05-cash-cash-equivalents.docx

FINANCIAL ACCOUNTING THEORY & PRACTICE CASH AND CASH EQUIVALENT QUIZZER

Cash and Cash Equivalent CASH AND CASH EQUIVALENTS Essay Questions 1.

What is cash? From the point of view of a layman, "cash" simply means money. Money is the standard medium of exchange in business transactions which refers to the currency and coins which are in circulation and legal tender. However, in the accounting parlance, the term "cash" has a special and broader meaning. It connotes more than money. As contemplated in accounting, cash includes "money and any other negotiable instrument that is payable in money and acceptable by the bank for deposit and immediate credit". Accordingly, cash includes checks, bank drafts and money orders because these are acceptable by the bank for deposit or immediate encashment.

2.

What is the meaning of "unrestricted cash"? There is no specific standard dealing with "cash". The only guidance is found in PAS 1, paragraph 66, which provides that "an entity shall classify an asset as current when it is cash or a cash equivalent unless it is restricted from being exchanged or used to settle a liability for at least twelve months after the end of reporting period." Accordingly, to be reported as "cash" as a current asset, an item must be unrestricted in use. This means that the cash must be readily available in the payment of current obligations and not be subject to any restrictions, contractual or otherwise. Thus, unrestricted cash includes cash on hand, cash in bank and cash fund set aside for current purposes.

3.

What is the meaning of "cash equivalents"? PAS 7, paragraph 6, defines cash equivalents as short-term and highly liquid investments that are readily convertible into cash and so near their maturity that they present insignificant risk of changes in value because of changes in interest rates. PAS 7 further states that "only highly liquid investments that are acquired three months before maturity can qualify as cash equivalents". Examples of cash equivalents are: a. Three-month BSP treasury bill b. Three-year BSP treasury bill purchased three months before date of maturity c. Three-month time deposit d. Three-month money market instrument

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FINANCIAL ACCOUNTING Equity securities cannot qualify as cash equivalents because shares do-not have a maturity date. However, preference shares with specified redemption date and acquired three months before redemption date can qualify as cash equivalents. 4.

Explain the valuation of cash in the statement of financial position. Cash is valued at face value. Cash in foreign currency is valued at the current exchange rate. If a bank or financial institution holding the funds of the entity is in bankruptcy or financial difficulty, cash should be written down to estimated realizable value if the amount recoverable is estimated to be lower than the face value.

5.

Explain the financial statement presentation and classification of cash and cash equivalents. The caption "cash and cash equivalents" should be shown as the first item among the current assets. This caption includes all cash items, such as cash on hand, cash in bank, petty cash fund and cash equivalents which are unrestricted in use for current operations. However, the details comprising the "cash and cash equivalents" should be disclosed in the notes to financial statements.

6.

Explain the classification of investments in time deposit, money market instrument, and treasury bills. Investments in time deposit, money market instruments and treasury bills should be classified as follows: a. If the term is three months or less, such instruments are classified as cash equivalents and therefore included in the caption "cash and cash equivalents". b. If the term is more than three months but within one year, such investments are classified as short-term or temporary investments and presented separately as current assets. c. If the term is more than one year, such investments are classified as long-term investments. However, if such investments become due within one year from the end of the reporting period, they are reclassified as temporary investments.

7.

Explain the treatment of foreign currency. Cash in foreign currency shall be translated to Philippine pesos using the current exchange rate. Deposits in foreign countries which are not subject to any foreign exchange restriction are included in "cash".

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Cash and Cash Equivalent Deposits in foreign bank which are subject to foreign exchange restriction, if material, shall be classified separately among noncurrent assets and the restriction clearly indicated. 8.

Explain the classification of a cash fund set aside for a certain purpose. If the cash fund is set aside for use in current operations, it is a current asset. It is included as part of cash and cash equivalents. Examples of such fund are petty cash fund, payroll fund, travel fund, interest fund, dividend fund and tax fund. On the other hand, if the cash fund is set aside for noncurrent purposes, it is shown as long-term investment. Examples of such fund are sinking fund, preferred redemption fund, contingent fund, insurance fund and fund for acquisition or construction of property, plant and equipment. Classification of a cash fund as current or noncurrent should parallel the classification of the related liability.

9.

Explain the treatment of a bank overdraft. When the cash in bank account has a credit balance, it is said to be an overdraft. The credit balance in the cash in bank account results from the issuance of checks in excess of the deposits. A bank overdraft is classified as a current liability and should not be offset against other bank accounts with debit balances. However, when the entity maintains two or more accounts in one bank and one account results in an overdraft, such overdraft may be offset against the other bank account with a debit balance. Moreover, an overdraft may also be offset against the other bank account if the amount is not material.

10. What is a compensating balance? Explain the classification in the statement of financial position. A compensating balance is the minimum checking or demand deposit account balance that must be maintained in connection with a borrowing arrangement with a bank. For example, an entity borrows P2,000,000 from a bank and agrees to maintain 10% compensating balance or P200,000 in a current or checking account. In effect, this arrangement results in the reduction of the amount borrowed because the compensating balance provides a source of funds to the bank as partial compensation for the loan extended.

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FINANCIAL ACCOUNTING 11. Explain fully the treatment of compensating balance. If the deposit is not legally restricted as to withdrawal by the borrower because of an informal compensating balance agreement, the compensating balance is part of cash. If the deposit is legally restricted because of a formal compensating balance agreement, the compensating balance is classified separately as "cash held as compensating balance" under current assets if the related loan is short-term. If the related loan is long-term, the compensating balance is classified as noncurrent investment. In many instances and in accordance with normal banking practices, deposits are not legally restricted because most often compensating balance agreements are informal and therefore not legally binding. The amount and nature of such agreements whether legally or not legally restricted shall be fully disclosed in the notes to financial statements. 12. What is the meaning of undelivered check? Postdated check? Stale check? An undelivered or unreleased check is one that is merely drawn and recorded but not given to the payee before the end of reporting period. The unreleased check shall not be treated as outstanding check. Accordingly, the original entry for the payment shall be reversed so as to restore the cash balance and the related liability account. A postdated check delivered is a check drawn, recorded and already given to the payee but it bears a date subsequent to the end of reporting period. The original entry recording a delivered postdated check shall also be reversed and therefore restored to the cash balance. A stale check is a check not encashed by the payee within a relatively long period of time. In banking practice, a check becomes stale if not encashed within six months from the time of issuance. Of course, this is a matter of entity policy. Thus, even after three months, the entity may issue a "stop payment order" to the bank for the cancelation of the stale check. The stale check previously issued by an entity shall also be restored to the cash balance. 13. Explain window dressing, lapping and kiting. Window dressing is a practice of opening the books of accounts beyond the close of the accounting period for the purpose of showing a better financial position and performance. Window dressing is usually perpetrated as follows: a. By recording as of the last day of the accounting period collections made subsequent to the close of the period. Essay Questions

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Cash and Cash Equivalent b. By recording as of the last day of the accounting period payments of accounts made subsequent to the close of the period. Lapping consists of misappropriating a collection from one customer and concealing this defalcation when collection is made from another customer. Kiting is a transfer of cash from one bank to another bank. Kiting is usually employed at the end of the month. Kiting occurs when a check is drawn against a first bank and depositing the same check in a second bank to cover the shortage in the latter bank. 14. Explain the imprest system. The imprest system is an internal control device for cash which requires that all cash receipts should be deposited intact and all cash payments should be made by means of check. Small disbursements are paid out of the petty cash fund. 15. What are the two systems of handling petty cash fund? Explain briefly. 1. Imprest fund system - Pretty cash expenses are recorded upon replenishment. The amount of the replenishment is normally equal to the petty cash disbursements. 2. Fluctuating fund system — Petty cash expenses are immediately recorded. The amount of replenishment may be equal to, more or less than, the petty cash disbursements. 16. What is a bank reconciliation? A bank reconciliation is a statement which brings into agreement the cash balance per book and cash balance per bank. It is usually prepared monthly because the bank provides the depositor with the bank statement at the end of every month. A bank statement is a monthly report of the bank to the depositor showing the cash balance per bank at the beginning, the deposits acknowledged, the checks paid, other charges and credits and the daily cash balance per bank during the month. Actually, the bank statement is an exact copy of the depositor's ledger in the records of the bank. 17. What are credit memos and debit memos? Credit memos refer to items not representing deposits credited by the bank to the account of the depositor but not yet recorded by the depositor as cash receipts. They have the effect of Essay Questions

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FINANCIAL ACCOUNTING increasing the bank balance. Typical examples of credit memos are note collected by bank in favor of the depositor and proceeds of bank loan credited to the account of the depositor. Debit memos refer to items not representing checks paid by bank which are charged or debited by the bank to the account of the depositor but not yet recorded by the depositor as cash disbursements. They have the effect of decreasing the bank balance. Typical examples of debit memos are NSF checks and bank service charges. 18. Explain deposits in transit. Deposits in transit are collections already recorded by the depositor as cash receipts but not yet reflected on the bank statement. Deposits in transit include: a. Collections already forwarded to the bank for deposit but too late to appear in the bank statement. b. Undeposited collections or those still in the hands of the depositor. In effect, these are cash on hand awaiting delivery to the bank for deposit. 19. Explain outstanding checks. Outstanding checks are checks already recorded by the depositor as cash disbursements but not yet reflected on the bank statement. Outstanding checks include: a. Checks drawn and already given to payees but not yet presented for payment. b. Certified checks - A certified check is one where the bank has stamped on its face the word "accepted" or "certified" indicating sufficiency of fund. When the bank certifies a check, the account of the depositor is immediately debited or charged to insure the eventual payment of the check. Certified checks should be deducted from the total outstanding checks (if included therein) because they are no longer outstanding for bank reconciliation purposes. 20. What are the three forms of bank reconciliation? 1. Adjusted balance method - Under this method, the book balance and the bank balance are brought to a correct cash balance that must appear on the balance sheet. Essay Questions

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Cash and Cash Equivalent 2. Book to bank method - Under this method, the book balance is reconciled with the bank balance or the book balance is adjusted to equal the bank balance. 3. Bank to book method - Under this method, the bank balance is reconciled with the book balance or the bank balance is adjusted to equal the book balance. 21. What is a "proof of cash"? A proof of cash is an expanded reconciliation in that it includes proof of receipts and disbursements. This approach may be useful in discovering possible discrepancies in handling cash particularly when cash receipts have been recorded but have not been deposited.

