Audit Of Cash - Roque 2018 (1)

CHAPTER 1 Audit of Cash & Cash Equivalents AUDIT PROGRAM FOR CASH Audit Objectives: To determine that: 1. Cash balances at the end of the reporting period represent cash and cash items on hand, in transit to, or in depository banks. 2. Cash transactions have been properly recorded. 3. Cash balances are properly described and classified, and adequate disclosures with respect to amounts restricted as to withdrawal are made in the financial statements. Audit Procedures: 1. Conduct a cash count of undeposited collections, petty cash, and other funds. • Obtain custodian's signature to acknowledge return of items counted. • Reconcile items counted with general ledger balances. • Trace undeposited collections counted to bank reconciliation. • Follow up dispositions of items in cash counted: ➢ Undeposited collections should be traced to bank deposits. ➢ Checks accommodated in petty cash should be deposited after the count to establish their validity. ➢ IOUs in the petty cash should be confirmed and traced to collections in the next payroll period. ➢ Expense vouchers should be traced to the succeeding replenishment voucher. • Coordinate cash count with count of marketable securities and other negotiable assets of the client. • Obtain confirmation of year-end fund balances of cash not counted in branches or other offices. 2. Confirm bank balance by direct correspondence with all banks in which the client has had deposits and loans during the year. 3. Obtain bank reconciliation. • • • ➢ ➢ • ➢ ➢

CHAPTER 1 AUDIT OF CASH AND CASH3 Trace balance per book to the general ledger balance of cash account. Trace balance per bank to bank statement and compare with amount confirmed by bank. Establish authenticity of reconciling items by reference to their respective sources, like: Bank debit or credit advices. Duly approved journal vouchers. Investigate checks outstanding for a long period of time. Consider adjustment, especially if the check is already stale. Consider the possibility of an erroneous preparation of the check.

• Investigate any unusual reconciling items. • Where internal control over cash is weak, consider preparing a proof of cash reconciliation. 4. Obtain cutoff bank statement showing the client's transactions. with the bank at least one week after the reporting date, and: • Trace year-end reconciling items, like: ➢ Deposit of the year-end undeposited collections. ➢ Completeness of year-end outstanding checks. ➢ Corrections of bank errors. • Examine supporting documents of year-encl outstanding checks that did not clear in the cutoff bank statement, 5. Obtain a list of interbank transfers of funds a few days before and after the reporting date. • Vouch supporting documents. • Ascertain that the related receipts and disbursements were booked by the client within the same day or at least within the same month. 6. Test reasonableness of cutoff by: • Comparing dates of checks returned with cutoff bank statement to dates of recording in the cash disbursements register. • Tracing receipts recorded a few days before the reporting date to bank deposits. 7. Inspect savings account passbook and certificates of deposits. • Reconcile with book balances. • Update interest earned posting on passbooks, if • necessary. • Compare balances with bank confirmation reply. 8. Determine any restrictions on availability of cash. 9. Determine propriety of financial statement presentation and adequacy of disclosures. Problem 1-1 Cash and Cash Equivalents The accountant of SANTIAGO COMPANY is in the process of preparing the company's financial statements for the year ended December 31, 2018. He is trying to determine the correct balance of cash and cash equivalents to be reported as a current asset in the statement of financial position. The following items are being considered: • Balances in the company's accounts at the Metropolitan Bank: ➢ Current account P81,OOO ➢ Savings account P132,600 • Undeposited customer checks of P22,200 (including a custcmer check dated January 2, 2019, for P3,000). • Currency and coins on hand of P3,480.

Savings account at the Northern Philippines Bank with a balance of P2,400,000. This account is being used to accumulate cash for future plant expansion (in 2019). • Petty cash of P4,000 (currency of P1,200 and unreplenished vouchers for P2,800). • P 120,000 in a current account at the Northern Philippines Bank. This represents a 20% compensating balance P600,000 loan with the bank. Santiago Company is legally restricted to withdraw the funds until the loan is due in 2021. • Treasury bills: Two -month maturity bills P90,OOO Seven -month bills 120,000 Time deposit (placement term is 2 months) P100,000 What total amount of cash and cash equivalents should be reported under current assets? A. P547,480 C. P430,280 B. P427480 D. P327,480 SOLUTION 1-1 Savings and current accounts - Metropolitan Bank ("132,600 + P81,OOO) P213,600 Undeposited customer checks (P22,200 — P3,OOO) 19,200 Currency and coins on hand 3,480 Petty cash 1,200 Two-month treasury bills 90,000 Time deposit 100,000 Total cash and cash equivalents P427.480 Answer: B Notes: 1. The P3,000 postdated customer check will not be accepted by the bank when presented either for encashment or deposit. This should be reverted to accounts receivable. 2. The P2,400,000 cash balance at Northern Philippines Bank is being maintained for future plant expansion. Thus, it is unavailable for use in current operations or payment of current liabilities. The amount should be shown as part of investments in the noncurrent assets section of the statement of financial position. 3. The P120,000 in ä current account at the Northern Philippines Bank which represents a compensating balance is legally restricted and is being held against a long-term borrowing. Hence, this Should be classified as investment or other asset in the noncurrent assets section of the statement of financial position. 4. The 7-month treasury bills are not cash equivalents and should be shown as part of short-term investments in the current assets section of the statement of financial position. PAS 7 defines "cash equivalents" as short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. These normally include short-term investments with maturities of three months or less from the date of acquisition. PROBLEM 1-2 The following information has been extracted from the accounting records of the URSULA COMPANY at December 31, 2018:

a. Cash on hand (see note below) P230,OOO b. Impukan Bank savings account (the required c. minimum Monthly Average Daily Balance is PIO,OOO) 9,500 c.364-day Treasury bills purchased March 1, 2018 400,000 d. Petty cash fund (see note below) 20,000 e. Tipid Bank current account (see note below) 160,000 f. Time deposit placements: Date Term Dec. 15, 2018 30 days 30,000 Oct. 31, 2018 90 days 40,000 Nov. 30, 2018 180 days 25,000 g. Employee travel advances 7,000 h. cash in bond sinking fund 500,000 i. customers note receivable 45,000 j. Postage stamps 2,400 The following are included in cash on hand: • A customer check for returned by the bank December 28, 2018. It was redeposited and cleared the batik on January 2, 2019. • A customer check for P75,000 dated January 3, 2019, receiv December 27, 2018. • PHLPost money orders received from customers, P30,000 The petty cash fund consists of the following: Currency and coins P13,500 IOUs from officers and employees 3,000 Unreplenished petty cash disbursements 1,500 Currency in envelope with the notation: "We were Bang Quay's coworkers. Words may not be adequate to express how sorry we feel. Please accept our heartfelt sympathies on the loss ofyour loved one." 1.500 P20.ooo The following information pertains to Tipid Bank current account: • A check for P13,000 was dated and recorded on December 29, 2018, but was delivered to payee on January 5, 2019. • A check for P5,000 dated January 10, 2019, payable to a supplier was recorded and released to payee on December 19, 2018. Tipid Bank requires current account depositors to maintain a monthly average daily balance of P50,000. What total amount should be recorded as cash and cash equivalents on December 31, 2018? A. P383,000 C. P378,OOO B. P373,500 D. P408,OOO Solution 1-2 Cash on hand (230,000-P43,000-P75,000) Impukan Bank savings account Petty cash fund Bank current account (P160,OOO + P13,OOO + PS,OOO) Time deposits:

P112,OOO 9,500 13,500 178,000

30 days 30,000 90 days 40,000 Total cash and cash equivalents P383,000 Answer: A PROBLEM 1-3 The controller of the LYRIC CO. is trying to determine the amount of cash and cash equivalents to be reported on its December 31, 2018, statement of financial position. The following information is provided: 1. Balances in the companys accounts at the Monte Bank: • Checking account—P540,000 • Savings account—P884,000 2. Undeposited customer checks of P208,000. 3. Currency and coins on hand of P23,200. 4. Savings account at the Naic Bank with a balance of P350,000. This account is being used to accumulate cash for future plant expansion (in 2020). 5. P800,000 balance in a checking account at the Naic Bank. 6. Treasury bills; 30-day maturity bills totaling and 180day bills totaling P800,000.

on December 31, 2018, what amount should be reported as cash and cash equivalents? A. P3,055,200 C. P2,955,200 B. P2,455,200 D. P2,355,200 Solution 1-3 Balance in Monte Bank checking account P540,000 Balance in Monte Bank savings account 884,000 Undeposited customer checks 208,000 Currency and coins on hand 23,200 Checking account in Naic bank 800,000 Treasury bills with 30-day maturity 600,000 Total cash and cash equivalents P3,055,200 Answer: A PROBLEM 1-4 The following facts apply to OTO COMPANY during 2018: 1. Savings account of P900,000 and a checking account balance of PI,200,000 are held at Manila Bank. 2. Money market placement with maturity of 3 months, P7,500,000. 3. Currency and coins on hand amounted to PI 1,550. 4. Travel advances of P270,000 for the first quarter of next year (employee reimbursement will be through salary deduction). 5. Oto Company has purchased P3,150,000 of commercial paper of mendez Corp which is due in 60 Days. 6. A separate cash fund amounting to P2,250,000 is restricted for the retirement of long-term debt.

7. Petty cash fund of P 1,500. 8. An IOU from an employee of Oto Company in the ampunt of P2,OOO. 9. Two certificates of deposit, each totaling P500,000. These CDs have a maturity of 120 days. 10. Oto Company has received a check from a customer in the amount of P 187,500 dated January 15, 2019. 1l. On January 1, 2018, Oto Company purchased marketable equity securities to be held as "trading" for P3,000,000. On December 31, 2018, its market value is P4,300,000. What amount should be reported as cash and cash equivalents on December 31, 2018? A. P13,736,050 C. P12,751,500 B. P12,575,550 D. P12,763,050 SOLUTION 1-4 Savings account — Manila Bank P 900,000 Checking account — Manila Bank 1,200,000 Money market placement 7,500,000 Petty cash 1,500 Commercial paper 3, 150,000 Currency and coins on hand 11,550 Total cash and cash equivalents P12,763,050 Answer: D PROBLEM 1-5 Your audit of the December 31, 2018, financial statements of DIONISIO CORP. reveals the following: Current account at Prime Bank P(30,000) Current account at Prudent 135,000 Treasury bills (acquired 3 months before maturity) 300,000 Treasury bills (maturity date is Dec. 31, 2019) 1,500,000 Payroll account 390,000 Foreign bank account — restricted (translated using the December 31, 2018, exchange rate) 2,000,000 Postage stamps 1,250 Employee's postdated check 4,500 IOU from the vice-president 8,000 Credit memo from a supplier for a purchase return 8,100 Traveler's check 21,000 Money order 12,900 Petty cash fund (P3,000 in currency and expense receipts for P12,000) 15,000 What amount would be reported as "cash and cash equivalents" in the statement of financial position on December 31, 2018?

A. P840,050 C. P849,400 B. P873,900 D. P861,900 SOLUT10N 1-5 Current account at Prudent Bank P 135,000 Treasury bills (acquired 3 months before maturity) 300,000 Payroll account 390,000 Travelers Check 21,000 Money order 12,900 Petty cash fund 3,000 Total cash and cash equivalents P861,900 Answer: D PROBLEM 1-6 Computation of Correct Cash Balance The Cash account of the BEA CORPORATION as of December 31, 2018, was composed of the following: On deposit in current account with the Bank of PI P900,000 Cash collection not yet deposited to the bank 350,000 A customer's check returned by the bank for insufficient fund 150,000 A check drawn by the Vice-President of the company dated January 15, 2019 70,000 A check drawn by a supplier dated December 28, 2018, for goods returned by the company 60,000 A check dated May 31, 2018, drawn by the company against the Bank of Manila in payment of customs duties. Since the importation did not materialize, the check was returned by the customs broker. This check was an outstanding check in the reconciliation of the Bank of Manila 410,000 Petty cash fund of which P 10,000 is in currency; P7,200 in form of employees' IOUs; and P2,800 is supported by approved petty cash vouchers for expenses all dated prior to closing of the books on December 31,2018 20 000 Total P1,960,000 Less: Overdraft with the Bank of Manila secured by a chattel mortgage on the inventories 300.000 Cash balance per ledger P1, 660,000 What is the amount of cash to be reported on the December 31, 2018, statement of financial position of Bea Company? SOLUTION 1-6 Current account — Bank of PI P900,OOO Undeposited collection 350,000

