 24,640

4. The adjusted cash bank balance of JULIET COMPANY at July 31 is:

a. P 25,020 b. P 24,820 c. P 24,730 d. P 24,640

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