Essay Questions

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FINANCIAL ACCOUNTING Multiple Choice - Theory Cash 1. Which of the following is usually considered cash? A. Certificate of deposit C. Money market saving certificate B. Checking account D. Postdated check FA © 2014 2.

Which of the following shall not be considered cash for financial reporting purposes? A. Coin and currency C. Money orders B. IOUs D. Petty cash fund FA © 2014

3.

All of the following may be included in "cash", except A. Checking account balance C. Money market instrument B. Currency D. Saving account balance

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Which of the following should not be considered "cash"? A. Certified check C. Personal check B. Change fund D. Postdated check

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Which of the following should not be included in "cash"? A. Certified check C. Personal check B. Manager check D. Travel cash advance

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4.

5.

6.

At the end of the current year, an entity had various checks and papers in the safe. Which of the following should not be included in "cash" in the current year-end statement of financial position? A. US $20,000 cash. B. Past due promissory note issued in favor of the entity by the President. C. The entity's undelivered check payable to a supplier dated December 31 of the current year. D. Another entity's P150,000 check payable to the entity dated December 15 of the current year. FA © 2014

Cash equivalent 7. A cash equivalent is a short-term, highly liquid investment that is readily convertible into known amount of cash and A. Is acceptable as a means to pay current liabilities. B. Has a current market value that is greater than the original cost. C. Is so near maturity that it presents insignificant risk of change in interest rate. MCQ – Theory

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Cash and Cash Equivalent D. Bears an interest rate that is at least equal to the prime interest rate at the date of liquidation. FA © 2014 8.

Which of the following is not considered as a cash equivalent? A. A 90-day T-bill B. A 60-day money market placement C. A three-year treasury note maturing on May 30 of the current year purchased by the entity on April 15 of the current year D. A three-year treasury note maturing on May 30 of the current year purchased by the entity on January 15 of the current year FA © 2014

Cash & cash equivalent 9. What is the basic requirement for cash and cash equivalent? A. Deposited in bank B. Unrestricted in use for current operations C. Set aside for the liquidation of long-term debt D. Available for the purchase of property, plant and equipment

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10. Which of the following should be excluded from cash and cash equivalents? A. Time deposit which matures in one year. B. A customer's check denominated in a foreign currency. C. The minimum cash balance in the current account which is maintained to avoid service charge. D. A check issued by the entity on December 27 of the current year but dated January 15 of next year. FA © 2014 11. All of the following can be classified as cash and cash equivalents, except? A. A bank overdraft B. Equity investments C. Commercial papers held and due for repayment in 90 days D. Redeemable preference shares acquired and due in 60 days

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12. 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 the current exchange rate. C. Cash equivalents should be measured at maturity value, meaning face value plus interest. D. If a bank or financial institution holding the funds of the entity is in bankruptcy or financial difficulty, cash should be written down to estimated realizable value. FA © 2014 MCQ – Theory

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FINANCIAL ACCOUNTING Internal control over cash 13. Which of the following statements is incorrect? A. Certain clerical personnel should be rotated among various jobs. B. An entity's personnel should be given well-defined responsibilities. C. The accounting function should be separated from the custodianship of assets. D. The responsibility for receiving merchandise and paying for it should usually be given to one person. FA © 2014 14. Which of the following is not a characteristic of a system of cash control? A. Use of a voucher system B. Daily deposit of all cash received C. Internal audits at irregular intervals D. Combined responsibility for handling and recording cash

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Petty cash fund 15. Petty cash fund is A. Restricted cash B. Set aside for the payment of payroll C. Separately classified as current asset D. Money kept on hand for making minor disbursements of coin and currency rather than by writing checks FA © 2014 16. The internal control feature specific to petty cash is A. Assignment of responsibility C. Proper authorization B. Imprest system D. Separation of duties

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17. What is the major purpose of an imprest petty cash fund? A. To ease the payment of cash to vendors B. To effectively control cash disbursements C. To effectively plan cash inflows and outflows D. To determine the honesty of the petty cashier

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18. The petty cash fund account under the imprest fund system is debited A. Only when the fund is created. B. When the fund is created and everytime it is replenished. C. When the fund is created and when the fund is decreased. D. When the fund is created and when the size of the fund is increased.

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Cash and Cash Equivalent 19. In reimbursing the petty cash fund, which of the following is true? A. Cash in debited C. Petty cash is credited B. Expense accounts are debited D. Petty cash is debited

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20. Which of the following statements in relation to petty cash is incorrect? A. The petty cash fund is reported as part of current assets. B. The petty cash account is debited when the fund is replenished. C. The imprest petty cash system in effect adheres to the rule of disbursement by check. D. Entries are made to the petty cash account only to increase or decrease the size of the fund or to adjust the balance if not replenished at year-end. FA © 2014 21. When a petty cash fund is used, which of the following statements is true? A. The reimbursement of the petty cash fund should be credited to the cash account. B. The balance of the petty cash fund should be reported in the statement of financial position as a long-term investment. C. The petty cashier's summary of petty cash payments serves as a journal entry that is posted to the appropriate general ledger account. D. Entries that include a credit to the cash account should be recorded at the time the payments from the petty cash fund are made. FA © 2014 22. A Cash Over and Short account A. Is not generally accepted. B. Is a contra account to cash. C. Is debited when the petty cash fund proves out over. D. Is debited when the petty cash fund proves out short.

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23. Which of the following statements in relation to the cash short or over account is true? A. It would be impossible to have cash shortage or overage if employees were paid in cash rather than by check. B. If the cash short or over account has a debit balance at the end of the period it must be debited to an expense account. C. The entry to account for daily cash sales for which a small amount of cash shortage existed would include a debit to cash short or over account. D. A credit balance in a cash short or over account should be considered a liability because the short changed customer will demand return of this amount. FA © 2014 24. Which of the following statements in relation to petty cash fund is false? A. Each disbursement from petty cash should be supported by a petty cash voucher. B. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund MCQ – Theory

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FINANCIAL ACCOUNTING out of the general cash account. C. With the establishment of an imprest petty cash fund, one person is given the authority and responsibility for issuing checks to cover minor disbursements. D. At any time, the sum of the cash in the petty cash fund and the total of petty cash vouchers should equal the amount for which the imprest petty cash fund was established. FA © 2014 Presentation & disclosure 25. What is the treatment of customers' postdated checks? A. Accounts payable C. Cash B. Accounts receivable D. Prepaid expenses FA © 2014 26. If material, deposits in foreign bank which are subject to foreign exchange restriction shall be classified A. Be written off as loss. B. As part of cash and cash equivalents. C. Separately as current asset, with appropriate disclosure. D. Separately as noncurrent asset with appropriate disclosure. FA © 2014 27. Under which classification is cash restricted for plant expansion reported? A. Current assets C. Equity B. Current liabilities D. Noncurrent assets 28. Bank overdraft generally should be A. Reported as a current liability. B. Reported as a deduction from cash. C. Reported as a deduction from current assets. D. Netted against cash and a net cash amount reported.

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29. What is a compensating balance? A. Saving account balance B. Demand deposit account balance C. Temporary investment serving as collateral for outstanding loan FA © 2014 D. Minimum deposit required to be maintained in connection with a borrowing arrangement 30. Deposits held as compensating balance A. Usually do not earn interest. B. If legally restricted and held against short-term credit may be included as cash. C. If legally restricted and held against long-term credit may be included among current assets. D. None of these FA © 2014 MCQ – Theory

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Cash and Cash Equivalent 31. A compensating balance A. Must be included in cash and cash equivalent. B. Which is legally restricted and related to a long-term loan is classified as current asset. C. Which is not legally restricted as to withdrawal is classified separately as current asset. D. Which is legally restricted and related to a short-term loan is classified separately as current asset. FA © 2014 32. At the end of the current year, an entity had cash accounts at three different banks. One account is segregated solely for 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? A. The segregated and regular accounts should be reported as current assets net of the overdraft B. The segregated and regular accounts should be reported as current assets, and the overdraft should be reported as a current Iiability C. The segregated account should be reported as a noncurrent asset, and the regular account should be reported as a current asset net of the overdraft D. The segregated account should be reported as a noncurrent asset, the regular account should be reported as a current asset, and the overdraft should be reported as a current liability FA © 2014 Bank reconciliation 33. A bank reconciliation is A. A merger of two banks that previously were competitors. B. A statement sent by the bank to depositor on a monthly basis. C. A formal financial statement that lists all of the bank account balances of an entity. D. A schedule that accounts for the differences between an entity's cash balance as shown in the bank statement and the cash balance shown in the general ledger. FA © 2014 34. Bank statements provide information about all of the following, except A. Bank charges for the period C. Errors made by the depositor B. Checks cleared during the period D. NSF checks FA © 2014 35. 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. Service charge B. NSF customer check C. Erroneous bank debit D. Note receivable collected by bank in favor of the depositor and credited to the account of the depositor FA © 2014 MCQ – Theory

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FINANCIAL ACCOUNTING 36. When preparing a bank reconciliation, bank credits are A. Added to the balance per book. B. Added to the bank statement balance. C. Deducted from the balance per book. D. Deducted from the bank statement balance.