Supplier's check for goods returned by.the company 60,000 Petty cash fund 10,000 Bank of Manila (P410,OOO - P300,OOO) 110,000 Correct cash balance P1,430,000 PROBLEM 1-7 In connection with your audit of the financial statements of ONOR COMPANY for the year ended December 31, 2018, you gathered the following information. 1. The company maintains its current account with Tsunami Bank. The bank statement on December 31, 2018, showed a balance of P638,340. Your audit of the companys account with Tsunami Bank disclosed the following: • A check for P22,500 received from a customer whose account is current had been deposited and then returned by the bank on December 28, 2018. No entry was made for the return of this check. The customer replaced the check on January 15, 2019. • A check for P5,720 was cleared by the bank as P7,520. The bank made the correction on January 2, 2019. • A check for P3,500 representing payment of an employee advance was received and deposited on December 27, 2018, but was not recorded until January 3, 2019. • Postdated checks totaling P67,300 were included in the deposits in transit. These represent collections of current accounts receivable from customers. The checks were actually deposited on January 5, 2019. • Various debit memos for drafts purchased for payment of importation of equipment totaling P230,000 were not yet recorded. These purchases were previously set up as accounts payable. Said equipment arrived in December 2018. • Interest earned on the bank balance for the 4th quarter of 2018, amounting to P 1,950 was not recorded. • Bank service charges totaling P 1,260 were not recorded. • Deposit in transit and outstanding checks at December 31, 2018, totaled P 136,250 and P276,380, respectively. 2. Various expenses from the companys imprest petty cash fund dated December 2018, totaled P 16,250, while those dated January 2019, amounted to P5,903. Another disbursement from the fund dated December 2018 was a cash advance to an employee amounting to P3,500. A replenishment of the petty cash fund was made on January 8, 2019 3. The companys trial balance on December 31, 2018, includes the following accounts: Cash in bank - Tsunami Bank P 748,320 Cash in bank - Earthquake Bank (restricted account for plant expansion, expected to be disbursed in 2019) 700,000 Petty cash fund 30,000 Time deposit, placed December 20, 2018, and due March 20, 2019 1,000,000

Money market placement - Prudential Bank 4,000,000 1. What is the adjusted petty cash fund balance on December 31, 2018? A.P4,347 C. P30,OOO B.P1O,250 D. P24,097

2. The petty cash shortage on December C. P3ßOO31, 2018, is A.P0 C. P3,500 B.P5,903 D. P4,347 3. What is the adjusted Cash in bank—Tsunami Bank balance on December 31, 2018? A.P500,010 C. P432,710 B.P748,320 D. P429,110 4. The entry to adjust the Cash in bank - Tsunami Bank account should include a debit to A.Accounts receivable for P89,800. B. Accounts receivable for P86,300. C. Accounts payable for P228,200. D Interest expense for P1,950. 5. The December 31, 2018, statement of financial position should show "Cash and cash equivalents" at A. P 6,142,960 C. P4,442,960 B. P5,439,360 D. P5,442,960 SOLUTION 1-7 1. Petty cash fund per trial balance Various expenses dated December 2018 Employee cash advance Adjusted petty cash fund balance Answer: B

P30,OOO (16,250) (3,500) P10,250

2. petty cash shortage cannot be determined because of insufficient information. Answer: A 3. Unadjusted balances NSF check Bank error (P7,520 -- P5,720) Unrecorded cash receipt Postdated checks Deposits in transit (P136,250 — P67,300) Bank debit memos Interest earned Bank service charges Outstanding checks Adjusted balances Answer: C 4.Accounts receivable (P22,500 + P67,300) Accounts payable Bank service charges Cash in bank — Tsunami Bank

Book P748,320 (22,500)

Bank P638,340 1,800

3,500 (67,300) 68,950 (230,000) 1,950 (1,260) _______ P432,710

(276,380) P432,710

89,800 230,000 1,260 315,610

Advances to employees Interest income Answer: A

3,500 1,950

5. Cash in bank — Tsunami Bank Petty cash fund Time deposit Money market placement Cash and cash equivalents Answer: D

P432,710 10,250 1,000,000 4,000,000 P5,442,960

PROBLEM 1-8 The auditor for SAMANTHA, INC. examined the petty cash fund immediately after the close of business, July 31, 2018, the end of the company's natural business year. The petty cash custodian presented the following during the count: Currency Petty cash vouchers 420 Postage Office supplies expense Transportation expense Computer repairs Advances to office staff A check drawn by Samantha, Inc., payable to the petty cash custodian

PI,650

Postage stamps An employee's check, returned by bank, marked NSF An envelope containing currency of P 1,890 for a gift for a retiring employee

300 1,000

420 900 340 800 1,500 7,200

1,890 P16,000 The general ledger shows an imprest petty cash fund balance of P16,OOO. 1. How much is the petty cash shortage or overage? A. P2,190 overage C. P 1,890 shortage B. P2,190 shortage D. P 1,890 overage 2. What is the adjusted balance of the petty cash fund at July 3 1' 2018? A. PIO,740 C. P7,200 B.P3,540 D. P8,850 Solution 1-8 1. Currency

PI,650

Petty cash vouchers (P420 + P900 + P340 + P800 + PI,500) 3,960 Replenishment check 7,200 Employee's NSF check 1,000 Petty cash accounted 13,810 Petty cash fund per ledger (custodian's accountability) 16,000 Petty cash shortage P2,190 Answer: B 2 .Currency PI,650 Replenishment check 7,200 Adjusted petty cash balance P8,850 Answer: D Problem 1-9 Petty Cash Fund On January 1, TANYA CO. establishes a petty cash account and designates Orly Reyes as petty cash custodian. The original amount included in the petty cash fund is P 10,000. The following disbursements are made from the fund: Office supplies P3,460 Postage 2,240 Entertainment 840 The balance in the petty cash box is P3,200. 1. The person responsible, at all times, for the amount of the petty cash fund is the A. Chairman of the Board of Directors B. President of the company C. Petty cash custodian D. General cashier 2. The following are appropriate procedures for controlling the petty cash fund, except A. To monitor variations in different types of expenditures, the petty cash custodian files petty cash vouchers by category of expenditure after replenishing the fund. B To replenish the fund, the general cashier issues a company check to the petty cash custodian, rather than cash. C. To determine that the fund is being accounted for satisfactorily, surprise counts of the fund are made from time to time by the internal auditor or other responsible official. D. Each individual to whom petty cash is paid is required to present signed receipts to the petty cash custodian. 3. The entry to replenish the fund is A.. Office supplies expense 3,460 Postage expense 2,240 Entertainment expense 840 Cash 6,540 B.Office supplies expense 3,460 Postage expense 2,240 Entertainment expense 840 Cash over and short 260 Petty cash 6,800 C. Office supplies expense 3,460

Postage expense Entertainment expense Cash over and short Cash

2,240 840 260 6,800

D .Office supplies expense 3,460 Postage expense 2,240 Entertainment expense 840 Petty cash 6,540 , 4. The objective of establishing a petty cash fund is to A. Cash checks for employees B. Account for all cash receipts and disbursements C. Account for cash sales D. Facilitate payment of small, miscellaneous items 5. What is the effect of not replenishing the petty cash at year-end and not making the appropriate adjusting entry? A. A detailed audit is essential B. The petty cash custodian should turn over the petty cash to the general cashier C. Cash will be overstated and expenses understated D. Expenses will be overstated and cash will be understated SOLUTION 1-9 1.One individual, the petty cash custodian, should be responsible for the petty cash fund. Answer: C 2. The petty cashier should not have custody of paid petty cash vouchers to prevent their reuse. Answer: A 3. Office supplies expense 3,460 Postage expense 2,240 Entertainment expense 840 Cash over and short 260 Cash 6,800 Conmputation Of cash shortage: Curreny and coins P3,200 Petty cash vouchers (P3,460 + p2,240 + P840) 6,540 Petty cash accounted 9,740 Petty cash fund per ledger 10,000 Shortage P 260 Answer: C 4. Facilitate payment of small, miscellaneous items. Answer: D 3. Cash will be overstated and expenses understated. Answer: C

PROBLEM 1-10 Count of Petty Cash Fund and Undeposited Collections In connection with your audit of the financial statements of BENJAMIN CORP. for the year ended December 31, 2018, you conducted a .surprise count of the company's petty cash fund and undeposited collections at 8:20 a.m. on January 3, 2019. Your count disclosed the following: Bills and coins PIOO.OO 5 pieces Bills Coins P100.00 5 pieces 5.00 18 pieces 50.00 40 pieces 1.00 206 pieces 20.00 48 pieces 0.25 32 pieces Postage stamps (unused)-P365 Checks Date Payee Maker Amount Dec. 30 Cash Custodian P 1,200 Dec. 30 Benjamin Corp SLV, Inc. 14,000 Dec. 31 Benjamin Corp. Mario Lansang, sales manager 1,680 Dec. 31 Benjamin Corp. MSU corp. 17,800 Dec. 31 Benjamin Corp. Ateneo, Inc. 8,300 Dec. 31 Taiwan Corp. Benjamin Corp. 27,000 Unreimbursed vouchers Date payee Description Amount Dec. 23 Mario Lansang, Advance for trip to P20,OOO sales manager Tagaytay City 28 Central Post Office Postage stamps 1,620 29 Messengers Transportation 150 29 Byte, Inc. Cömputer repair 800 Other itemsfound inside the cash box: 1. Unclaimed pay envelope of Juan MacDonut. Indicated on the pay slip is his net salary of P 7,500. Your inquiry revealed that Juan's salary is mingled with the petty cash fund. 2. The sales manager's liquidation report for his Tagaytay City trip. Cash advance received on Dec. 23 P20,OOO Less: Hotel accommodation, meals, etc. P 16,000 Bus fare for two 1,200 Cash given to Pablo, salesman 1.000 18,200 Balance P1,800 Accounted for as follows: Cash returned by Pablo to the sales manager Personal check of the sales manager Total Additional information:

P 120 1.680 P1,800

1. The custodian is not authorized to cash checks. 2. The last official receipt included in the deposit on December 30 is No. 4351 and the last official receipt issued for the current year is No. 4355. The following official receipts are all dated Decemb 31, 2018. OR No. Amount. Form of Payment 4352 P13,600 Cash 4353 17,800 Check 4354 3,600 Cash 4355 8,300 Check 3. The petty cash balance per general ledger is P25,000. The last replenishment of the fund was made on December 22, 2018. 1. What is the amount of shortage due from the sales manager? A P240 C P120 B. PI,800 D. PO 2. What is the amount of undeposited collections on December 31, A. P44,300 C. P57,300 B. P84,300 D. P41,OOO December 31, 2018, should include a net A. P17,320 C. P18,200 B. P18,320 D. P18,080 4. The cash count should include total checks of A. P69,980 C P41,780 B. P42,980 D. P41,300 5. What is the total cash shortage? A. P22,166 c. P22,406 B. P8,166 D. P20,486 SOLUTION 1-10 1. Cash advance Less: Actual cash disbursed Hotel, meals, etc. Bus fare Pablo (PI,OOO - P120) Cash that should be returned Cash actually returned Shortage due from the sales manager Answer: A 2. Collections per OR nos. 4352 – 4355 Unreceipted collections Total undeposited collections Answer: C 3. Travel expenses (P16,OOO + PI,200 + 880) Answer: D 4. Total checks Answer: B

P20,OOO P16,OOO 1,200 880

18,080 1,920 1,680 p 240 P43,300 14 000 P57.300 P18,080 P42,980

5.Total cash shortage Answer: A

P22,166

Benjamin Corp. CASH COUNT SHEET January 3, 2019 — 8:20 a.m. Bills and coins: Denomination Quantity P100.00 5 50.00 40 20.00 48 5.00 18 1.00 206 0.25 32 Checks: Date Maker Dec. 30 Custodian Dec. 30 SLV, Inc. Dec. 31 Mario Lansang Dec. 31 MSU Corp. Dec. 31 Ateneo, Inc

Amount P500 2,000 960 90 206 8 Amount P1,200 14,000 1,680 17,800 8,300

Unreimbursed vouchers: Date Account Dec. 23 Advances Dec. 28 Postage Dec. 29 Transportation Dec. 29 Repairs Total cash accounted Less: Accountabilities Petty cash Collections (per official receipts) Unclaimed salary Excess travel advance Unreceipted collection from SLV, Inc CASH SHORTAGE

1. Cash

Amount P20,ooo 1,620 150 800

P25,OOO 43,300 7,500 1,680 14,000

Total

P3,764

42,980

22,570 P69,314

91,480 (P22,166)

Benjamin Corp. ADJUSTING JOURNAL ENTRIES December 31, 2018 14,000

Accounts receivable 2. Advances to officers and employees Postage expense Transportation expense

14,000 20,000 1,620 150

Repairs expense 800 Petty cash fund 22,570 3. Unused postage 365 Postage expense 365 4. Cash 27,000 Accounts payable 27,000 5. Cash 7,500 Salaries payable 7,500 6. Receivable from custodian 22,166 Cash 22,166 7. Travel expenses (P16,OOO + PI,200 + P880) 18,080 Petty cash fund 1,680 Advances to officers and employees 19,760 PROBLEM 1-1 1 Petty Cash Fund; Bank Reconciliation Anying Velasco is reviewing the cash accounting for ABX, Inc. vAnying's review will focus on the petty cash fund account and the bank reconciliation for the month ended May 31, 2018. She has collected the following information from ABX's bookkeeper for this task. Petty Cash Fund 1. The petty cash fund was established on May 2, 2018, in the amount of PI 0,000. 2. Expenditures from the fund by the custodian as of May 31, 2010, were evidenced by approved petty cash vouchers for the following: Various office supplies P3,920 IOU from employees 1,200 Shipping charges 2,298 Miscellaneous expense 1,526 On May 31, 2018, the petty cash fund was replenished and increased to P12,000; currency and coins in the fund at that time totaled P756. Bank Reconciliation Shore Bank Bank Statement Disbursements Receipts Balance Balance, May 1, 2018 P350,760 Deposits P1,120,000 Note payment direct from customer (interest of PI,200) 37,200 Checks cleared during May P1,246,000 Bank service charges 1,080 Balance, May 31, 2018 260,880 ABX, Inc.'s Cash Account Balance, May 1, 2018 Deposits during May 2018 Checks written during May 2018

P 354,000 1,240,000 1,273,400

Deposits in transit are determined to be P 120,000, and checks outstanding at May 31 total P34,000. Cash on hand (besides petty cash) at May 31, 2018, is P9,840. I. What is the amount of petty cash shortage? A. P2300 C. P300 B. P11,244 D. PO 2. The journal entry to record the replenishment of, and increase in the petty cash fund includes a credit to A. Cash of P10,944 B. Cash ofP11,244 C. Petty cash fund of P 10,944 D. Petty cash fund of PI 1,244 3. What amount of cash should be reported in the May 31, 2018, statement of financial position? A. P368,720 C. P368,420 B. P356,720 D.P358,880 SOLUTION 1-1 1 1. Coins and currency P 756 Fund disbursements (P3,920 + PI,200 + 2,298 + PI,526) 8,944 Petty cash accounted 9,700 Custodian's accountability 10 000 Petty cash shortage P300 Answer: C p 300 2. Petty cash fund 2,000 Office supplies 3,920 Accounts receivable-employees 1,200 Shipping expense 2,298 Miscellaneous expense 1,526 Cash short/over 300 Cash 11,244 Answer: B 3. Book Bank Unadjusted balances P320,600 P260,880 Deposit in transit 120,000 Cash on hand 9,840 Outstanding checks (34,000) Note collected by bank 37,200 Bank service charges (1,080) Adjusted balances p-356.72Q usa.2Q Adjusted cash balance (P356,720 + P12,OOO) P368,720 Answer: A PROBLEM 1-1 2 Bank Reconciliation; Computation of Cash Balance Presented below are a series of unrelated situations. Answer the question at the end of each situation.