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37. In preparing a bank reconciliation, interest paid by the bank on the account is FA © 2014 A. Added to the bank balance C. Subtracted from the bank balance B. Added to the book balance D. Subtracted from the book balance 38. In preparing a monthly bank reconciliation, which of the following would be added to the balance per bank statement to arrive at the correct cash balance? A. Deposits in transit B. Outstanding checks C. Bank service charge D. A customer's note collected by the bank on behalf of the depositor FA © 2014 39. Which of the following must be deducted from the bank statement balance in preparing a bank reconciliation which ends with adjusted cash balance? A. Certified check B. Deposit in transit C. Outstanding check D. Reduction of loan charged to the account of the depositor FA © 2014 40. 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 in transit B. Outstanding checks C. Bank charges not yet recorded by the entity D. Deposits credited by the bank but not yet recorded by the entity FA © 2014 41. If the cash balance shown on entity's accounting records is less than the correct cash balance and neither the entity 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 entity D. Deposits credited by the bank but not yet recorded by the entity FA © 2014

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Cash and Cash Equivalent 42. Which of the following would not require an adjusting entry on the depositor's books? A. Bank service charge B. NSF check from customer FA © 2014 C. Deposit of another entity is credited by the bank to the account of the depositor D. Check in payment of account payable as recorded by the depositor is overstated 43. The adjusting entries for a bank reconciliation A. Are taken from the "balance per bank" section only. B. May include a debit to office expense for bank service charge. C. May include a debit to accounts payable for an NSF customer check. D. May include a credit to accounts receivable for an NSF customer check.

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44. 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. 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. FA © 2014 45. Which of the following statements in relation to bank reconciliation is true? A. The cash amount reported in the statement of financial position must be the balance reported in the bank statement. B. Credit memos will cause the cash balance per ledger to be higher than that reported by the bank, all other things being equal. C. Bank service charge will cause the cash balance per ledger to be higher than that reported by the bank, all other things being equal. D. Outstanding checks will cause the cash balance per ledger to be greater than the balance reported by the bank, all other things being equal. FA © 2014 46. Which of the following statements is false? A. A certified check is a liability of the bank certifying it. B. A certified check is one drawn by a bank upon itself. C. A certified check should not be included in the outstanding checks. D. A certified check will be accepted by many persons who would not otherwise accept a personal check. FA © 2014

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FINANCIAL ACCOUNTING Proof of cash 47. A proof of cash A. Is a summary of cash receipts and cash payments. B. Is a formal statement showing the total cash receipts during the year. C. Is a physical count of currencies on hand at the end of reporting period. FA © 2014 D. Is a four-column bank reconciliation showing reconciliation of cash balances per book and per bank at the beginning and end of the current month and reconciliation of cash receipts and cash disbursements of the bank and the depositor during the current month. 48. A proof of cash would be useful for A. Discovering time lag in making deposits B. Discovering cash receipts that have not been recorded in the journal FA © 2014 C. Discovering an inadequate separation of incompatible duties of employees D. Discovering cash receipts that have been recorded but have not been deposited

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Cash and Cash Equivalent Multiple Choice Problems Petty cash fund 1. Timex Company reported petty cash fund which comprised the following: Coins and currency 3,300 Paid vouchers: Transportation 600 Gasoline 400 Office supplies 500 Postage stamps 300 Due from employees 1,200 3,000 Manager's check returned by bank marked "NSF" 1,000 Check drawn by the entity to the order of petty cash custodian 2,700 What is the correct amount of petty cash fund for statement presentation purposes? A. 6,000 C. 9,000 B. 7,000 D. 10,000 P1 © 2014 2.

Liwanag Company reported petty cash fund with the following details: Coins & Currencies 22,000 Petty cash vouchers: Gasoline payments for delivery equipment 3,000 Medical supplies for employees 1,000 Repairs of office equipment 1,500 Loans to employees 3,500 A check drawn by the entity payable to the order of Grace de la Cruz, petty cash custodian, representing her salary 15,000 An employee's check returned by the bank for insufficiency of funds 3,000 A sheet of paper with names of several employees together with contribution for a birthday gift of a co-employee. Attached to the sheet of paper is a currency of 5,000 The petty cash general ledger account has an imprest balance of P50,000. What is the amount of petty cash fund that should be reported in the statement of financial position? A. 22,000 C. 37,000 B. 27,000 D. 42,000 FA © 2014

MCQ – Problems

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FINANCIAL ACCOUNTING Cash 3. Thor Company provided the following data on December 31, 2014: Checkbook balance 4,000,000 Bank statement balance 5,000,000 Check drawn on Thor's account, payable to supplier, dated and recorded on December 31, 2014, but not mailed until January 15,2015 500,000 Cash in sinking fund 2,000,000 On December 31, 2014, what amount should be reported as "cash" under current assets? A. 3,500,000 C. 5,500,000 B. 4,500,000 D. 6,500,000 P1 © 2014 4.

At year-end, Myra Company reported cash and cash equivalents which comprised the following: Cash on hand 500,000 Demand deposit 4,000,000 Certificate of deposit 2,000,000 Postdated customer check 300,000 Petty cash fund 50,000 Traveler's check ' 200,000 Manager's check 100,000 Money order 150,000 What total amount should be reported as "cash" at year-end? A. 4,800,000 C. 6,800,000 B. 5,000,000 D. 7,000,000 P1 © 2014

5.

ABC Company reported that the cash account per ledger had a balance on December 31, 2014 of P4,415,000 which consisted of the following: Petty cash fund 24,000 Undeposited receipts, including a postdated customer check for P70,000 1,220,000 Cash in Allied Bank, per bank statement, with a check for P40,000 still outstanding 2,245,000 Bond sinking fund 850,000 Vouchers paid out of collections, not yet recorded 43,000 IOUs signed by employees, taken from collections 33,000 4,415,000 What amount should be reported as cash on December 31,2014? A. 3,379,000 C. 3,449,000 B. 3,419,000 D. 3,489,000 P1 © 2014

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Cash and Cash Equivalent 6.

Dove Company reported checkbook balance on December 31, 2014 at P4,000,000. Data about certain cash items follow: * A customer check amounting to P200,000 dated January 2, 2015 was included in the December 31, 2014 checkbook balance. * Another customer check for P500,000 deposited on December 22, 2014 was included in the checkbook balance but returned by the bank for insufficiency of fund. This check was redeposited on December 26, 2014 and cleared two days later. * A P400,000 check payable to supplier dated and recorded on December 30, 2014 was mailed on January 16, 2015. * A petty cash fund of P50,000 with the following summary on December 31,2014: Coins and currencies 5,000 Petty cash vouchers 43,000 Return value of 20 cases of soft drinks 2,000 50,000 * A check of P43,000 was drawn on December 31, 2014 payable to Petty Cash. What total amount should be reported as "cash" on December 31, 2014? A. 3,748,000 C. 4,205,000 B. 4,200,000 D. 4,248,000 P1 © 2014

Unrestricted cash 7. Islander Company provided the following information with respect to the cash and cash equivalents on December 31,2014: Checking account at First Bank (200,000) Checking account at Second Bank 3,500,000 Treasury bonds 1,000,000 Payroll account 500,000 Value added tax account 400,000 Foreign bank account - unrestricted (in equivalent pesos) 2,000,000 Postage stamps 50,000 Employee's postdated check 300,000 IOU from president 750,000 Credit memo from a vendor for a purchase return 80,000 Traveler's check 300,000 Not-sufficient-fund check 150,000 Petty cash fund (P20,000 in currency and expense receipts for P30,000) 50,000 Money order 180,000 What amount should be reported as unrestricted cash on December 31, 2014? A. 4,600,000 C. 5,900,000 B. 4,900,000 D. 6,900,000 P1 © 2014 MCQ – Problems

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FINANCIAL ACCOUNTING Cash & cash equivalents 8. On December 31, 2014, West Company had the following cash balances: Cash in bank 1,800,000 Petty cash fund (all funds were reimbursed on 12/31/2014) 50,000 Time deposit (due February 1,2015) 250,000 Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement on December 31, 2014. The compensating balance is legally restricted as to withdrawal. On December 31,2014, what total amount should be reported as cash and cash equivalents? A. 1,250,000 C. 1,850,000 B. 1,500,000 D. 2,100,000 P1 © 2014 9.

Pygmalion Company had the following account balances on December 31, 2014: Cash in bank - current account 5,000,000 Cash in bank - payroll account 1,000,000 Cash on hand 500,000 Cash in bank - restricted account for building construction expected to be disbursed in 2015 3,000,000 Time deposit, purchased December 15, 2014 and due March 15, 2015 2,000,000 The cash on hand included a P200,000 check payable to Pygmalion, dated January 15, 2015. What total amount should be reported as "cash and cash equivalents" on December 31, 2014? A. 6,300,000 C. 8,300,000 B. 6,500,000 D. 8,700,000 P1 © 2014

10. Everlast Company reported the following information at the current year-end: * 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 P1,500,000. 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. What total amount should be reported as cash and cash equivalents at the current year-end? A. 5,400,000 C. 6,900,000 B. 6,400,000 D. 7,900,000 P1 © 2014 MCQ – Problems

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Cash and Cash Equivalent 11. On December 31,2014, Roel Company reported cash accounts with the following details: Undeposited collections 60,000 Cash in bank - PCIB checking account 500,000 Cash in bank - PNB (overdraft) ( 50,000) Undeposited NSF check received from customer, dated Dec. 1, 2014 15,000 Undeposited check from a customer, dated January 15, 2015 25,000 Cash in bank - PCIB (fund for payroll) 150,000 Cash in bank - PCIB (saving deposit) 100,000 Cash in bank - PCIB (money market instrument, 90 days) 2,000,000 Cash in foreign bank restricted 100,000 IOUs from officers 30,000 Sinking fund cash 450,000 Financial asset held for trading 120,000 On December 31, 2014, what total amount should be reported as "cash and cash equivalents"? A. 810,000 C. 2,770,000 B. 2,660,000 D. 2,810,000 P1 © 2014 12. Campbell Company had the following account balances on December 31, 2014: Petty cash fund 50,000 Cash in bank - current account 4,000,000 Cash in bank - sinking fund 2,000,000 Cash on hand 500,000 Cash in bank - restricted account for plant addition, expected to be disbursed in 2015 1,500,000 Treasury bills 1,000,000 The petty cash fund included unreplenished December 2014 petty cash expense vouchers of PI 0,000 and employee IOU of P5,000. The cash on hand included a P100,000 check payable to Campbell dated January 15,2015. In exchange for a guaranteed line of credit, the entity 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 30,2015. What total amount should be reported as "cash and cash equivalents" on December 31, 2014? A. 4,435,000 C. 5,535,000 B. 5,435,000 D. 7,435,000 P1 © 2014

MCQ – Problems

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FINANCIAL ACCOUNTING 13. Yasmin Company provided the following information on December 31, 2014: Petty cash fund 50,000 Current account - First Bank 4,000,000 Current account - Second Bank (overdraft) ( 250,000) Money market placement - Third Bank 1,000,000 Time deposit - Fourth Bank 2,000,000 * The petty cash fund included unreplenished December 2014 petty cash expense vouchers for P15,000 and an employee check for P5,000 dated January 31,2015. * A check for PI00,000 was drawn against First Bank current account dated and recorded December 29,2014 but delivered to payee on January 15,2015. * The Fourth Bank time deposit is set aside for land acquisition in early January 2015. What total amount should be reported as "cash and cash equivalents" on December 31,2014? A. 4,130,000 C. 5,130,000 B. 4,880,000 D. 5,150,000 P1 © 2014 14. Karla Company provided the following information on December 31,2014: Cash on hand 500,000 Petty cash fund 20,000 Security Bank current account 1,000,000 PNB Current account No. 1 400,000 PNB Current account No. 2 ' ( 50,000) BSP treasury bill - 60 days 3,000,000 BPI time deposit - 30 days 2,000,000 * The cash on hand included a customer postdated check of P 100,000 and postal money order of P40,000. * A check for P200,000 was drawn against Security Bank account, dated January 15, 2015, delivered to the payee and recorded December 31, 2014. * The BPI time deposit is set aside for acquisition of equipment. What total amount of cash and cash equivalents should be reported on December 31,2014? A. 1,970,000 C. 4,970,000 B. 4,770,000 D. 6,970,000 P1 © 2014 15. On December 31,2014, Erika Company reported "cash account" balance per ledger of P3,600,000 which included the following: Demand deposit 1,500,000 Time deposit - 30 days 500,000 NSF check of customer 20,000 Money market placement due on June 30, 2015 1,000,000 MCQ – Problems

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Cash and Cash Equivalent Saving deposit IOU from an employee Pension fund Petty cash fund Customer check dated January 31,2015 Customer check outstanding for 18 months

50,000 30,000 400,000 10,000 60,000 30,000 3,600,000 * Check of P100,000 in payment of accounts payable was dated and recorded on December 31, 2014 but mailed to creditors on January 15,2015. * Check of P50,000 dated January 31, 2015 in payment of accounts payable was recorded and mailed December 31,2014. * The entity used the calendar year. The cash receipts journal was held open until January 15, 2015, during which time P200,000 was collected and recorded on December 31,2014. What total amount should be reported as "cash and cash equivalents" on December 31,2014? A. 1,510,000 C. 1,960,000 B. 1,860,000 D. 2,010,000 P1 © 2014 16. Celine Company provided the following information on December 31,2014: Cash on hand 200,000 Petty cash fund 20,000 Philippine Bank current account 5,000,000 Manila Bank current account 4,000,000 City Bank current account (bank overdraft) (100,000) Asia Bank saving account for equipment acquisition 250,000 Asia Bank time deposit, 90 days 2,000,000 Cash on hand included customer check of P30,000 dated January 10, 2015 received on December 23,2014. Included among the checks drawn by Celine against the Philippine Bank current account and recorded in December 2014 are: * Check written and dated December 23, 2014 and delivered to payee on January 3,2015, P25,000. * Check written December 26, 2014, dated January 30, 2015, delivered to payee on December 28, 2014, P45,000. What total amount should be reported as cash and cash equivalents on December 31,2014? A. 11,160,000 C. 11,330,000 B. 11,260,000 D. 11,510,000 P1 © 2014 MCQ – Problems

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FINANCIAL ACCOUNTING Cash - current assets 17. Burr Company had the following account balances on December 31, 2014: Cash in bank 2,250,000 Cash on hand 125,000 Cash restricted for addition to plant (expected to be disbursed in 2015) 1,600,000 Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement. The compensating balance is not. legally restricted as to withdrawal. On December 31, 2014, what total cash should be reported under current assets? A. 1,775,000 C. 2,375,000 B. 2,250,000 D. 3,975,000 P1 © 2014 18. Tawiran Company reported cash account which consisted of the following: Bond sinking fund Checking account in BPI (A P320,000 check is still outstanding per bank statement) Currency and coins awaiting deposit Deposit in a bank closed by BSP Petty cash fund (of which P10,000 in is the form of paid vouchers) Receivables from officers and employees What total amount of cash should be reported under current assets? A. 4,330,000 C. 4,830,000 B. 4,440,000 D. 5,830,000

1,500,000 3,155,000 1,135,000 500,000 50,000 175,000 6,515,000 P1 © 2014

19. ABC Company provided the following information on December 31, 2014: Balance per book 6,776,000 Balance per bank statement 6,532,000 Deposit in bank closed by BSP 1,600,000 Deposit in transit 1,234,000 Outstanding checks 987,000 Currency and coins counted 950,000 Petty cash fund (of which P10,000 is in the form of paid vouchers) 50,000 Bank service charge not yet taken up in the book 6,000 Bond sinking fund 1,000,000 Receivables from employees 70,000 Error in recording a check in the book. The correct amount as paid by the bank is P89,000 instead of P98,000 as recorded in the book, or a difference of9,000

MCQ – Problems

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Cash and Cash Equivalent What total amount of cash should be reported as current asset on December31,2014? A. 6,779,000 C. 8,769,000 B. 7,769,000 D. 9,309,000 P1 © 2014 Bank reconciliation Adjusted cash balance 20. Esteem Company provided the month-end bank statement which showed a balance of P3,600,000. Outstanding checks amounted to PI,200,000, a deposit of P400,000 was in transit at month-end, and a check for P50,000 was erroneously charged by the bank against the account. What amount should be reported as cash in bank at month-end? A. 2,050,000 C. 2,850,000 B. 2,750,000 D. 4,350,000 FA © 2014 21. Gallant Company showed a cash account balance of P4,500,000. The bank statement did not include a deposit of P230,000 made on the last day of the month. The bank statement showed a collection by the bank of P94,000 and a customer check for P32,000 returned because it was NSF. A customer check for P45,000 was recorded on the books as P54,000, and a check written for P79,000 was recorded as P97,000. What amount should be reported as cash in bank? A. 4,571,000 C. 4,801,000 B. 4,765,000 D. 4,819,000 FA © 2014 22. In preparing the August 31,2014 bank reconciliation, Apex Company provided the following information: Balance per bank statement 1,805,000 Deposit in transit 325,000 Return of customer's check for insufficient fund 60,000 Outstanding checks 275,000 Bank service charge for August 10,000 On August 31,2014, what is the adjusted cash in bank? A. 1,755,000 C. 1,795,000 B. 1,785,000 D. 1,855,000 FA © 2014 23. In preparing the bank reconciliation on December 31, 2014, Case Company provided the following data: Balance per bank statement 3,800,000 Deposit in transit 520,000 Amount erroneously credited by bank to Case's account 40,000 Bank service charge for December 5,000 Outstanding checks 675,000 MCQ – Problems

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FINANCIAL ACCOUNTING What is the adjusted cash in bank on December 31, 2014?. A. 3,600,000 C. 3,645,000 B. 3,605,000 D. 3,685,000