1. The accountant of NARCISA CO. provided the following data in reconciling the April 30 cash in bank balance: Balance per bank, April 30 P130,350 Balance per books, April 30 85,000 Bank service charge 2,000 Deposits in transit 49,000 Outstanding checks 17,650 Note collected by bank including P 11,200 interest (Narcisa Co. not yet informed) 136,000 Check drawn by XYZ Co. erroneously charged by bank to Narcisa's account 54,600 A transposition error was made in recording a sale and deposit in the sales journal and cash receipts journal in April. Correct amount P13,658 Recorded as P16,358 What is the adjusted cash balance on April 30? 2. The following information is included in EMIL CORPORATION's bank statement for the month of March: A customer's check has been marked "NSF" by the bank and returned Bank service charge for March

P13,OOO 1,200

In comparing the bank statement to the companys cash records, you found: Outstanding checks on March 31 P184,OOO Deposits made but are not yet shown in the April bank statement 14,000 The deposits in transit and outstanding checks have been correctly taken up in the companys books. You also found a customer's check for PI7,400 that had not yet been deposited and had not been recorded in Emil's books. Your client's books show a cash balance of P36,420. What is Emil Corporation's correct cash balance at March 31? 3. The following information pertains to a checking account of a company at June 30, 2018. Balance per bank statement P200,OO0 Interest earned for the second quarter 500 Outstanding checks 15,000 Customers' checks returned for insufficient funds 5,000 Deposit in transit 25,000 What is the cash balance per books at June 30, 2018?

4. A company is reconciling its bank statement with internal records. The cash balance per the company's books is P45,000. There are of bank charges not yet recorded, P7,500 of outstanding checks, PI 2,500 of deposits in transit, and P 15,000 of bank credits and collections not yet taken up in the company’s books. What is the cash balance per bank? 5. A company shows a cash balance of P 175,000 on its bank statement dated June 30. As of June 30, there are P55,COO of outstanding checks and P37,500 of deposits in transit. What is the adjusted cash balance on June 30? 6. The Cash account shows a balance of P 225,000 before reconciliation. The bank statement does not include a deposit of P 11,500 made on the last day of the month. The bank statement shows a collection by the bank of P4,700 and a customer's check for P 1,600 was returned because it was NSF. A customer*s check for P2,250 was recorded on the books as P 2,700, and a check written for P395 was recorded as P485. What should be the correct cash balance? 7. On July 5, 2018, EMILIA CORP. received its bank statement for the month ending June 30. The statement showed a P 209,500 balance while the cash account balance on June 30 was P35,000. In reconciling the balances, the auditor discovered that: 1. The June 30 collections of P 176,000 were recorded on the books but were not deposited until 'July. 2. The bank service charges for the month of June totaled P3,000. 3. A paid check for P24,30() was entered incorrectly in the cash payments journal as P34,200. What is the total outstanding checks at June 30, 2018? SOLUTION 1-12 1. Unadjusted balances Bank service charge Deposits in transit Outstanding checks Collection of note Erroneous bank debit Transposition error (P16,358 - P13,658) Adjusted balances 2. Balance per books Unrecorded and undeposited customer's check Bank service charge

Book P 85,000 (2,000)

Bank

49,000 (17,650) 136,000 (2,700) P216,300

54,600 _______ P216,300 P 36,420 17,400 (1,200)

NSF check Adjusted cash balance

(13,000) P 39,620

3. Balance per bank statement

200,000

Outstanding checks Deposit in transit Interest earned NSF checks Balance per books at June 30, 2018

(15,000) 25,000 (500) 5,000 P214,500

4. Balance per books Bank charges Outstanding checks Deposits in transit Bank credits and collections Balance per bank

P45,000 (5,000) 7,500 (12,500) 15,000 P50,000

5. Balance per bank statement Outstanding checks Deposits in transit Adjusted cash balance 6. Balance per books Bank collection Customer's NSF check Overstatement of cash receipt (P2,700 — P2,250) Overstatement of cash disbursement (P485 — P395) Adjusted cash balance

P175,OOO (55,000) 37,500 P157,500 P225,OOO 4,700 (1,600) (450) 90 P227,740

7. Balance per books, June 30, 2018 Bank service charges Overstatement of disbursement (P34,200 — P24,300) Adjusted cash balance

35,000 (3,000) 9,900 P41,900

Balance per bank, June 30, 2018 Add: Undeposited collections Total Less: Adjusted cash balance Outstanding checks, June 30, 2018

209,500 176,000 385,500 41,900 P343,600

Problem 1-13 Bank Reconciliation The bank statement for the current account of IAN Co. showed a December 31, 2018, balance of P585,284. Information that might be useful in preparing a bank reconciliation is as follows: a) Outstanding checks were P52,810.

b) The December 31, 2018, cash receipts of P23,000 were not deposited in the bank until January 2, 2019. c) recorded One check by written the bank in but payment was recorded of rent by P8,940 Ian Co. was as a correctlyP9,840 disbursement. d) In accordance with prior authorization, the bank withdrew P18,OOO directly from the current account as payment on a mortgage note payable. The interest portion of that payment was p14,OOO. Ian Co. has made no entry to record the automatic payment. e) Bank service charges of P 740 were listed on the bank statement. f) A deposit of P35,000 was recorded by the bank on December 12, but it did not belong to Ian Co. g) The bank statement included a charge of P 3,400 for a notsufficient-fund check. The company will seek payment from the customer. h) Ian Co. maintains an P8,000 petty cash fund that was appropriately reimbursed at the end of December. i) According to instructions from Ian Co. on December 301 the bank withdrew P40,000 from the account and purchased treasury bills for Ian Co. The company recorded the transaction in its books on December 31 when it received notice from the bank. Half of the treasury bills mature in three months and the other half in six months. 1. What is the cash in bank balance per books on December 31, 2018? A. P549,714 C. P534,914 B. P543,514 D. P541,714 2. What is the adjusted cash in bank balance on December 31, 2018? A. P520,474 C. P518,674 B. P527,274 D. P520,154 3. What amount of cash and cash equivalents should be shown under current assets on December 31, 2018? A. P928,474 C. P720,474 B. P728,474 D. P735,274 SOLUTION 1-1 3 1. Balance per bank statement P585,284 Outstanding checks (52,810) Undeposited collections 23,000 Error in recording rent check (P9,840 -- P8,940) (900) Automatic mortgage payment 18,000 Bank service charges 740 Bank error — deposit incorrectly credited to Ian Co. (35,000) NSF check 3,400 Balance per books P541,714 Answer: D 2. Book Bank Unadjusted balances P541,714 P585,284 Outstanding checks (52,810) Undeposited collections 23,000 Error in recording rent check 900 Automatic mortgage payment (18,000)

Bank service charges (740) Bank error — deposit incorrectly credited to Ian Co. account (35,000) NSF check (3,400) Adjusted balances P520,474 P520,474 Answer: A 3. Current account balance P520,474 Petty cash 8,000 Treasury bills (P400,OOO x 1/2) 200,000 Total cash and cash equivalents P728,474 Answer: B PROBLEM 1-14 Bank Reconciliation: Unadjusted to Adjusted Balances Format The following data were taken from GARAY's check register for the month of April. Garays bank reconciliation for March showed one outstanding check, check No. 178 for P2,150 (written on March 20), and one deposit in transit for P4,350 (made on March 31). Date 2018 April 1 1 1 4 27 29

Item Beginning Balance Deposit Check No. 179 Check No. 180 Deposit Check No. 181

Checks

Deposits

250 250 10,673

26,167

11,774 13,217

The following is from Garay's bank statement for April: Date Item Checks Deposits 2018 April 1 Beginning Balance 3 Check No. 179 250 3 Deposit 4,350 5 Check No. 180 10,673 5 Automatic loan 8,150 5 Deposit 26,417 20 NSF check 1,000 20 Service charge 600 30 Interest 82 Assume that any errors or discrepancies you find are Garay's, not the bank's. What is the adjusted cash balance as of April 30? A. P26,833 B. P26,838

C. P30,426 D. P26,872

Balance 6,150 32,317 32,567 21,898 33,672 20,490

Balance 3.950 3,700 8,050 (2,623) 5,527 31,944 30,944 30,344 30,426

SOLUTION 1-14 Book P20,490

Unadjusted balances Outstanding checks: Check no. 178 P2,150 Check no. 181 13,217 Deposit in transit Error in recording deposit (P26,417 - P26,167) 250 Automatic loan 8,150 Interest 82 NSF check (1,000) Bank service charge 600) Arithmetic error for: Check no. 179 (500) Check no. 180 (P21,898- P21,894) (4) Check no. 181 (35) Adjusted balance P26,833 Answer: A PROBLEM 1-15 Reconciliation: Unadjusted to Adjusted Balances Format The following information pertains to FLINT CORP.: Flint Corp. BANK RECONCILIATION November 30, 2018 Balance per bank statement P435,OOO Less: Outstanding checks No. 4321 P 6,000 4329 15,000 4340 1,700 4341 4,675 27,375 P407,625 Add: Deposit in transit 16,200 Balance per books P423,825

Bank P30,426

(15,367) 11,774

________ P26,833

CHECK REGISTER December 2018 Vouchers Date Dec.

1 3 7 12

Payee San Beda, Inc. Miriam Corp. UE Enterprises PSBA corp.

No. 4342 4343 4344 4345

Payable P 10,000 4,200 3,755 12,000

Discount P500 120

Cash P 9,500 4,200 3,755 11,880

15 16 18 21 22 28

Payroll BU, Inc. New Era Co. UST, Inc. Petty cash fund Payroll

4346 4347 4348 4349 4350 4351

96,000 6,300 14,200 7,000 10,000 98.000 P261.455 BANK STATEMENT

142 _ -__ P762

BANKABLE BANK PERIOD: NOVEMBER 30, 2018 - DECEMBER 31, 2018 No.: 001-43-44 Check Date Description Number Debit Credit Balance last statement Dec. 1 Cash deposit P16,200 1 Check issued 4329 P15,OOO 4 Check issued 4342 9,500 4 Check issued 4341 4.675 5 Check deposit 49,000 6 Check issued 4343 4,200 8 Check deposit 14,000 10 Check issued 4344 3,755 15 Encashment 4346 96,000 22 Encashment 4350 10,000 28 Encashment 4351 98,000 29 Debit memo service charge 1,000 29 Credit memo – interest 1,550 Deposits in transit at December 31 totaled P49,OOO. 1. What is the total book receipts for December? A. P113,550 C. P63,OOO B. P80,750 D. 112,OOO 2. What is the cash balance per books on December 31, 2018? A. P275,132 C. P291,332 B. P226,132 D. P274,370 3. What is the total outstanding checks on December 31, 2018? A. P68,313 C. P46,938 B. P39,238 D. P40,938 4. What is the adjusted cash balance on November 30, 2018? A. P446,375 C. P423,825 B. P417,825 D. P435,OOO 5. What is the adjusted cash balance on December 31, 2018? A. P281,682 C. P226,682 B. P275,682 D. P274,920

96,000 6,300 14,058 7,000 10,000 98.000 P260.693

Balance P435,OOO 451,200 436,200 426,700 422,025 471,025 466,825 480,825 477,070 381,070 371,070 273,070 272,070 273,620