FA © 2014

24. In an audit of Mindanao Company on December 31,2014, the following data are gathered: Balance per book 1,000,000 Bank charges 3,000 Outstanding checks 235,000 Deposit in transit 300,000 Customer note collected by bank 375,000 Interest on customer note 15,000 Customer check returned NSF 62,000 Depositor's note charged to account 250,000 What is the adjusted cash in bank on December 31,2014? A. 1,065,000 C. 1,325,000 B. 1,075,000 D. 1,575,000 P1 © 2014 25. Core Company provided the following data for the purpose of reconciling the cash balance per book with the balance per bank statement on December 31,2014: Balance per bank statement 2,000,000 Outstanding checks (including certified check of P100,000) 500,000 Deposit in transit 200,000 December NSF checks (of which P50,000 had been redeposited and cleared by December 27) 150,000 Erroneous credit to Core's account, representing proceeds of loan granted to another company 300,000 Proceeds of note collected by bank for Core, net of service charge of P20,000750,000 What amount should be reported as cash in bank on December 31,2014? A. 1,400,000 C. 1,500,000 B. 1,450,000 D. 1,800,000 FA © 2014 26. Aries Company kept all cash in a checking account. An examination of the accounting records and bank statement for the month ended June 30, 2014 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 bank's night depository on June 30 does not appear on the bank statement. * The bank statement shows on June 30, the bank collected note for Aries and credited the proceeds of P950,000 to the entity's account. * Checks outstanding on June 30 amount to P300,000. MCQ – Problems

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Cash and Cash Equivalent *

Aries discovered that a check written in June for P200,000 in payment of an account payable, had been recorded in the entity's records as P20,000. * Included with the June bank statement was NSF check for P250,000 that Aries had received from a customer on June 26. * The bank statement shows a P20,000 service charge for June. What amount should be reported as cash in bank on June 30,2014? A. 8,300,000 C. 9,180,000 B. 9,000,000 D. 9,360,000 FA © 2014 27. Letty Company provided the bank statement for the month of April which included the following information: Bank service charge for April 15,000 Check deposited by Letty during April was not collectible and has been marked "NSF" by the bank and returned 40,000 In comparing the bank statement to its own records, the entity found the following: Deposits made but not yet recorded by bank 130,000 Checks written and mailed but not yet recorded by bank 100,000 All deposits in transit and outstanding checks have been properly recorded in the entity's books. A customer check for P35,000 payable to Letty Company had not yet been deposited and had not been recorded by the entity. The cash in bank account balance per ledger is P920,000. What is the adjusted cash in bank on April 30? A. 865,000 C. 930,000 B. 900,000 D. 965,000 FA © 2014 28. Divine Company prepared the following bank reconciliation on December 31, 2014: Balance per bank statement 2,800,000 Add: Deposit in transit 195,000 Checkbook printing charge 5,000 Error made by Divine in recording check No. 45 (issued in December) 35,000 NSF check 110,000 345,000 3,145,000 Less: Outstanding check 100,000 Note collected by bank (includes P15,000 interest) 215,000 315,000 Balance per book 2,830,000 The entity had P200,000 cash on hand on December 31, 2014. MCQ – Problems

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FINANCIAL ACCOUNTING What amount should be reported as cash in the statement of financial position on December 31,2014? A. 2,895,000 C. 3,095,000 B. 2,930,000 D. 3,130,000 FA © 2014 29. Ron Company provided the following data for the month of January of the current year: Balance per book, January 31 3,130,000 Balance per bank statement, January 31 3,500,000 Collections on January 31 but undeposited 550,000 NSF check received from a customer returned by the bank on February 5 with the January bank statement 50,000 Checks outstanding on January 31 650,000 Bank debit memo for safety deposit box rental not recorded by depositor 5,000 A creditor check for P30,000 was incorrectly recorded in the depositor's book as 300,000 A customer check for P200,000 was recorded by the depositor as 20,000 The depositor neglected to make an entry in its books for a check drawn in payment of an account payable 125,000 What is the adjusted cash in bank on January 31 ? A. 2,950,000 C. 3,400,000 B. 3,130,000 D. 3,500,000 P1 © 2014 30. In reconciling the cash balance on December 31,2014 with that shown in the bank statement, Sam Company provided the following information: Balance per bank statement 4,000,000 Balance per book 2,700,000 Outstanding checks 600,000 Deposit in transit 475,000 Service charge 10,000 Proceeds of bank loan, December 1, discounted for 6 months at 12%, not recorded on Sam Company's books 940,000 Customer's check charged back by bank for absence of counter signature 50,000 Deposit of P100,000 incorrectly recorded by bank as 10,000 Check of Sim Company charged by bank against Sam account 150,000 Customer's note collected by bank in favor of Sam Company. Face 400,000 Interest 40,000 Total 440,000 Collection fee 5,000 435,000 MCQ – Problems

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Cash and Cash Equivalent Erroneous debit memo of December 28, to charge Sam account with settlement of bank loan Deposit of Sim Company credited to Sam account What is the adjusted cash in bank on December 31,2014? A. 3,075,000 C. 4,015,000 B. 3,925,000 D. 4,315,000

200,000 300,000 P1 © 2014

31. Susan Company showed the following information on August 31, 2014. Balance of cash in bank account 1,300,000 Balance of bank statement 1,200,000 Outstanding checks, August 31: Number 555 10,000 761 55,000 762 40,000 763 25,000 764 65,000 765 70,000 Receipts of August 31, deposited September 1 275,000 Service charge for August 5,000 NSF check received from a customer 85,000 The cashier-bookkeeper had misappropriated P30,000 and an additional PI 0,000 by charging sales discounts and crediting accounts receivable. The stub for check number 765 and the invoice relating thereto show that it was for P50,000. It was recorded incorrectly in the cash disbursements journal as P70,000. This check was drawn in payment of an account payable. Payment has been stopped on check number 555 which was drawn in payment of an account payable. The payee cannot be located. What is the adjusted cash in bank on August 31, 2014? A. 1,200,000 C. 1,230,000 B. 1,210,000 D. 1,240,000 P1 © 2014 32. Mcbride Company provided the following data pertaining to the cash transactions and bank account for May of the current year: Cash balance per accounting record 1,719,000 Cash balance per bank statement 3,195,000 Bank service charge 10,000 Debit memo for the cost of printed checks delivered by the bank; the charge has not been recorded in the accounting record 12,000 Outstanding checks 685,000 Deposit of May 30 not recorded by bank until June 1 500,000 MCQ – Problems

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FINANCIAL ACCOUNTING Proceeds of a bank loan on May 30, not recorded in the accounting record, net of interest of P30,000 570,000 Proceeds from a customer's promissory note, principal amount P800,000 collected by the bank not taken up in the accounting record with interest 810,000 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 120,000 Stolen check lacking an authorized signature deducted from Mcbride's account by the bank in error 80,000 Customer's check returned by the bank marked NSF, indicating that the customer's balance was not adequate to cover the check; no entry has been made in the accounting record to record the returned check 77,000 What is the adjusted cash in bank? A. 2,910,000 C. 3,000,000 B. 2,990,000 D. 3,080,000 P1 © 2014 33. Carefree Company prepared the following bank reconciliation on March 31: Book balance Add: March 31 deposit 750,000 Collection of note 2,500,000 Interest on note 150,000 Total Less: Careless Company's deposit to our account 1,100,000 Bank service charge 45,000 Adjusted book balance

1,405,000 3,400,000 4,805,000 1,145,000 3,660,000

Bank balance 5,630,000 Add: Error on check No. 175 45,000 Total 5,675,000 Less: Preauthorized payments for water bills 205,000 NSF check 220,000 Outstanding check 1,650,000 2,075,000 Adjusted bank balance 3,600,000 Check No. 175 was made for the proper amount of P249,000 in payment of account. However it was entered in the cash payments journal as P294,000. The entity authorized the bank to automatically pay its water bills as submitted directly to the bank. What is the adjusted cash in bank on March 31 ? A. 2,880,000 C. 3,630,000 B. 3,600,000 D. 3,660,000 P1 © 2014 MCQ – Problems

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Cash and Cash Equivalent Cash balance per ledger 34. Stellar Company provided the bank statement for the month of December which included the following information: Ending balance, December 31 2,800,000 Bank service charge for December 12,000 Interest paid by bank to Stellar Company for December 10,000 In comparing the bank statement to its own cash records, the entity found the following: Deposits made but not yet recorded by the bank 350,000 Checks written and mailed but not yet recorded by the bank 650,000 In addition, the entity discovered that it had drawn and erroneously recorded a check for P46,000 that should have been recorded for P64,000. What is the cash balance per ledger on December 31? A. 2,500,000 C. 2,540,000 B. 2,520,000 D. 2,800,000 FA © 2014 35. On June 30,2014, the bank statement of Bougainvilla Company had an ending balance of P3,735,000. The following data were assembled in the course of reconciling the bank balance: * The bank erroneously credited Bougainvilla Company for P21,000 on June 22. * During the month, the bank charged back NSF checks amounting to P23,000 of which P8,000 had been redeposited by June 25. * Collection for June 30 totaling PI03,000 was deposited the following month. * Checks outstanding on June 30 amounted to P302,000. * Note collected by the bank for Bougainvilla Company was P80,000 and the corresponding bank charge was P5,000. What is the unadjusted cash in bank per ledger on June 30,2014? A. 3,455,000 C. 3,557,000 B. 3,515,000 D. 3,497,000 P1 © 2014 Cash balance per bank statement 36. On March 31, 2014, Able Company received the bank statement. However, the closing balance of the account was unreadable. Attempts to contact the bank after hours did not secure the desired information. The following data are available in preparing a bank reconciliation: February 28 book balance 1,460,000 Note collected by bank 100,000 Interest earned on note 10,000 NSF check of customer 130,000 Bank service charge on NSF check 2,000 MCQ – Problems

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FINANCIAL ACCOUNTING Other bank service charges Outstanding checks Deposit of February 28 placed in night depository Check issued by Axle Company charged to Abie's account What is the cash balance per bank statement? A. 1,338,000 C. 1,532,000 B. 1,435,000 D. 1,557,000

3,000 202,000 85,000 20,000 FA © 2014

Deposit in transit 37. Kate Company shows a cash account balance per ledger of P1,652,000 at December 31. The bank statement, however, shows a balance of P2,090,000 at the same date. The only reconciling items consist of a bank service charge of P2,000, a large number of outstanding checks totaling P590,000 and a deposit in transit. What is the deposit in transit in the December 31 bank reconciliation? A. 150,000 C. 440,000 B. 154,000 D. 592,000 P1 © 2014 Outstanding checks 38. Grass Company provided the following information: Balance per bank statement July 31 1,240,000 Balance per ledger, July 31 750,000 Deposit of July 30 not recorded by bank 280,000 Debit memo - service charges 10,000 Credit memo - collection of note by bank for Grass 300,000 Outstanding checks ? An analysis of the canceled checks returned with the bank statement reveals the following: * Check for purchase of supplies was drawn for P60,000 but was recorded as P90,000. * The manager wrote a check for traveling expenses of P100,000 while out of town. The check was not recorded. What is the amount of outstanding checks on July 31 ? A. 270,000 C. 610,000 B. 550,000 D. 970,000 P1 © 2014

MCQ – Problems

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Cash and Cash Equivalent 39. Bayside Company provided the following information for October and November 2014: Checks and charges recorded by bank in November, including a November service charge of P4,000 and NSF check of P20,000 550,000 Service charge made by bank in October and recorded by depositor in November 2,000 Total credits to cash in all journals during November 620,000 Customer NSF check returned in October and redeposited in November (no entry made by depositor in either October or November) 40,000 Outstanding checks on October 31, 2014 that cleared in November 230,000 What is the amount of outstanding checks on November 30,2014? A. 282,000 C. 302,000 B. 300,000 D. 322,000 P1 © 2014 Journal entries 40. Margar Company kept all cash in a checking account. An examination of the accounting records and bank statement for the month ended December 31,2014 revealed a bank statement balance of P8,469,000 and a book balance of P8,524,000. A deposit of P950,000 placed in the bank's night depository on December 29 does not appear on the bank statement. Checks outstanding on December 31 amount to P270,000. The bank statement showed that on December 25 the bank collected a note for Margar Company and credited the proceeds of P935,000 to the entity's account which included P35,000 interest. Margar Company discovered that a check written in December for P183,000 in payment of an account had been recorded as PI 38,000. Included with the December 31 bank statement was an NSF check for P250,000 that Margar Company had received from a customer on December 20. The bank statement showed a P15,000 service charge for December. What is the journal entry to adjust the cash in bank on December 31 ? P1 © 2014 A. Debit to cash in bank of P935,000 C. Net debit to cash in bank of P625,000 B. Credit to cash in bank ofP310,000 D. Net credit to cash in bank of P625,000 Proof of Cash 41. Oro Company had the following bank reconciliation on March 31 of the current year: Balance per bank statement, March 31 4,650,000 Add: Deposits in transit 1,000,000 Total 5,65,0,000 Less: Outstanding checks 1,250,000 Balance per book, March 31 4,400,000 MCQ – Problems

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FINANCIAL ACCOUNTING Data per bank statement for the month of April follow: Deposits 6,000,000 Disbursements 5,000,000 All reconciliation items on March 31 cleared through the bank in April. Outstanding checks on April 30 totaled P750,000 and deposits in transit amounted to PI,500,000. What is the amount of cash receipts per book in April? A. 5,000,000 C. 6,500,000 B. 5,500,000 D. 7,500,000 Questions 42 & 43 are based on the following information. P1 © 2014 Lira Company prepared the following bank reconciliation dated June 30 of the current year. Balance per bank 9,800,000 Deposits in transit 400,000 Outstanding checks (1,400,000) Balance per book 8,800,000 There were total deposits of P6,500,000 and charges for disbursements of P9,000,000 for July per bank statement. All reconciliation items on June 30 cleared the bank on July 31. Checks outstanding amounted to P1,000,000 and deposits in transit totaled P1,200,000 on July 31. 42. What is the amount of cash disbursements per book in July? A. 7,600,000 C. 8,600,000 B. 8,400,000 D. 9,400,000 43. What is the adjusted cash in bank on July 31? A. 6,300,000 C. 7,300,000 B. 6,500,000 D. 7,500,000 Questions 44 thru 46 are based on the following information. Lazer Company had the following bank reconciliation on June 30, 2014: Balance per bank statement, June 30 Deposit in transit Total Outstanding checks Balance per book, June 30 The bank statement for the month of July showed the following: Deposits (including P200,000 note collected for Lazer) Disbursements (including P 140,000 NSF check and P10,000 service charge) MCQ – Problems

P1 © 2014 3,000,000 400,000 3,400,000 ( 900,000) 2,500,000 9,000,000 7,000,000 Page 34

Cash and Cash Equivalent 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 July31. 44. What is the cash balance per book on July 31? A. 4,500,000 C. 5,400,000 B. 5,350,000 D. 5,550,000 45. What is the amount of cash receipts per book in July? A. 8,600,000 C. 9,600,000 B. 9,400,000 D. 9,800,000 46. What is the amount of cash disbursements per book in July? A. 6,550,000 C. 6,850,000 B. 6,700,000 D. 7,300,000 Questions 47 thru 49 are based on the following information. FA © 2014 Chris Company presented the following bank reconciliation for the month of November of the current year: Balance per bank statement, November 30 3,600,000 Add: Deposit in transit 800,000 4,400,000 Less: Outstanding checks 1,200,000 Bank credit recorded in error 200,000 1,400,000 Balance per book, November 30 3,000,000 Data per bank statement for the month of December follow: December deposits (including note collected of PI,000,000 for Chris) 5,500,000 December disbursements (including NSF, P350,000 and service charge, P50,000) 4,400,000 All items that were outstanding on November 30 cleared through the bank in December, including the bank credit. In addition, checks amounting to P500,000 were outstanding and deposits of P700,000 were in transit on December 31. 47. What is the cash balance per ledger on December 31 ? A. 4,100,000 C. 4,700,000 B. 4,300,000 D. 4,900,000 48. What is the amount of cash receipts per book in December? A. 4,400,000 C. 5,500,000 B. 5,400,000 D. 6,400,000 MCQ – Problems

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FINANCIAL ACCOUNTING 49. What is the amount of cash disbursements per book in December? A. 3,100,000 C. 3,500,000 B. 3,300,000 D. 3,700,000 Questions 50 thru 52 are based on the following information. Jam Company provided the following bank reconciliation on May 31: Balance per bank statement Deposits outstanding Checks outstanding Correct cash balance Balance per book Bank service charge Correct cash balance June data are as follows: Checks recorded Deposits recorded Collection by bank (P400,000 note plus interest) NSF check returned with June 30 statement Balances

Bank 2,300,000 1,620,000 420,000 10,000 1,830,000

FA © 2014 2,100,000 300,000 ( 30,000) 2,370,000 2,372,000 (2,000) 2,370,000 Book 2,360,000 1,800,000 1,810,000

50. What is the amount of checks outstanding on June 30? A. 0 C. 60,000 B. 30,000 D. 90,000 51. What is the amount of deposits in transit on June 30? A. 120,000 C. 480,000 B. 180,000 D. 680,000 52. What is the adjusted cash in bank on June 30? A. 1,810,000 C. 2,240,000 B. 2,220,000 D. 2,780,000

MCQ – Problems

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Cash and Cash Equivalent ANSWER KEY Theory 1.B 2.B 3.C 4.D 5.D 6.B 7.C 8.D 9.B 10.A 11.B 12.C 13.D 14.D 15.D 16.B 17.B 18.D 19.B 20.B

Answer Key

21.A 22.D 23.C 24.C 25.B 26.D 27.D 28.A 29.D 30.D 31.D 32.D 33.D 34.C 35.D 36.A 37.B 38.A 39.C 40.A

41.D 42.C 43.B 44.D 45.C 46.B 47.D 48.D

Problems 1.A 2.C 3.B 4.B 5.A 6.D 7.D 8.B 9.C 10.C 11.D 12.D 13.C 14.C 15.D 16.B 17.C 18.A 19.B 20.C

21.A 22.D 23.B 24.B 25.C 26.B 27.B 28.C 29.C 30.C 31.D 32.C 33.C 34.B 35.A 36.C 37.A 38.B 39.D 40.C

41.C 42.C 43.D 44.C 45.B 46.A 47.B 48.A 49.A 50.D 51.C 52.B

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FINANCIAL ACCOUNTING ANSWER EXPLANATION 1.

Answer is (A). Coins and currency Check drawn by the entity to the order of the petty cash custodian

3,300 2,700 6,000 The check drawn by the entity to the order of the petty cash custodian is actually a replenishment check and therefore part of cash. 2.

Answer is (C). Currencies Coins Check drawn to the order of the petty cash custodian

3.