SOLUTION 1-15 1. Dec. 5 deposit P49,OOO Dec. 8 deposit 14,000 Dec. 31 deposit in transit 49,000 Total collections/book receipts P 112,000 Answer: D 2. Cash balance, November 30 P423,825 Add: December receipts (see no. 1) 112,000 Total 535,825 Less: Disbursements per check register 260,693 Cash balance, December 31 P275,132 Answer: A 3. Outstanding checks, December 31: Check no. 4321 P 6,000 4340 1,700 4345 11,880 4347 6,300 4348 14,058 4349 7,000 Total P46,938 Answer: C 4. Adjusted cash balance, Nov. 30, 2018 P423,825 The balance per books as determined •and as shown on the November 30 reconciliation is also the adjusted cash balance on that date. Notice that there are no book reconciling items in November. Answer: C 6. Book Bank Unadjusted balances Bank P275,132 P273,620 Deposits in transit 49,000 Outstanding checks (46,938) Service charge (1,000) Interest 1,550 _______ Adjusted balances P275,682 P275,682 Problem 1-16 Bank Reconciliation: Unadjusted to Adjusted Balances Format EDGARDO CO. was organized on January 2, 2018. The following items are from the companys trial balance on December'31, 2018. Ordinary share capital 1,500,000 Share premium 150,000 Merchandise inventory 69,000 Land 1,000,000 Building 1,400,000

Furniture and fixtures Accounts receivable Accounts payable Notes payable-bank Sales Operating expenses (including depreciation of P400,OOO) Additional information is as follows: 1. Deposits in transit, December 31 2. Service charge 3. Outstanding checks, December 31 4. Bank balance, December 31 5. Edgardo Co.'s mark up on sales is 30%

367,000 165,400 389,650 500,000 6,235,200 1,005,150 P384,660 2,000 475,000 892,000

1. What is the total collections from sales? A. P6,114,967 C. P6,235,200 B.P4,119,240 D. P6,069,800 2. What is the total payments for merchandise purchases? A. P3,905,990 C. P4,043,990 B. P4,649,140 D. P5,914,550 3. What is the total cash receipts per books? A. P7,819,800 C. P8,219,800 B. P8,169,800 D. P8,069,800 4. What is the total cash disbursements per books? A. P7,816,140 C. P8,021,290 B. P7,416,140 D. P7,278,140 5. What is the cash balance per books on December 31? A.P653,660 C. P1,203,660 B. P803,660 D.P707,060 6. What is the adjusted cash balance on December 31? A. P801,660 B. P651,660 Solution 1-16 1.Sales Less: Accounts Receivable Collections from customers Answer: D 2.Cost of sales (P6,235,200 x 70%) Add: Merchandise inventory, December 31 Goods available for sale/Purchases (there is no beginning inventory) Less: Accounts payable, December 31 Payments for purchases Answer: C

C. P1,201,660 D. P803,660 P6,235,200 165,400 P6,069,800 P4,364,640 69,000 4,433,640 389,650 P4,043,990

3. Issue price of ordinary shares (1,500,000 + P150,OOO) Notes payable — bank Collections Total cash receipts per books Answer: C

P1,650,000 500,000 6,069,800 P8,219,800

4. Land Building Furniture and fixtures Operating expenses paid (PI,005,150 p400,000) Payments for purchases Total cash disbursements per books Answer: C

P1,000,000 1,400,000 367,000 605,150 4,043,990 P7,416,140

5. Cash receipts per books (see no. 3) Cash disbursements per books (see no. 4) Cash balance per books, December 31 Answer: B 6. Unadjusted balances Deposits in transit Service charge Outstanding checks Adjusted balances Answer: A

P8,219,800 (7,416,140) P 803,660

Book P803,660

Bank P892,OOO 384,660

(2,000) ________ P801,660

(475,000) P801,660

PROBLEM 1-1 7 Computation of Cash Receipts and Disbursements In connection with your audit of the cash account ofANNIE CORP., you gathered the following information. a. Balance per bank, December 1, 2018 b. Total bank receipts (credits) in December c. Balance per bank, December 31, 2018 d. Outstanding checks, Nov. 30, 2018 (including PI 2,000 paid by bank in December) e. Outstanding checks, December 31, 2018 (including checks issued in November) f. Deposit in transit, November 30, 2018 g. A customer's check received on December 4, 2018, was returned by bank on December 7 marked "NSF." It was redeposited on December 8, 2018.

P145,OOO 346,000 114,500 67,000 94,162 39,458

The only entry made was to take up the collection on December 4, 2018.

SOLUTION 1-1 7 1. Bank receipts (credits) in December Less: Deposit in transit, November 30 NSF check redeposited in December Book receipts (debits) in December Answer: A 2. Bank balance, December 1, 2018 Add: Bank receipts in December Total Less: Bank balance, December 31, 2018 Bank disbursements in December Answer: B 3. Bank disbursements in December Add: Bookdisbursements in December but not in December bank disbursements: Checks issued in December, outstanding at December 31 Outstanding checks, Dec. 31 Less: Checks issued in Nov., still outstanding at Dec. 31 (P67,OOO - P12,OOO) Total Less: Bankdisbursements in December but not in book disbursements in December; November outstanding checks paid by bank in December NSF check Book disbursements (credits) in December Alternative computation: Bank disbursements in December Add: Outstanding checks, December 31 Total Less: Outstanding checks, Nov. 30 NSF check Book disbursements in December Answer: D

11,143

P346,OOO P39,458 11,143

50,601 P295,399 P145,OOO 346 000 491,000 114,500 P376,500 P376,500

P94, 162 55 000

P12,OOO 11,143

39,162 415,662

23,143 P392,519

P376,500 94,162 P470,662 P67,000 11,143

78,143 P392,519

PROBLEM 1-1 8 Petty Cash Fund; Bank Reconciliation Your audit of the cash accöunt of JUNIE CORP. disclosed the following information:

1. Cash in bank balance per books, Dec. 31, 2018 2. Bank statement balance, Dec. 31, 2018 3. Note collected by bank in December (Principal plus interest of P800, less collection fee of P 200) 4. Debit memo for a checkbook 5. Deposits in transit, Dec. 31, 2018 6. Transposition error made by bank in recording deposit of December 28: Correct amount Recorded as

P35,OOO 60,000 27,600 ? 15,200

P45,OOO 54 000

9,000

7. Erroneous bank debit 26,700 8. Included in the Cash in bank account is petty cash fund of P 10,000. Your count on December 31, 2018, revealed the following fund items: Currency and coins P3,OOO Supplies 2,400 Transportation 100 IOUs 4 000 9,500 9. Erroneous bank credit 11,000 10. Outstanding checks (including a certified check of PIO,OOO) 39,400 1. What is the principal amount of the note collected by bank in December? A. P27,600 C. P28,200 B. P26,800 D P27,000 2. What is the adjusted cash in bank balance at December 31, 2018? A. P52,500 C. P53,OOO B. P52,700 D. P51,900 3. The cost of checkbook is A. P600 C. PO B. P300 D. PIOO 4. What is the amount of petty cash shortage at December 31, 2018? A. P400 C. PIOO B. P500 D. P O 5. What is the adjusted petty cash balance? A. P9,500 C, P3,OOO B. P3,500 D. PIO,OOO Solution 1-18

1.Principal (SQUEEZE) Interest Collection fee Proceeds credited by bank Answer: A 3. B

P27,OOO 800 (200) 27,600 Book

Bank

Unadjusted balances Note collected by bank Debit memo for a checkbook (SQUEEZE) Deposit in transit Transposition error in recording deposit P54,OOO - P45,OOO) Erroneous bank debit Petty cash fund Erroneous bank credit Outstanding checks, net of certified check (P39,400 - PIO,OOO) Adjusted balances Answer: A

P35,OOO 27,600 (100)

P60,OOO

15,200 (9,000) 26,700 (10,000) (11,000) ______ P52,500

3.Cost of checkbook (see no. 2) Answer: D 4. petty cash fund per ledger Petty cash accounted Petty cash shortage Answer: B 5.Adjusted petty cash balance currency & coins Answer: C

(29,400) P52,500

100 P1O,OOO 9500 500 P3,000

PROBLEM 1-1 9 Bank Reconciliation The cash receipts and the cash payments of LIEZEL COMPANY for April 2018 follow: Cash Receipts (CR) Cash Payment (CP) Date April 2 8 10 16 22 29 30 Total

Cash Debit P208,700 20,350 27,950 109,350 92,700 53,000 16,850 P528,900

Check No. 4113 4114 4115 4116 4117 4118 4119 4120 4121 4122 Total

Cash Credit P44,550 7,350 96,500 33,200 73,600 50,000 31.600 93,750 5,000 120,650 P546,200

The cash account of Liezel Company shows the following information at April 30, 2018: _______________________________CASH______________________________

Date April 1 30 30

Item Balance

Ref

Debit

Credit

CR 6 CP 11

528,900 546,200

Balance 95,550 624,450 73,250

Liezel Company received the following bank statement on April 30, 2018: Bank Statement for April 2018 Beginning balance Deposits and other Credits: April 1 P 16,300 4 208,700 9 20,350 12 27,950 17 109,350 22 68,400 BC 23 92 700 Checks and other Debits: April 7 P 44,550 13 69,500 14 45,150 US 15 7,350 18 33,200 21 10,950 EFT 26 73,600 30 50,000 30 1,000 sc Ending balance ______________ Explanation: EFT--- electronic funds transfer US---- unauthorized signature BC---- bank collection SC---- service charge

P 95,550 EFT

543,750

(335,300) P 304,000

Additional datafor the bank reconciliation include the following: a. The EFT deposit was a receipt of monthly rent. The EFT debit was a monthly insurance payment. b. The unauthorized signature check was received from Lester Soon. c. The P68,400 bank collection of a note receivable on April 22 included P9,250 interest revenue. d. The correct amount of check number 4115, a payment on account, is P69,500. (Liezel's accountant mistakenly recorded the check for P96,500.) 1. What is the amount of deposits in transit on April 30? A, P53,OOO C. P45,150 B. P69,850 D. P115,OOO 2. What is the amount of outstanding checks on April 30?

A. P241,OOO C. P286,150 B. P337,500 D D. P310,500 3. What is the amount of bank receipts in April? A. P543,750 C. P459,050 B. P527,450 D. P528,900 4. What is the amount of bank disbursements in April? A. P290,150 C. P289,150 B. P335,300 D. P316,150 5. What is the correct cash balance as of April 30? A. P132,850 C. P122,150 B. P87,700 D. P223,150 SOLUTION 1-19 1. Deposits in transit, April 30: April 29 collection per CR April 30 collection per CR Total Answer: B 2. Oustanding checks, April 30: Check no, 4119 Check no. 4120 Check no. 4121 Check no. 4122 Total Answer: A 3. Bank receipts in April (Total deposits and other credits) Answer: A 4. Bank disbursements in April (Total checks and other debits Answer: B 5.B ` Unadjusted balances, April 30 Deposits in transit Outstanding checks Error in check no. 4115 (P96,500 - P69,500) EFT -rent Bank collection Unauthorized signature check EFT – insurance Service charge Adjusted balances, April 30 Answer: A

P53,OOO 16,850 P69,850

P 31,600 83,750 5,000 120,650 241,000

P543,750 P335,300

Book P78,250

27,000 16,300 68,400 (45,150) (10,950) (1,000) P132,850

Bank P304,OOO 69,850 (241,000)

_________ P132,850

PROBLEM 1-20 Bank Reconciliation: Unadjusted to Adjusted Balances Format FERMIN COMPANY's check register shows the following entries for the month of December: Date Checks Deposits Balance 2018 Dec. 1 Beginning Balance P 89,300 5 Deposit P 65,000 154,300 7 Check #14344 P 32,500 120,800 11 Check # 14345 14,000 106,800 26 Deposit 49,000 155,800 29 Check #14346 8,600 147,200 Fermin's bank reconciliation for November revealed one outstanding check (No. 14343) for P 12,000 (written on November 28)) and one deposit in transit for P5,550 (made on November 29). The following is from Fermin's bank statement for December 2018: Date Checks Deposits Balance 2018 Dec. 1 Beginning Balance P950,750 1 Deposit P 5,550 101,300 4 Check No. 14344 P32,500 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 Assume that all errors were committed by Fermin Company, not the bank. Based on the preceding information, determine the following: 1. Adjusted cash balance on November 30 A, P89,300 C. P102,200 B. P95,750 D. P101,300 2. Outstanding checks on December 31 A. P46,500 C. P8,600 B. P45,500 D. P20,600 3. Deposit in transit on December 31 A. P52,600 C. P5,550 B. P49,000 D. P43,450 4. Total bank receipts in December A. P114,000 C. P565,150 B. P119,550 D.P 61,550 5. Adjusted cash balance on December 31 A. P663,800 C. P748,200 B. P634,200 D. P597,200

Solution 1-20 1. Balance per bank, Nov. 30 P95,750 Outstanding in check (no. 14343) (12,000) Deposit transit 5,550 Adjusted bank balance, Nov. 30 P89,300 Answer: A Since there are no book reconciling items in November, the adjusted bank balance agrees with the cash in bank balance per ledger on November 30. 2. Outstanding checks on December 31: Check no. 14343 Check no. 14646 Total Answer: D 3. Deposit in transit on December 31: Dec. 26 collection Answer: B 4. Total bank receipts in December

P12,OOO 8,600 P20,600

P49,000 P565,150

Answer: C The total bank receipts is the tota/ amount credited by the bank during the period.