Answer is (B). Checkbook balance 4,000,000 Undelivered check drawn on Thor's account 500,000 Adjusted cash balance 4,500,000 The undelivered check is restored to the cash balance by debiting cash and crediting accounts payable. The cash in sinking is a noncurrent investment because it is set aside for the payment of noncurrent liability.

4.

Answer is (B). Cash on hand 500,000 Demand deposit 4,000,000 Petty cash fund 50,000 Traveler's check 200,000 Manager's check 100,000 Money order 150,000 Total cash 5,000,000 The certificate of deposit is a cash equivalent. The postdated customer check is reverted to accounts receivable.

20,000 2,000 15,000 37,000 The check drawn payable to the order of the petty cash custodian representing her salary is actually an accommodation check. Thus, it is included as part of cash.

Answer Explanations & Solutions

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Cash and Cash Equivalent 5.

Answer is (A). Petty cash fund Undeposited receipts (1,220,000-70,000) Cash in Allied bank (2,245,000-40,000)

6.

Answer is (D). Checkbook balance 4,000,000 Postdated customer check ( 200,000) Undelivered check payable to supplier 400,000 Adjusted cash in bank 4,200,000 Petty cash: Coins and currencies 5,000 Replenishment check 43,000 48,000 Total 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 31,2014. Thus, the same is not deducted anymore from the checkbook balance.

7.

Answer is (D). Checking account at Second Bank Payroll account Value added tax account Foreign bank account - unrestricted Traveler's check Petty cash fund Money order Total unrestricted cash

3,500,000 500,000 400,000 2,000,000 300,000 20,000 180,000 6,900,000

8.

Answer is (B). Cash in bank (1,800,000 - 600,000) Petty cash fund Time deposit Total cash

1,200,000 50,000 250,000 1,500,000

24,000 1,150,000 2,205,000 3,379,000 The postdated customer check of P70,000 should be reverted to accounts receivable. The outstanding check of P40,000 is deducted from the Cash in Allied Bank because the cash balance is per bank statement. The bond sinking fund is a noncurrent investment. The vouchers paid should be recorded as expenses. The IOUs should be shown as advances to employees.

Answer Explanations & Solutions

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FINANCIAL ACCOUNTING Since the compensating balance is legally restricted, it is excluded from the amount shown as cash. In this case, the compensating balance is shown as "cash held as compensating balance" as a current asset because the related loan is short-term. The problem is silent on the term of the time deposit. It is assumed that the term is three months or less, this being the normal banking practice. Accordingly, the time deposit is a cash equivalent. 9.

Answer is (C). Cash in bank - current account 5,000,000 Cash in bank - payroll account 1,000,000 Cash on hand (500,000 - 200,000) 300,000 Time deposit 2,000,000 Total cash and cash equivalents 8,300,000 The cash in bank set aside for payroll is included in cash because it is for the payment of current liability. The cash on hand is reduced by the postdated check payable to Pygmalion. The postdated check should be reverted to accounts receivable. The time deposit is classified as cash equivalent because the term is three months. Under PAS 7, treasury bills, money market placement and time deposit normally qualify as cash equivalents only when they have a short maturity of three months or less from the date of acquisition. The cash in bank restricted for building construction is classified as a noncurrent investment because it is set aside for the acquisition of a noncurrent asset and not for the payment of a current liability.

10. Answer is (C). Government treasury bills 2,000,000 Cash 3,400,000 Commercial papers 1,500,000 Total cash and cash equivalents 6,900,000 The share investments cannot qualify as cash equivalents because although very actively traded the investments 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.

Answer Explanations & Solutions

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Cash and Cash Equivalent 11. Answer is (D). Undeposited collections 60,000 PCIB checking account 500,000 PCIB payroll fund 150,000 PCIB saving deposit 100,000 PCIB money market 2,000,000 Total cash and cash equivalents 2,810,000 The PNB overdraft is a current liability. The NSF check and the postdated check dated January 15, 2015 should be reverted to accounts receivable. The restricted cash in foreign bank is classified as noncurrent. 12. Answer is (D). Petty cash fund (50,000 - 15,000) 35,000 Current account 4,000,000 Sinking fund 2,000,000 Cash on hand (500,000 - 100,000) 400,000 Treasury bills 1,000,000 Total cash and cash equivalents 7,435,000 The sinking fund is included in cash and cash equivalents because the bond payable is already due within one year from the end of the reporting period. The classification of a cash fund should parallel the classification of the related liability. 13. Answer is (C). Petty cash fund (50,000 - 15,000 - 5,000) 30,000 Current account - First Bank (4,000,000 + 100,000) 4,100,000 Money market placement 1,000,000 Total cash and cash equivalents 5,130,000 In the absence of specific term, money market placement, time deposit and treasury bills are short-term investment of three months or less and therefore qualify as cash equivalents. The Fourth Bank time deposit is a noncurrent asset because it is set aside for the acquisition of a noncurrent asset. 14. Answer is (C). 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 Answer Explanations & Solutions

(500,000 - 100,000)

400,000 20,000 (1,000,000 + 200,000) 1,200,000 400,000 ( 50,000) 3,000,000 Page 41

FINANCIAL ACCOUNTING Total cash and cash equivalents 4,970,000 The BPI time deposit is noncurrent because it is set aside for the acquisition of equipment. 15. Answer is (D). Demand deposit (1,500,000 + 100,000 + 50,000 - 200,000) Time deposit - 3 0 days Saving deposit Petty cash fund * Total cash and cash equivalents 16. Answer is (B). Cash on hand (200,000 - 30,000) Petty cash fund Philippine Bank current (5,000,000 + 25,000 + 45,000) Manila Bank current Asia Bank time deposit Total cash and cash equivalents

1,450,000 500,000 50,000 10,000 2,010,000 170,000 20,000 5,070,000 4,000,000 2,000,000 11,260,000

17. Answer is (C). Cash in bank 2,250,000 Cash on hand 125,000 Total cash 2,375,000 A compensating balance is a minimum checking or demand deposit account balance that must be maintained in connection with a borrowing arrangement with a bank. The compensating balance is part of cash if it is not legally restricted as to withdrawal. Otherwise, if it is legally restricted, the compensating balance is excluded from the amount shown as "cash", and shown separately as current or noncurrent asset depending on the bank loan to which it is related. If the related bank loan is short-term, the restricted compensating balance is a current asset. If the related bank loan is long-term, the restricted compensating balance is a noncurrent asset. 18. Answer is (A). BPI 3,155,000 Currency and coins 1,135,000 Petty cash fund (50,000 - 10,000) 40,000 Total 4,330,000 The outstanding check of P320,000 is not deducted from the BPI checking account because the BPI account is believed to be the balance per book. The term "bank statement" appearing Answer Explanations & Solutions

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Cash and Cash Equivalent on the problem simply signifies that the outstanding check was determined from the bank statement. It does not mean that the checking account in BPI is the balance per bank statement. The deposit in bank closed by BSP is a noncurrent asset. 19. Answer is (B). Balance per book Bank service charge Book error in recording check Adj usted book balance Balance per bank Deposit in transit Outstanding checks Adjusted bank balance Adjusted cash in bank Currency and coins Petty cash fund Total cash

(

(50,000 - 10,000)

20. Answer is (C). Adjusted bank balance (3,600,000 - 1,200,000 + 400,000 + 50,000) 21. Answer is (A). Balance per book Collection by bank NSF check Book error-customer's check (54,000-45,000) Book error - check written (97,000 - 79,000) Adjusted book balance The deposit in transit of P230,000 is a bank reconciling item.

6,776,000 6,000) 9,000 6,779,000 6,532,000 1,234,000 (987,000) 6,779,000 6,779,000 950,000 40,000 7,769,000 2,850,000

4,500,000 94,000 ( 32,000) ( 9,000) 18,000 4,571,000

22. Answer is (D). Balance per bank 1,805,000 Deposit in transit 325,000 Total 2,130,000 Outstanding checks ( 275,000) Adjusted bank balance 1,855,000 The customer's check which is returned for insufficient fund and the bank service charge are ignored because these are book reconciling items. Answer Explanations & Solutions

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FINANCIAL ACCOUNTING 23. Answer is (B). Per bank statement Deposit in transit Outstanding checks Bank error Adjusted bank balance

3,800,000 520,000 675,000) 40,000) 3,605,000

24. Answer is (B). Per book Bank charges Note collected by bank Interest oh note NSF Note charged to account Adjusted book balance

1,000,000 (3,000) 375,000 15,000 (62,000) ( 250,000) 1,075,000

25. Answer is (C). Balance per bank 2,000,000 Deposit in transit 200,000 Total 2,200,000 Outstanding checks (500,000-100,000) ( 400,000) Erroneous bank credit (300,000) Adjusted bank balance 1,500,000 The certified check of PI00,000 is no longer outstanding for reconciliation purposes. Thus, the amount is deducted from the total outstanding checks. 26. Answer is (B). Balance per book Note collected by bank Total Book error NSF check Service charge Adjusted book balance

Answer Explanations & Solutions

(200,000-20,000)

8,500,000 950,000 9,450,000 ( 180,000) ( 250,000) ( 20,000) 9,000,000

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Cash and Cash Equivalent 27. Answer is (B). Balance per ledger Unrecorded customer check Bank service charge NSF check Adjusted book balance

920,000 35,000 ( 15,000) ( 40,000) 900,000.