5. Book Bank Unadjusted balances P147,200 P605,800 Deposit in transit 49,000 Outstanding checks (see no. 2) (20,600) Error in recording deposit (P65,OOO - P56,OOO) (9,000) Error in arithmetic for Check No. 14344 1,000 Loan proceeds 500,000 NSF check (7,600) Interest 3,600 Service charge (1,000) Adjusted balances P634,200 P634,200 Answer: B PROBLEM 1-2 1 Bank Reconciliation: Unadjusted to Adjusted Balances Format In connection with an audit, you are given the following bank reconciliation BANK RECONCILIATION December 31, 2018 Balance per ledger, December 31, 2018 P 34,350 Add: Collections received on the last day of

December and charged to "Cash in Bank" on books but not deposited Debit memo for customer's check returned unpaid (check is on hand but no entry has been Inade on the books) Debit memo for bank service charge for December

Deduct: Outstanding checks (see detailed list below) 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 Check for an account payable entered on books as P12,625 but drawn and paid by bank as P16,225 Computed balance Unlocated difference

4,000 1,000 P46,675

P18,625

8,000

3,600

Balance per bank (checked to confirmation) LIST OF OUTSTANDING CHECKS, Dec. 31, 2018 Check No. Amount 14344 14358 14367 14399 14401 14407

5,325

32,225 P14,450 36,600

P51,050

P 5,820 1,295 3,543 2,001 4,892 5,074 PI 8,625

1. What is the correct amount of outstanding checks on December 31? A. P18,625 C. P17,625 B. P22,625 D. P21,625

2. The journal entry to correct the outstanding checks should include a

A. Debit to Cash in bank of P4,000 B. Credit to Cash in bank ofP4,000 C. Debit to accounts payable of P4,000 D. No journal entry is necessary 3. The correct amount of "unlocated difference" is A. P32,600 C. P36,600 B. P35,600 D. P O

4. The Cash in bank to be shown on the company's December 31, 2018, statement of financial position is A. P34,750 C. P33,750 B. P37,350 D. P37,750 5. The journal entry to adjust the Cash in bank account as of December 31 should include a A. Debit to Cash in bank ofP8,000 B. Credit to Cash in bank ofP8,600 C. Net credit to Cash in bank of P600 D. Net debit to Cash in bank ofP600 SOLUTION 1-21 1. Outstanding checks, Dec. 31 (correct total of the list) pp.625 Answer: B 2. No journal entry is necessary. There is no information in the problem that will indicate that those included in the list of outstanding checks were not taken up properly on books. Answer: D 3. A correct reconciliation (see no. 4) shows that there is actually no "unlocated difference," Answer: D 4. Unadjusted balances Deposits in transit Customer's check returned Bank service charge Outstanding checks Credit memo for note collected Understatement of book disbursement Adjusted balances Answer: C 5. ADJUSTING JOURNAL ENTRIES December 31, 2018 a. Accounts receivable Cash in bank b. Bank service charges Cash in bank c. Cash in bank Notes receivable d. Accounts payable Cash in bank Debit to cash in bank Credit to cash in bank (P4,000 + PI,OOO + P3,600) Net credit to cash in bank Problem 1-22 Computation of Book Disbursements

Book P34,350

Bank P51,050 5,325

(4,000) (1,000) (22,625) 8,000 (3,600) P33,750

4,000 4,000 1,000 1,000 8,000 8,000 3,600 3,600 P8,OOO (8,600) (P600)

_______ P33,750

In connection with your audit of the MARCELO COMPANY at December 31, 2018, the following bank reconciliation was submitted to you by an employee of your client: Balance per bank P30,534 Deposits in transit 37, 856 P68,390 Outstanding checks 42 ,756 Balance per books P25,634 As part of your verification, you obtained the bank statement and canceled checks from the bank on January 15, 2019. According to the records of the company, checksissued from January 1 to January 15, 2019;amounted to P22,482. Checks returned by the bank on January 15, 2019, totaled P58,438. Of the checks outstanding on December 31, 2018, P9,600 were not returned by the bank with the January 15, 2019, bank statement; and of those issued, according to the records of the company, in January 2019, P7,200 were not returned by the bank. Based on the above data, calculate the disbursements per company records. 1. The difference between the disbursements per books as computed and as reported is A. P61,912 C. PIO,OOO B. P2,800 D. P29,874 2. Suggest three possible explanations for the difference between the disbursements per company as computed and as reported SOLUTION 1-22 1. Outstanding checks, January 15: From December or before From January Add: Disbursements per bank statement Total Less: Outstanding checks, December 31 Disbursements per books as computed Disbursements per books as computed Disbursements per books as reported Difference in disbursements Answer: C

P9,600 7 200

P16,800 58 438 75,238 42,756 P32,482 P32,482 22,482 P10,000

2. Three possible explanations for the above difference: correct. a. The bank disbursements (P58,438) may be overstated by PIO,OOO. Another company check for PIO,OOO may have been charged erroneously by the bank against the client's account. b. Tie December 31 outstanding checks may be understated by PIO,OOO. Since the bank reconciliation given in the problem was prepared by a company employee, there is no assurance that it is correct.

c. The client's employee may have failed to record check/s issued in January, thus, understating the book disbursements (P22,482). Problem 1-23 Bank Reconciliation: Unadjusted to Adjusted Balances Format In auditing the HECTOR COMPANY, you obtained the bank statement, canceled checks, and other memoranda which relate to the company’s bank account for December 2018. In reconciling the bank balance with that shown on the company's books, you observed the facts set forth below; (1) Balance per bank statement, Dec. 31, 2018 (2) Balance per books, Dec. 31, 2018 (3) Outstanding checks, Dec. 31, 2018 (4) Receipts of Dec. 31, 2018, deposited Jan. 2, 2019 (5) Service charge for November, per bank memo of Dec. 15, 2018 (6) Proceeds of bank loan, Dec, 15, 2018, discounted for 3 months at 18% per annum, omitted from company books (7) Deposit of Dec. 22,2018, omitted from Bank statement (8) Check of Milano company, returned on Dec. 21, 2018, for absence of counter-signature and redeposited with complete signature on Jan. 3, 2019, no entry on the books having been made for the return or redeposit (9) Error on bank statement in entering deposit of Dec. 18, 2018: Correct amount Entered in statement (10) Check No. 021261 of Yek Company, charged by bank in error to company's account (11) Proceeds of note of Harthur Co., collected by bank, Dec. 10, 2018, not entered in cash book (principal amount of P25,OOO plus interest of P 1,125 less collection fee) (12) Erroneous debit memo of Dec. 28, 2018, to charge companys account with settlement of bank loan which was paid by check no. 112170 on same date (13) Error on bank statement in entering deposit of Dec. 4, 2018:

P47,174 19,289 63,000 6,260 1,000

47,750 9,170

77,320

PI,600 160

1,440

13,600

25,625

5,000

Entered as P14,200.62 Correct amount 12,400.62 1,800 (14) Deposit of Bunso Co. of Dec. 2, credited in error to this company 3,500 1. What is the principal amount of the loan obtained from bank in December? A. P50,OOO C. P48,125 B. P47,750 D. P49,625 2. What amount of prepaid interest should on Hectors December 31, 2018, statement A. P2,250 C. P375 B. P0 D. P1,875 3. The amount of collection fee A. P625 C. P500 B. P1,625 D. P0 4. What is the adjusted Cash in bank balance as of December 31, 2018? A. P14,344 C. PI 7,944 B. P11,464 D. P9,344 5. The Cash in bank per ledger as of December 31, 2018, should be increased (decreased) by A. P4,945 C. P(4,945) B. P5,945 D. P(5,945) SOLUTION 1-23 1. Proceeds = Principal -Interest 47,750=P - (Px180/0 x 3/12) 47,750=P - 0.045P 47/750=0.955 P P= 47,750 + 0.955 P= P50,000 Answer: A 2. Prepaid interest, Dec.31 (2/250 x 2.5/3) Answer: D 3. Principal Interest income Maturity value Proceeds Answer: C 4. Unadjusted balances Outstanding checks Receipts of 12/31/18, deposited 1/02/19 Service charge for November Proceeds ofbank loan Deposit of 12/22/18, omitted from bank Statement Check of Milano Company, charged back Error in entering deposit of 12/18/18

PI ,875

Book P19,289

Bank P47,174 (63,000) 6,260

(1,000) 47,750 9,170 (77,320) 1,440

Check of Yek Company charged in error to Hector Company Proceeds of note of Harthur Co. Erroneous debit memo of 12/28/18, charged by bank in settlement of loan paid by check no. 112170 Error in entering deposit of 12/04/18 Deposit of Bunso Co., credited in error to Hector Company ADJUSTED BALANCES Answer: A 5. Adjusted Cash in bank balance (see no, 4) Cash in bank balance per ledger

13,600 25,625

5,000 (1,800) _________ P14,344

(3,500) P14,344

P14,344 19,289

Net credit adjustment— decrease P 4,945 Answer: C Problem 1-24 Bank Reconciliation You are auditing general cash for the DION COMPANY for the fiscal year ended July 31, 2018. The client has not prepared the July 31 bank reconciliation. After a brief discussion with the owner you agree to prepare the reconciliationj with assistance from one of Dion Company's clerks. You obtain the following information: General Bank Ledger Statement Beginning balance P 46,110 P57,530 Deposits 250,560 Cash receipts journal 254,560 Checks cleared (236,150) Cash disbursements journal (218,110) July bank service charge (870) Note paid directly (61,000) NSF check _________ (3,110) Ending balance P82,560 P6,960 June 30 Bank Reconciliation Information in General Ledger and Bank Statement Balance per bank P57,530 Deposits in transit 6,000 Outstanding checks 17,420 Balance per books 46,110 Additional information obtained is: I. Checks clearing that were outstanding on June 30 totaled P 16,920. 2. Checks clearing that were recorded in the July disbursements journal totaled P204,670.

3. A check for P 10,600 cleared the bank, but had not been recorded in the cash disbursements journal. It was for an acquisition of inventory. Dion uses the periodic inventory method. 4. A check for P3,960 was charged to Dion Company but had been written on a different company's bank account. 5. Deposits included P6,000 from June and P 244,560 for July. 6. The bank charged Dion Company's account for a not-sufficientfund check totaling P3,110. The credit manager concluded that the customer intentionally closed its account and the owner left the city The check was turned over to a collection .

7. A note for plus interest, was paid directly to the bank under an agreement signed four months ago. The note payable was recdrded at on Dion Company's books.ency. Based onfactsgiven, answer the following: 1. The checks outstanding on June C. 30 P13,940 amount to A. P9,980 C. P13,940 B.P10,830 D. P3,340 2. The deposits in transit on June 30 amount to A. P6,890 C. P6,OOO B. PIO,OOO D. P9,110 3. The adjusted cash bålance on July 31 is A. P6,980 c. 3,870 B. PIO,940 D. P3,020 4. Which of the following audit procedures would be used to verify the payment of note in July? A. Check the arithmetical accuracy of the July 31 reconciliation. B. Check for absence of note on July 31 bank confirmation. C. Trace payment to duplicate deposit slip. D. Obtain cutoff bank statement. 5. The auditor would perform the following procedures to verify the unrecorded check of P10,600, except A. Obtain cutoff bank statement. B. Examine checks retürned with July bank statement. C. Trace check number to absence in July cash disbursements journal and recording in August. D. Examine supporting documentation. SOLUTION 1-24 1. Outstanding checks, June 30 P 17,420 Add: Checks issued in July (P218,110 per cash disbursements journal + PIO,600 unrecorded check) 228,710 Total 246,130 Less: Checks paid by bank in July (236, 150 - 2,960 erroneous check charged by bank) 232, 190 Outstanding checks, July 31 P13,940 Answer: C Alternative computation: Checks outstanding on June 30 that did not clear in July (P17,420 - P16,920) P 500

Checks issued in July that did not clear in July (P218,110 - P204,670) Outstanding checks, July 31 2. Deposits in transit, June 30 Add: July deposits per cash receipts journal Total Less: Deposits credited by bank in July Deposits in transit, July 31 Answer: B 3. Unadjusted balances Outstanding checks (see no. 1) Deposits in transit (see no. 2) Bank service charge Unrecorded check Check erroneously charged to Dion NSF check Note payment (P58,000 principal + P3,000 interest) Adjusted balances Answer: A

13 440 P13,940 P 6,000 254 560 260,560 250,560 P10,000 Book

Bank

P82,560

P 6,960 (13,940) 10,000

(870) (10,600) 3,960 (3,110) (61,000) P6 ,980

______ P6 ,980

4. The following audit procedures would be performed to verify the note payment: 1. Examine cancelled check. 2.Recompute interest. 3. Check for absence of note on July 31 bank confirmation. Answer: B 5. The following audit procedures would be performed to verify the unrecorded check: 1. Examine check returned with July bank statement. 2. Trace number to absence in July cash disbursements journal and recording in August. 3. Examine supporting documentation. 4. Investigate why it was unrecorded. The cutoffbank statement WI/ no longer show the unrecorded check because it was already paid by the bank in July. Answer: A Problem 1-25 Proof of Cash: Unadjusted to Adjusted Balances Format The cash account of VELASCO COMPANY shows the following activities: Date Debit Credit Balance Nov. 30 Balance P115,OOO Dec. 2 November bank charges P 50 114,950 4 November bank credit for notes receivable collected P10,000 124,950

15 NSF check 20 Loan proceeds 21 December bank charges 31 Cash receipts book 31 Cash disbursements book

1,300 48,500 60 707,300 408,000 CASH BOOKS

RECEIPTS Date Dec. 1 2 3 4 5 8 9 10 11 12 15 16 17 18 19 22 23 23 23 26 28 28 29 29 29 Totals

Date Dec. 1

2 3 4 5

PAYMENTS OR No. 110-120 121-136 137-150 151-165 166-190 191-210 211-232 23 250 251-275 276-300 301-309 310-350 351-390 391-420 421 ·480 481-500 501-525 526-555 556-611 61 630 -

Check No. 792

802 804 EC

Amount Check NO. P 11,000 801 21, 300 802 20, 000 803 56, 000 804 39,000 805 66, 000 806 88, 000 807 77, 000 808 21 , 000 809 30, 000 810 55,000 811 8,000 812 19, 000 813 9, 000 814 17,000 816 21, 000 817 32, 000 818 819 820 74, 000 821 5 , 000 822 823 38, 000 824 825 _______826 P707,300 BANK STATEMENT Charges P 2, 500

3,000 3,000 81,000

Amount 8, 000 3,000 1,000 3,000 12,000 19,000 26,000 30,000 61,000 7,000 8,000 16,000 20,000 22,000 36,000 11,000 50,000 7,000 4,000 3,000 12,000 13,000 29,000 2,000 11,000 P408,000

Credits P 8,500

11,000 21,300 20,000 81,000

123,650 172,150 172,090 879,390 471,390

8 9 10 11 12 15

16 17 18 19 22 23 23 23 26 28 28 29 29 29 Totals

805 CM 16 799 DM 57 808 803 809 DM 61

813 CM 20 815 816 811 801 814 818 DM 112 821 CM 36 820

12,000 7,050 1,300 30,000 1,000 61,000 60

95,000 12,000 154,000 77,000 21,000 85,000 8,000

20,000 6,000 36,000 8,000 2,000 22,000 50,000 120 3,000 4,000 P353,030

19,000 48,500 47,000 32,000 74,000 5,000 12,000 ____P831,300

Additional information: a. DMS 61 and 112 are for service charges. b. EC is error corrected. c. DM 57 is for an NSF check. d. CM 20 is for loan proceeds, net of P 150 interest charges for 90 days. e. CM 16 iS for the correction of an erroneous November bank charge. f. CM 36 is for customers' notes collected by bank in December. g. Bank balance on December 31 is P592,270. 1. The total outstanding checks at November 30 should be A. P9,550 C. P13,050 B. P7,050 D. P15,550 2. The total outstanding checks at December 31 should be A. P147,OOO C. P153,OOO B. P162,550 D. P159,OOO 3. The deposit in transit at November 30 should be A. P8,500 C. P48,500 B. P19,500 D. P O 4. The deposit in transit at December 31 should be A. P44,OOO C. P46,500 B. PO D. P38,OOO 5. The adjusted book balance at November 30 should be

A. P125,OOO C. P115,OOO B. P124,950 D. P136,950 6. The adjusted bank receipts for the month of December should A. P763,800 C. P765,800 B. P773,800 D. P767,800 7. The adjusted book disbursements for the month of December should be A. P403,480 C. P415,480 B. P415,540. D. P409,480 8. The adjusted bank balance at December 31 should be A. P592,270 C. P558,270 B. P477,270 D. P483,270 Solution 1-25 1. OUTSTANDING CHECKS, NOVEMBER 30: check no. 792 799 Total Answer: A 2. OUTSTANDING CHECKS, DECEMBER 31: Check no. 806 807 810 812 817 819 822 823 824 825 826 Total Answer: C 3. Deposits in transit, November 30 Answer: A 4. Deposit in transit, November 30 (see no. 3) Add: Collections per cash receipts book Total Less: Deposits credited by bank: Bank receipts Correction of erroneous bank charge in December Correction of erroneous bank charge in November Loan proceeds

P2,500 7, 050 P9,550

P 19,000 26,000 7,000 16,000 11,000 7,000 12,000 13,000 29,000 2,000 11,000 P153,000

P8,500 P 8,500 707,300 715,800 P831,300 (81,000) (12,000) (48,500)

Note collected Deposit in transit, December 31 Answer: D

(12,000)

677,800 P 38,000

PROOF OF CASH December 1-31

Balances per bank Bank error corrected the same date Erroneous bank charge in November Deposits in transit: November 30 December 31 Outstanding checks: November 30 December 31 Adj. book balances

Balance Nov. 30 P114,OOO

Receipts P831,300 (81,000)

12,000

Balance November 30 P115,OOO

(81,000)

(12,000)

8,500

(9,550) _______ P124,950

Disbursements P353,030

Balance Dec. 31 P592,270

(8,500) 38,000

_________ P767,800

Receipts P765,800

Disbursements P409,410

38,000 (9,550) 153,000 P415,480 Balance Dec. 31 P471,390

Balances per books Bank service charges: November 30 (50) (50) December 31 120 (120) Notes collected by bank: November 30 10,000 (10,000) December 31 12,000 12,000 Unrecorded disburse ment — Check no. 815 _______ _______ 6 000 (6,000) Adj. bank balances P124,950 P767,800 P415,480 P477,270 5. Adjusted book balance, Nov. 30 P124,950 Answer: B 6. Adjusted bank receipts in December P767,800 Answer: D 7. Adjusted book disbursements in December P415,480 Answer: C 8. Adjusted bank balance, December 31 P477,270 Answer: B PROBLEM 1-26 Proof of Cash: Bank to Book Balances Format Shown below is the May 31, 2018, bank reconciliation prepared by your client's staff. Reconciliation May 31, 2018

(153,000) P477,270

Bank balance Add: Deposit in transit Total Less: Outstanding No, 640 P10,000 652 8,000 653 2,000 Adjusted bank balance Book balance Add: Proceeds of note receivable collected in May P70,OOO Deposit on May 31 not recorded on books until June 2,000 Total Less: Bank service charge Adjusted book balance June 30 3,000 DM The June 2018 bank statement is shown below: Pasig Bank Period covered: May 31, 2018 - June 30, 2018 Account No.: 0021261 Date Checks June 8,000 June 8 2,000 June 11 14,000 June 13 1,000 DM June 16 4,000 June 21 12,000 June 27 18,000 June 29 1,000 EC June 30 200 SV June 30 3,000 DM

P652,000 10,000 P662,000

20,000 P642,000 P570,800

72,000 P642,800 ____800 P642,000

Deposits 10,000 20,000 1,000 56,000 1,000

SV-Service Charges DM-Debit Memo EC - Error Corrected CM Credit Memo The paid checks accompanying this bank statement (all clearing in June) are the following: No. 652 P8,OOO No. 654 P14,OOO No. 657 P12,OOO No. 653 P2,OOO No. 655 P 4,000 No. 658 P18,OOO The check register reveals that the last check issued in June is No. 659 for P5,000 and that check no. 656 is for P2,600. Cash received for the period June 22 through June 30 of P70,000 was deposited in the bank on July 1.

The debit memos on June 13 and June 30 represent customers' NSF checks returned by the bank. The June 13 NSF check was immediately redeposited without entry. The June 30 NSF check was redeposited on July 1 without entry. 1. What is the total bank receipts in June? A. P87,OOO C. P77,OOO D. P78,OOO B. P88,OOO 2. What is the total bank disbursements in June? A. P59,200 `C. P58,200 D. P63, B. P58,OOO 3. What is the balance per bank statement on June 30, 2018? A. P676,800 C. P732,400 B. P627,200 D. P729,200 4. What is the total book receipts in June? A. P88,OOO C. P146,OOO B. P220,OOO D. P218,OOO 5. What is the total book disbursements in June? A. P53,OOO C. P56,400 B. P57,400 D. P63,200 6. What is the book balance on June 30, 2018? A. P732,200 C. P732,400 B.P729,200 D. P676,800 SOLUTION 1-26 1. Bank receipts in June (arrived at by footing the Deposits column of the bank statement) Answer: B 2. Bank disbursements in June (arrived at by footing the Checks column of the bank statement) Answer: D 3. Bank balance, May 31 Add: Bank receipts in June Total Less: Bank disbursements in June Bank balance, June 30 Answer: A

Bank balances Deposits in transit: May 31 June 30

Balance May 31 P652,OOO 10,000

P88,000

P63,200 P652,OOO 88,000 740,000 63,200 P676,800

PROOF OF CASH June 1-30, 2018 June Receipts Disbursements P88,000 P63,200

Balance June 30 P676,800

(10,000) 70,000

70,000

Outstanding checks: May 31 (20,000) (20,000) June 30 17,600 (17,600) Bank service charges: May 31 800 800 June 30 200 200 Bank collection in May (70,000) 70,000 May deposit recorded By the company in June (2,000) 2,000 NSF checks: Already redoposited (1,000) (1,000) Not yet deposited (3,000) 3,000 Bank error corrected On the same date ______ (1,000) (1,000) _______ Book balances P570,800 P218,000 P56,400 P732,400 4.Total book receipts in June P218,000 Answer: D 5. Total book disbursements in June P56,4OO Answer: C 6.Book balance on June 30, 2018 P732,400 Answer: C PROBLEM 1-27 Proof of Cash: Bank to Book Balances Format The following information was obtained in an audit of the cash account of CHELSEE.COMPANY as of December 31, 2018. Assume that the CPA has satisfied himself as to the propriety of the cash book, the bank statements, and the returned checks, except as noted: 1. The bookkeeper's bank reconciliation at November 30, 2018. Balance per bank statement Add: Deposit in transit Total Less: Outstanding checks PI,400 No. 1434 1562 1571 1584 1591 Balance per books

P194,OOO 11 000 P205,OOO P1,400 7,500 5,800 8,000 300

2. A summary of the bank statement for December 2018. Balance brought forward Deposits Total Charges

23,000 PI 82,000

P 194,000 1,487,000 P1,681,000 (1,325,000)

Balance, December 31, 2018 P356,000 3. Included in cancelled checks returned with the December bank statement were the checks listed below. 4. The Chelsee Company discounted its own 60-day note for P90,000 with the bank on December 1, 2018. The discount rate was 6 percent. The accountant recorded the proceeds as a cash receipt at the face value of the note. 5. The accountant records customers' dishonored checks as a reduction of cash receipts. When the dishonored checks are redeposited they are recorded as a regular cash receipt. Two NSF checks for P 1,800 and P2,200 were returned by the bank during December. Both checks were redeposited and were recorded by the accountant. 6. Cancellations of Chelsee Company checks are recorded by a reduction of cash disbursements. 7. December bank charges were P200. In addition, a P 100 service charge was made in December for the collection of a note receivable in November. These charges were not recorded on the books. 8. Check no. 1434 listed in the November outstanding checks was drawn in 2016. Since the payee cannot be located, the president of Chelsee Company agreed to the CPA's suggestion that the check be written back into the accounts by a journal entry. 9. Outstanding checks at December 31, 2018, totaled P49,400, including checks 1434 and 1584. 10. The cutoff bank statement disclosed that the bank had recorded a deposit of P24,000 on January 2, 2019. The accountant had recorded this deposit on the books on December 31, 2018, and then mailed the deposit to the bank. Cancelled Checks Returned with the December Bank Statement Date Amount Number of Check of check Comments 1562 11/28/18 P 750 This check was in payment of an invoice for P7,500 and was recorded in the cash book as P7,500 1571 11/28/18 5,800 This check was in payment of an invoice for P5,800 and was recorded in the cash book as P5,800. 1583 12/04/18 1,500 Examination of this check revealed that it was unsigned. A discussion with the client disclosed that it had been mailed inadvertently before it was signed. The check was endorsed and deposited by the payee and processed by the bank even though it was a legal nullity. The check was recorded in the cash disbursements journal. 1588 12/12/18 8,000 This check replaced 1584, which was returned by the payee because it was mutilated. Check 1584 was not cancelled on the

books ---------

12/19/18

2,000

This was a counter check drawn at the bank by the president of the company as a cash advance for travel expense. The president overlooked informing the bookkeeper about the check. ---------12/20/18 3,000 The drawer of this check was the Chelsea Company. 1595 12/20/18 3,500 This check had been labeled NSF and returned to the payee because the bank had erroneously believed that the check was drawn by Chelseen. Subsequently, the payee was advised to redeposit the check. 1599 01/05/19 100,000 This check was given to the payee on December 30, 2018, as a postdated check with the understanding that it would not be deposited until January 5. The check was not 1. What is the correct amount of outstanding checks on December 31? A. P41,400 C. P48,OOO B. P33,250 D.P40,OOO 2. What is .the amount of cash receipts per book in December? A.P1,496,900 C. P1,495,100 B. P1,504,900 D. P1,487,000 3. What is the amount of cash disbursements per book in December? A. P1,254,850 C. P1,256,850 B. P1,252,850 D. P1,248,850 4. What is the cash in bank balance per book as of December 31? A. P426,050 C. P430,050 B. P428,250 D.P343,050 5. What is the adjusted cash balance as of December 31? A. P343,OOO C. P347,OOO B. P340,200 D. P344,200 Solution 1-27 1. Outstanding checks, December 31 (P49,400 - PI,400 - P8,OOO) P40,000 Answer: D Balance December Balance Nov. 30 Receipts Disbursements Dec 31 Per bank statement P194,OOO P1,487,000 P1,325,000 P356,000

Outstanding checks: Nov. 30 (23,000) Dec. 31 Deposits in transit: Nov. 30 11,000 Dec. 31 Interest on note discounted (P90,OOO x 60/360) NSF checks Bank service charge Cancellation of check no. 1434 Error in recording check no. 1562 (P7,500 - P750) Cancellation of check no. 1584 Counter check drawn by president Check of Chelsea diarged in Error Postdated check presented for payment _______ Per book balances P182,000

(23,000) 40,000

(40,000)

(11,000) 24,000 900 (4,000)

24,000 900 (4,000) (300) 1,400 6,750 8,000 (2,000) (3,000)

_______ P1,496,900

(100,000) P1,248,850

(1,4000 (6,750) (8,000) 2,000 3,000 100,000 P430,050

2.Book receipts in December P1,496,900 Answer: A 3. Book disbursements in December P1 ,248,850 Answer: D 4, Book balance on December 31 P430,050 Answer: C 5. Book Bank Unadjusted balances p430,050 P356,OOO Outstanding checks (40,000) Deposits in transit 24,000 Interest on note discounted (900) Bank service charge (300) Cancellation of check no. 1434 1,400 Error in recording check no. 1562 6,750 Cancellation of check no. 1584 8,000 Counter check (2,000) Check of Chelsea charged in error 3,000 Postdated check presented for payment (100,000) ______ Adjusted balance P343,000 P343,000 Answer: A PROBLEM 1-28 The following information was obtained in connection with the audit of PINKY COMPANY's cash account as of December 31, 2018.