28. Answer is (C). Balance per bank Deposit in transit Outstanding check Adjusted cash in bank Cash on hand Total cash

2,800,000 195,000 (100,000) 2,895,000 200,000 3,095,000

29. Answer is (C). Balance per book Overstatement of creditor check Understatement of customer check NSF check Bank debit memo for safety deposit box Unrecorded check Adjusted book balance Balance per bank Undeposited collections Checks outstanding Adjusted bank balance 30. Answer is (C). Balance per book Add: Proceeds of bank loan Note collected by bank Total Less: Service charge Customer's check charged back Adjusted book balance

Answer Explanations & Solutions

3,130,000 270,000 180,000 ( 50,000) ( 5,000) ( 125,000) 3,400,000 3,500,000 550,000 ( 650,000) 3,400,000

940,000 435,000 50,000

2,700,000 1,375,000 4,075,000 10,000 60,000 4,015,000

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FINANCIAL ACCOUNTING Balance per bank Add: Deposit in transit Incorrect deposit Erroneous bank charge Erroneous debit memo Total Less: Outstanding checks Erroneous bank credit Adjusted bank balance 31. Answer is (D). Balance per book Add: Overstatement of check number 765 Check number 555 stopped for payment Total Less: Service charge NSF check Adjusted book balance Balance per bank Add: Undeposited collections Total Less: Outstanding checks: Number 761 762 763 764 765 Adjusted bank balance 32. Answer is (C). Balance per book Service charge Debit memo for printed checks Proceeds of bank loan Proceeds of customer's note NSF check Adjusted book balance Answer Explanations & Solutions

4,000,000

475,000 90,000 150,000 200,000

915,000 4,915,000

600,000 300,000

900,000 4,015,000 1,300,000

20,000 10,000

30,000 1,330,000

5,000 85,000

90,000 1,240,000 1,200,000 275,000 1,475,000

55,000 40,000 25,000 65,000 50,000

235,000 1,240,000 1,719,000 10,000) 12,000) 570,000 810,000 ( 77,000) 3,000,000

( (

Page 46

Cash and Cash Equivalent Balance per bank Outstanding checks Deposit in transit Bank error in recording check Stolen check deducted by bank in error Adjusted bank balance 33. Answer is (C). Book balance Collection of note Interest on note Book error on Check No. 175 Bank service charge Water bills NSF check Adjusted book balance

3,195,000 ( 685,000) 500,000 ( 90,000) 80,000 3,000,000 1,405,000 2,500,000 150,000 45,000 ( 45,000) ( 205,000) ( 220,000) 3,630,000

34. Answer is (B). Balance per bank 2,800,000 Deposits in transit 350,000 Outstanding checks ( 650,000) Adjusted bank balance 2,500,000 Balance per ledger (SQUEEZE) 2,520,000 Interest income 10,000 Service charge ( 12,000) Book error (64,000-46,000) ( 18,000) Adjusted book balance 2,500,000 The cash balance per ledger is "squeezed" by working back from the adjusted balance. 35. Answer is (A). Balance per bank Erroneous bank credit Deposit in transit Outstanding checks Adjusted bank balance

Answer Explanations & Solutions

3,735,000 ( 21,000) 103,000 ( 302,000) 3,515,000

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FINANCIAL ACCOUNTING Balance per book (SQUEEZE) NSF checks Note collected by bank Service charge Adjusted book balance

(23,000-8,000)

3,455,000 ( 15,000) 80,000 ( 5,000) 3,515,000

36. Answer is (C). February 2 8 book balance 1,460,000 Note collected by bank 100,000 Interest earned on note 10,000 NSF check (130,000) Bank service charges (2,000 + 3,000) (5,000) Adjusted book balance 1,435,000 Balance per bank statement (SQUEEZE) 1,532,000 Deposit in transit 85,000 Bank error - erroneous charge 20,000 Outstanding checks (202,000) Adjusted bank balance 1,435,000 The bank statement balance is "squeezed" by working back from the adjusted balance. 37. Answer is (A). Balance per book 1,652,000 Service charge ( 2,000) Adjusted book balance 1,650,000 Balance per bank 2,090,000 Deposit in transit (SQUEEZE) 150,000 Total 2,240,000 Outstanding checks ( 590,000) Adjusted bank balance 1,650,000 The deposit in transit is "squeezed" by working back from the adjusted balance. 38. Answer is (B). Balance per ledger Service charges Collection of note Book error (90,000-60,000) Unrecorded check for traveling expenses Adjusted book balance Answer Explanations & Solutions

750,000 (10,000) 300,000 30,000 ( 100,000) 970,000 Page 48

Cash and Cash Equivalent Balance per bank 1,240,000 Deposit in transit 280,000 Total 1,520,000 Outstanding checks (SQUEEZE) ( 550,000) Adjusted bank balance 970,000 The amount of outstanding checks is "squeezed" by working back from the adjusted bank balance. 39. Answer is (D) Checks and charges by bank in November 550,000 Service charge in November ( 4,000) NSF check in November ( 20,000) Checks paid by bank in November 526,000 Total credits to cash in all journals during November 620,000 Service charge in October recorded in November ( 2,000) Checks issued by depositor in November 618,000 Outstanding checks - October 31 230,000 Total checks to be paid by bank 848,000 Checks paid by bank in November (526,000) Outstanding checks - November 30 322,000 The customer NSF check in October and redeposited in November is ignored in the computation because no entry was made by depositor in either October or November. 40. Answer is (C). Book balance Note collected Total Book error NSF check Service charge Adjusted book balance Debit to cash in bank Credit to cash in bank Net debit to cash in bank

Answer Explanations & Solutions

(183,000-138,000)

8,524,000 935,000 9,459,000 (45,000) (250,000) ( 15,000) 9,149,000 935,000 310,000 625,000

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FINANCIAL ACCOUNTING 41. Answer is (C). Bank receipts for April Deposits in transit - March 31 Deposits in transit - April 30 Book receipts for April 42. Answer is (C). Bank disbursements for July Outstanding checks - June 30 Outstanding checks - July 31 Book disbursements for July

6,000,000 (1,000,000) 1,500,000 6,500,000 9,000,000 (1,400,000) 1,000,000 8,600,000

43. Answer is (D). Balance per bank - July 31 (9,800,000 + 6,500,000 - 9,000,000) 7,300,000 Deposits in transit - July 31 1,200,000 Outstanding checks - July 31 (1,000,000) Adjusted cash in bank - July 31 7,500,000 44. Answer is (C). 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

3,000,000 9,000,000 ( 7,000,000) 5,000,000 1,000,000 ( 600,000) 5,400,000

Balance per book - July 31 (SQUEEZE) 5,350,000 Note collected by bank in July 200,000 NSF check in July (140,000) Service charge in July (10,000) Adjusted book balance 5,400,000 The balance per book on July 31 is "squeezed" by working back from the adjusted balance. 45. Answer is (B). Deposits per bank statement for July Note collected by bank in July Deposit in transit-June 30 ' Deposit in transit - July 31 Answer Explanations & Solutions

9,000,000 (200,000) (400,000) 1,000,000 Page 50

Cash and Cash Equivalent Cash receipts per book for July 46. Answer is (A). 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 Proof of the cash balance per book - July 31 Balance per book - June 30 Book receipts for July Book disbursements for July Balance per book - July 31

9,400,000 7,000,000 ( 140,000) (10,000) (900,000) 600,000 6,550,000 2,500,000 9,400,000 (6,550,000) 5,350,000

47. Answer is (B). Balance per bank - November 30 December deposits Total December disbursements Balance per bank - December 31 Deposit in transit - December Outstanding checks - December Adjusted bank balance - December 31 Balance per book - December 31 (SQUEEZE) Note collected by bank NSF check Service charge Adjusted book balance

3,600,000 5,500,000 9,100,000 (4,400,000) 4,700,000 700,000 (500,000) 4,900,000 4,300,000 1,000,000 (350,000) (50,000) 4,900,000

48. Answer is (A). December bank deposits Note collected by bank in December Deposit in transit - November 30 Deposit in transit - December 31 December book receipts

5,500,000 (1,000,000) ( 800,000) 700,000 4,400,000

Answer Explanations & Solutions

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FINANCIAL ACCOUNTING 49. Answer is (A). December bank disbursements NSF check in December Service charge in December Outstanding checks - November 30 Erroneous bank credit in November Outstanding checks - December 31 December book disbursements Proof of cash balance per book - December 31 Balance per book - November 30 December book receipts December book disbursements Balance per book - December 31

4,400,000 (350,000) ( 50,000) (1,200,000) ( 200,000) 500,000 3,100,000 3,000,000 4,400,000 (3,100,000) 4,300,000

50. Answer is (D). Checks outstanding - May 31 Checks recorded by book in June Total Checks recorded by bank in June Checks outstanding - June 30

30,000 2,360,000 2,390,000 (2,300,000) 90,000

51. Answer is (C). Deposits in transit - May 31 Deposits recorded by book - June Total Deposits recorded by bank - June Deposits in transit-June 30

300,000 1,800,000 2,100,000 (1,620,000) 480,000

52. Answer is (B). Balance per bank - June 30 Deposits in transit - June 30 Outstanding checks - June 30 Adjusted bank balance Balance per book Note collected by bank NSF check Adjusted book balance Answer Explanations & Solutions

1,830,000 480,000 (90,000) 2,220,000 1,810,000 420,000 ( 10,000) 2,220,000 Page 52