Outstanding checks, Nov. 30, 2018 P16,250 Outstanding checks, Dec. 31, 2018 12,500 Deposit in transit, Nov. 30, 2018 12,500 Cash balance per general ledger Dec. 31, 2018 37,500 Actual company collections from its customers during December 152,500 Company checks paid by bank in December 130,000 Bank service charges recorded on company books jn Decernber 2,500 Blank service charges per December bank statement 3,250 Deposits credited by bank during December 145,000 November bank service charges recorded on company books in December 1,500 The cash receipts book of December is underfooted by P2,500. The bank erroneously charged the companys account for a P3,750 check of another depositor. This bank error was corrected in January 2019. 1. How much is the deposit in transit on December 31, 2018? A. P5,OOO C. P22,500 B. P20,OOO D. P17,500 2. The total unrecorded bank service charges as of December 31, 2018, is A. P750 C. PI,750 B. P2,250 D. P4,250 3. What is the total book receipts in December? A. P150,OOO C. P155,OOO B.P152,000 D. P147,500 4. What is the total amount of company checks issued in December? A. P130,000 C. P133,750 B. P123,OOO D. P126,250 5. What is the total book disbursements in December? A. P123,750 C. P126,250 B, P128,500 D. P128,750 6. What is the book balance on November 30, 2018? A. P16,250 C. P37,500 B. P21,250 D. P35,OOO 7. What is the bank balance on November 30, 2018? A. P23,OOO C. P43,500 .BP18,500 D. P16,250 8. What is the total bank receipts in December? A. P120,OOO C. P145,OOO B.P140,OOO D. P150,OOO 9. What is the total bank disbursements in December? A. P154,500 C. P129,500 B.P132,500 D. P137,OOO

10. What is the bank balance on December 31, 2018? A. P21,500 C. P31,OOO B. P26,500 D. P33,250 Solution 1-28 1. Deposit in transit, November 30 Add: Company collections in December Total Less: Deposits credited by bank in December Deposit in transit, December 31 Answer: B 2. Bank service charges per December bank statement Less: December bank service charges recorded on company books in December (2,500 - PI,500) Unrecorded December bank service charges Answer: B

6. What is the book balance on November 30, 2018? A.P16,250 C. P37,500 B. P21,250 D. P35,OOO 7. What is the bank balance on November 30, 2018 B.P23,OOO C. P43,500 B. P18,500 D. P16,250 8. hat is the total bank receipts in December? C. P120,OOO C. P145,OOO B. P140,OOO D. P150,OOO 9. What is the total bank disbursements in December? A. P154,500 C. P129,500 B. P132,500 D. P137,OOO 10. What is the bank balance on December 31, 2018? A. P21,500 C. P310,OOO B. P26,500 D. P33,250

SOLUTION 1-28

P12,500 152 500 165,000 145,000 P20,000 P3,250

1 000 P2,250

1.

Deposit in transit, November 30 Add: Company collections in December Total Less: Deposits credited by bank in December Deposit in transit, December 3

P12,500 152 500 165,000 145 000 20,000

Answer: B 2.

Bank service charges per December bank statement Less: December bank service charges recorded on company books in December (2500-1500) Unrecorded December Bank Service Charge

Answer: B 3. Actual company collections in December Less: Underfooting of December cash receipts book Book receipts in December

P152,500 2,500 150,000

Answer: A

4. Outstanding checks, December 31 Add: Checks paid by bank in December Total Less: Outstanding checks, November 30 Checks issued in December

P12,500 130,000 142,500 16,250 126,250

Answer: D

5. Checks issued in December (see no. 4) P126,250 Add: Bank service charges recorded in December 2,500 Book disbursements in December 128,750 Answer: D 6. Book balance, December 31 Add: Book disbursements in December (see no. 5) Total Less: Book receipts in December (see no. 3) Book balance, November 30 Answer: A

P 37,500 128,750 166,250 150 000 P16,250

P3, 250 P1,000 P2, 250

Pinky Co. PROOF OF CASH For the Month of December 2018 Balance Nov. 30 Book balances Outstanding checks: Nov. 30 Dec. 31 Deposits in transit: Nov. 30 Dec. 31 Bank service charges: Nov. 30 Dec. 31 Underfooting of December book receipts Erroneous bank charge in December Bank balances

December Receipts Disbursements

P16,250

P150,OOO P128,750

16,250

16,250 (12,500)

(12,500)

12,500 (20,000)

(1,500)

2,500

P145,000

7. Bank balance, November 30, 2018 Answer: B

18,500

8, Total bank receipts in December Answer: C

145,000

9. Total bank disbursements in December Answer: D

137,000

10. Bank balance, December 31, 2018 Answer: B

26,500

P37,500

12,500

(20,000) (1,500) 2,250

P18,500

Balance Dec. 31

(2,250) 2,500

3 750 P137,000

(3,750) P 26,500

Problem 1-29 Proof of Cash: Unadjusted to Adjusted Balances Format In your audit of HARRY INC.'s cash account as of December 31, 2018, you ascertain the following information: The bookkeeper's bank reconciliation on November 30, 2018, is as follows: Balance per bank statement, November 30 Add: Deposits in transit

P24, 298 3,643

Total Less: Outstanding checks No. 3408 No. 3413 No. 3414 No. 3416 No. 3417 Balance Add: Bank Service Charge For November Balance per general ledger, November 30

P27,946 P440 300 6,820 3,924 800

12,248 15,662 36* 15,698

*Entered in Check Register in December The Cash Receipts Journal shows total receipts for December of P371, 766. The Check Register reflects total checks issued in December of P377, 632. A collection of P5, 912 was recorded on company books on December 31 but was not deposited until January 2, 2019. The balance per bank statement at December 31, 2018, is PI 7,516. This statement shows total receipts of P373, 502 and checks paid of P380,284. Your examination reveals the following additional information: 1) Check no. 3413 dated November 24, 2018, was entered in the Check Register as P300. Your examination of the paid checks returned with the December bank statement reveals that the amount of this check is P'3ff 2) Check no. 3417 was mutilated and returned by the payee. A replacement check (no. 3453) was issued. Both checks were entered in the Check Register but no entry was made to cancel check no. 3417. 3) The December bank statement includes an erroneous charge of P 480. 4) On January 3, 2019, the bank informed your client that a December bank service charge of P42 was omitted from the statement. 5) Your examination of the bank credit memo accompanying the December bank statement discloses that it represents proceeds from the note receivable' collection in December for P4,000. 6) The outstanding checks at December 31, 2018, are as follows: No. 3408 No. 3417

P440 800

No. 3418 No. 3419

P2, 814 5,788

1. What is the total book disbursement for the month of December? A. P377, 668 C. P377, 632 B. P377, 710 D. P377, 596 2. What is the book balance at December 31? A. P9, 832 C. P9, 754

B. P9, 868

D. P9, 796

3. The outstanding checks at December 31 totaled A. P8, 602 C. P9, 042 B. P9, 072 D. P9, 842 4. What is the adjusted bank balance on November 30? A. P16, 690 C. P16, 804 B. P16, 732 D. P16, 774 5. The adjusted book receipts for the month of December should be A. P375, 724 C. P371, 238 B. P371, 766 D. P375,766 6. The adjusted book disbursements for the month of December should be A. P377, 590 C. P377,674 B. P377, 662 D. P377,632 7. What is the adjusted book balance on December 31? A. P14, 824 C. P14, 908 B. P14, 866 D. P14, 782

8. A proof of cash used by an auditor A. Provides that the client's year-end balance of cash is fairly stated. B. Confirms that the client has properly separated the custody function from the recording function with respect to cash. C. Validates that the client's bank did not make an error during the period being examined. D. Determines whether any unauthorized disbursements or unrecorded deposits were made for the given time period. Solution 1-29 1..

Company check issued in December Add: November Bank service charge Total book disbursement in December Answer: A

377,632 36 377,668

Answer: 2.

Book balance, November 30 Add: December book receipts Total Less: December book disbursements Book balance, December 31

P15,698 371,766 387,464 377,668 9,796

Answer: D 3. Outstanding checks, December 31: Check no. 3408 3418 3419 Total

P440 2,814 5,788 9,042

Answer: C

Book balances Bank service charges: November 30 December 31 Overstatement of Nov. disbursement (check #3413) Mutilated check (#3417) Note collected by bank Adj. book balance

Bank balances Deposits in transit: November 30 December 31 Erroneous bank charge Bank service charge Outstanding checks: November 30 December 31 Adj. bank balance

Balance Nov 30 P15, 698

December Receipts Disbursements P371,766 P377,668

Balance Dec. 31 P 9,796

(36)

(36) 42

(42)

377,674

270 800 4,000 14,824

270 800 16,732

Balance Nov. 30 P 24,298 3,648

4,000 375,766

December Receipts Disbursements P373, 502 P380, 284 (3,648) 5,912 (480) 42

(11,214) P 16,732

P 375,766

(11,214) 9,042 P 377,674

4. Adjusted bank balance, November 30 Answer: B

P16, 732

5. Adjusted book receipts in December Answer: D

P375, 766

6. Adjusted book disbursements in December Answer: C

P377, 674

7. Adjusted book balance, December 31

P14, 824

Balance Dec. 31 P17, 516

5,912 480 (42)

(9,042) P 14824

Answer: A 8. A proof of cash usually consists of four columns, with reconciliations of beginning and end-of-period cash balances and reconciliations of cash receipts and disbursements during the period. The amounts appearing in the ledger and on bank statement should reconcile both horizontally and vertically. This reconciliation detects unauthorized disbursements and unrecorded deposits for the period. This is useful when internal control over cash transactions is weak or inadequate. Answer: D

Problem 1 – 30 Proof of Cash: Unadjusted to Adjusted Balances Format The following data are assembled by the accountant of the HAROLD COMPANY: Nov. 30, 2018

Dec. 31. 2018

Cash account balance P 41,175.00 Bank statement balance 267,705.00 Deposits in transit 20,502.50 Outstanding checks 69,295.00 Bank service charges 1,800.00 NSF check * Company's notes receivable collected by bank

P100, 712.50 344,542.50 32,200.00 75,280.00 1,500.00 20,625.00

*Redeposited in the same month. No entries made to take up the return and redeposit. The bank statement and the company's cash records show the following total: Canceled checks and debit memos per bank statement Cash receipts per cash book Checks written per cash book Deposits and credit memos per bank statement

P545, 932.50 411,592.50 529,792.50 622,770.00

l. What is the total book receipt in December? A. 613, 842.50 C. P411, 592.50 B. P591, 130.OO D. P580, 330.00 2. What is the total book disbursement in December? A. P531, 592.50 C. P533, 092.50 B. P529, 792.50 D. P531, 292.50 3. What is the adjusted book balance on November 30? A. P220, 712.50 C. P218, 912.50 B. P222, 512.50 D. P217, 412.50 4. The adjusted bank receipts in December should be A. P634, 168.50 C. 632,667.50 B. P622, 770.00 D. 634, 467.50 5. The adjusted book disbursements in December should be A. P545, 932.50 C. P548, 917.50 B. P552, 517.50 D. P551, 917.50 6. What is the adjusted book balance on December 31? A. P301, 462.50 C. P322, 087.50 B. P302, 662.50 D. P280, 537.50 Solution 1-30 1. Cash receipts per cash book Add: Notes collected by bank in November Total book receipts in December Answer: B 2. Checks written per cash book Add: Bank service charge in November Total book disbursements in December Answer: A

Balance per bank statement Deposits in transit: November 30 December 31 Outstanding checks: November 30 December 31 Adj. bank balance

P411, 592.50 179,537.50 P 591,130.00

P529, 792.50 1,800.00 P 531, 592.50

Balance Nov. 30 P 267, 705.00 20, 502.50

(69, 295.00) P 218, 912.50

December Receipts Disbursements P622, 770.00 P545, 932.50 (50, 502.50) 32, 200.00 (69, 295.00) 75, 280.00 P 634, 467.50 P 551,917.50

Balance Dec. 31 P344, 542.50

32, 200

(75, 280.00) P 301, 462.50

Balance per books Bank service charges: November December NSF check Collections of Notes Receivable November December Adj. balance

Balance December Nov 30 Receipts Disbursements P41, 175.00 P591, 130.00 P531, 592.50 (1800) 20, 625.00 179, 537.50 (179, 537.50) 202, 250.00 P218, 912.50 P634, 467.50

3. Adjusted book balance, November 30 Answer: C

P218, 912.50

4. Adjusted book receipts in December Answer: D

P634, 467.50

5. Adjusted book disbursements in December Answer: D

P351, 917.50

6. Adjusted book balance, December 31 Answer: A

P301, 462.50

(1800) 1, 500.00 20, 625.00

P551, 917.50

Balance Dec. 31 P 100, 712.50

(1, 500.00)

202,250.00 P301, 462.50

PROBLEM 1-31 Proof of Cash: Book to Bank Balances Format The auditor of TSIKOY COMPANY gathered the following information: 1. The November 30 bank statement balance included bank service charges of P2, 000. 2. The November 30 cash balance in the general ledger was P244, 500. 3. Outstanding checks on November 30 were P63, 000 while undeposited receipts were P36, 000. 4. The bank service charges as shown on the bank statement totaled P3, OOO. 5. The December 31 cash balance in the general ledger was P319, 750, which recognized P482, 750 for December receipts and P405, 500 for checks written during December. In transit to the bank were receipts of P28, 750. Checks of P 15,000 written prior to December and checks of P60, 500 written in December had not yet cleared the bank. 1. What is the total book disbursement for December? A. P403, 500 C. P407, 500 B. P404, 500 D. P405, 500

2. What is the November 30 bank balance? A. P271, 500 C. P268, 500 B. P269, 500 D. P266, 500 3. What is the total bank receipts C. in December? A. P490, 000 B. P482, 750

C. 497, 250 D. 488, 00

4. What is the total bank disbursement in December? A. P419, 000 B. P405, 500

C. P408, 500 D. P396, 000

5. What is the bank balance on December 31? A. P316, 750 C. P322, 750 B. P363, 500 D. P366, 500

1.. Checks written during December Add: November bank service charges recorded on company books in December Total book disbursements in December Answer: C

Balance per books Undeposited receipts Nov. 30 Dec. 31 Outstanding checks: Nov. 30 Dec. 31 Bank service charges: Nov. 30 Dec. 31 Bank balances

405,5000 2 000 P407, 500

Balance Nov. 30

December Receipts Disbursements

Balance Dec. 31

P244, 500

P482, 750 P407, 500

P319, 750

(36, 000)

36, 000

63, 000

63, 000 (12,500)

(2, 000) P269, 500

P490, 000

(2, 000) 3,000 P369, 000

12,500

3,000 P 363,500

2. Bank balance, November 30 Answer: B

P 269, 500

3. Total bank receipts in December Answer: A

P 490, 000

4. Total bank disbursements in December P 369, 000 Answer: D 5. Bank balance, December 31 Answer: B

P363, 500

PROBLEM 1-32 Proof of Cash: Unadjusted to Adjusted Balances Format RODELIO CO. has a current account in Pinoy Bank. Your audit of the company's cash account reveals the following: 1. Balances taken from the company's general ledger: Cash balance, Nov. 30, 2018 P637, 860 Cash balance, Dec. 31, 2018 576,420 Receipts, Dec. 1-31, 2018 306,220

2. Balances taken from the December bank statement: Bank balance, Nov. 30, 2018 P685, 180 Bank balance, Dec. 31, 2018 637,220 Disbursements (debits) 356,080 3. Outstanding checks, Nov. 30, 2018 (P26,140 was paid by bank in December )

64,140

4. Checks written and recorded in December; not included in the checks returned with the December bank statement 36,080 5. Deposit in transit, Nov. 30, 2018

15,260

6. Deposit in transit, Dec. 31; 2018

16,140

7. A bank credit memo was issued in December to correct an erroneous charge made in November

1, 500

8. Note collected by bank in December (company was not informed of the collection

2,060

9. A check for P2,020 (payable to a supplier) was recorded in the Check Register in December as P3,OOO

980

10. A check for P2,240 was charged by the bank as P2,420 in December

180

11. Rodelio Co. issued a stop payment order to the bank in December. This pertains to a check written in December which was not received by the payee. A new check was written and recorded in the Check Register in December. The old check was written off by a journal entry also in December 780 12. Bank service charge, Nov. 30, 2018

60

1. What is the total book disbursement in December? A. P367, 660 C. P369, 720 B. P244, 780 D. P368, 540 2. What is the total bank receipt in December? A. P260, 160 C. P306, 060 B. P308, 120 D. P309, 020 3. What is the total outstanding check on December 31? A. P100, 000 C. P62, 220 B. P38, 000 D. P74, 080 4. What is the adjusted bank balance on November 30? A. P636, 300 C. P637, 800 B. P685, 180 D. P634, 800 5. What is the adjusted book receipt in December? A. P307, 500 C. P303, 380 B. P306, 220 D. P305, 440 6. What is the adjusted bank disbursement in December? A. P353, 980 C. P345, 960 B. P365, 840 D. P366, 020 7. What is the adjusted book balance on December 31? A. P577, 500 C. P576, 420 B. P577, 400 D. P579, 460 SOLUTION 1-32 1. Book balance, November 30

P637, 860

Add: Book receipts in December Total Less: Book disbursements in December (SQUEEZE) Book balance, December 31 Answer: A

306, 220 944,080 367,660 576,420

2. Bank balance, November 30 Add: Bank receipts in December (SQUEEZE) Total Less: Bank disbursements in December Bank Balance, December 31 Answer: B

P685, 180 308, 120 993,300 356, 080 637, 220

3. Checks issued prior to December (P64,140 - P26,140) Checks issued in December Total outstanding checks, December 31 Answer: D

38,000 36,080 74, 080

Balance per books Note collected by bank in December Overstatement of Dec. book disbursement (3, 000-2, 020) Check Stopped for payment Bank service charges in Nov. Adj. book balance

Bank balance Outstanding checks: Nov. 30 Dec. 31 Deposits in transit: Nov. 30 Dec. 31 Erroneous bank charge

Balance Nov 30 P637, 860

December Receipts Disbursements P306, 220 P367, 660 2,060

(780) ( 60) P637. 800 P307, 500

Balance Nov. 30 P685, 000

15, 260

2060 (980) (780) (60) 365, 840

December Receipts Disbursements P308, 120 P356, 080

(64,140)

(64, 140) 74, 080 (15, 260) 16, 140

Balance Dec. 31 P576, 420

980 . P579, 460

Balance Dec. 31 P637,220

(74, 080)

16, 140

In November Overstatement of bank disbursement in Dec. Adj. bank balance

1, 500

(1, 500)

P637, 800

P307, 500

4. Adjusted bank balance, November 30 Answer: C

P637, 800

5. Adjusted book receipts in December Answer: A

P307, 500

6. Adjusted bank disbursements in December Answer: B

P365, 840

7. Adjusted book balance, December 31

P579, 460

(180) P 365, 840

Answer: D

PROBLEM 1-33 Proof of Cash: Unadjusted to Adjusted Balances Format Data for the ANNABELLE, INC. are shown below: Nov. 30 Cash account balance P 20,340 Bank statement balance 107,060 Deposits in transit 8,200 Outstanding checks 27,700 Bank service charge for the month, not shown on company books 720 NSF checks returned by banks, not shown on company books 4, 300 Bank collections from company customer, not shown on company books 72, 240

Dec. 31 P 48,540 137,820 12,880 30,100 600 8, 240 80, 900

Additional information: 1. Deposits and credit memos per bank statement

P249, 100

180 . P579, 460

2. Canceled checks and debit memos per bank statement

218, 340

3. Cash receipts per cash book

172, 880

4. Checks written per cash book

211, 900

1. What is the total book receipt in December? A. P172, 880 C. P253, 780 B. P245, 120 D. P181, 540 2. What is the total book disbursement in December? A. 211, 900 C. 211, 180 B. P216, 200 D. 216, 920 3. What is the adjusted cash balance on November 30? A. P89, 000 C. P71, 160 B. P87, 560 D. P96, 160 4. What is the adjusted cash balance on December 31? A. P120, 600 C. P137, 080 B. P94, 840 D. P155, 040

5. What is the adjusted book receipt in December? A. P253, 780 C. P244, 420 B. P236, 460 D. P270, 180 6. What is the adjusted bank disbursement in December? A. P215, 940 C. P248, 440 B. P220, 740 D. P204, 260 SOLUTION 1-33

1. Cash receipts per cash book Add: November bank collections Total book receipts (debits) in December Answer: B

P172, 880 72,240 245, 120

2. Checks written per cash book P211, 900 Add: Bank service charges in November P720 NSF checks returned in November 4, 300 5,020 . Total book disbursements (credits) in December 216, 920 Answer: D

Balance Nov. 30

Unadj. book balances Bank service charges: November 30 December 31 NSF checks November 30 December 31 Bank Collections: November 30 December 31 Adj. book balances Balance December

Unadj. bank balances Deposits in transit: November 30 December 31 Outstanding checks: 12,880 12,880 November 30 December 31 Adj. bank balances P87.560 Answer: B

20,340

December Receipts Disbursements

P245,120

(720)

Balance Nov. 30 P107,060 8,200

(27,700) _______ P87,560

4.Adjusted cash balance, December 31 Answer: A 5. Adjusted cash balance, December 31 Answer: A 6. Adjusted book receipts in December Answer: B Problem 1-34

216,920

P48,540

(720) 600

(4,300)

72,240 ______ P87,560

Balance Dec. 31

(4,300) 8,240 (72,240) 80 900 P253,780

( 8,240)

_______ P220,740

December Receipts Disbursements P249AOO P218,340

80 900 P120,600

Balance Dec. 31 P137,820

(8,200)

_________ P253,780

(27,700) 30,100 P220,740

(30,100) P120,600

P120,600 P253,780 P220,740

On January 10, 2019, you started the audit of the financial records of the KEMIRARA COMPANY for the year ended December 31, 2018. From your investigation, you discovered the following: 1. The bookkeeper acts also as the cashier. Her December 31, 2018, year-end cash reconciliation contained the following items: Cash per ledger, Dec. 31, 2018 P184,200 Cash per bank, Dec. 31, 2018 194,550 Checks outstanding 15,660 Amnesia Co. check charged by the bank in error

Dec. 20, 2018; corrected by the bank on Jan. 5, 2019 450 Cash in transit, credited by the bank on Jan. 2, 2019 2,160 2. The cash account balances per ledger as of December 21, 2018 were : Cash P184,200 Petty cash 450 3, The count of the cash on hand at the close of the business on January 10, 2019, including the pettY8sh, was as follows: Currency and coins PI,155 Expense vouchers 60 Employees' IOU's dated Jan. 5, 2019 165 Customers' checks in payment of account 870 4. From January 2, 2019 to January 10, 2019, the date ofyour cash count, total cash receipts appearing in the cash records were P25,800. According to the bank statement for the period from January 2, 2019 to January 10, 2019, total deposits were 5. On July 5, 2018, cash of P 1,200 was received on account from a customer; the Allowance for Doubtful Accounts was charged and Accounts Receivable was credited. 6. On December 5, 2018, cash of P900 was received on account from a customer; Inventory was charged and Accounts Receivable was credited. 7. Cash of P 2,190 received during 2018 was not recorded. 8. Checks received from customers from January 2, 2019 to January 10, 2019, totaling P 1,260, were not recorded but were deposited in the bank. 9. On July 1, 2018, the bank refunded interest of P60 because a note of the Kemirara Company was paid before maturity. No entry was made for the refund. 10. In the. cashier's petty cash, there were receipts for collection from the customers on January 9, 2019, totaling PZ,550; these were unrecorded and undeposited. 11. In the outstanding checks, there is one for P 150 made payable to a trade creditor; investigation shows that this check had been returned by the creditor on November 14, 2018 and a new check for P300 was issued in its place; the original check for P 150 was made in error as to amount. Required: 1. Compute the correct bank balance as of December 31, 2018. 2. Compute the ca h shortage as of December 31, 2018. 3. Compute the c sh shortage for the period January 1, 2019 to January 10, 2019. Book Bank Unadjusted balances Outstanding checks (P15,660 - P150) Amnesia Co. check charged by bank in error Deposit in transit Collection from a customer charged to Allowance for Doubtful Accounts Collection from a customer charged to Inventory account Unrecorded collection Bank credit for refund of interest

P184,200

1,200 900 2,190 60

P194,550 (15,510) 450 2,160

Check returned and replaced Corrected balances SHORTAGE AS OF DEC. 31, 2018 (Req. 2) Adjusted balances (Req. 1) Requirement 3 Cashier's accountability: Cash receipts per cash records, Jan. 2-10, 2019 Unrecorded deposited collections, Jan. 2-10, 2019 Unrecorded undeposited collections, Jan. 9, 2019 Petty cash fund Total Accounted for as follows: Count of cash on hand and petty cash fund: Currency and coins Expense vouchers Employees' IOUs Customers' checks Total deposits per bank Statement Correction of bank error Deposit in transit, Dec. 31 CASH SHORTAGE, Jan. 2-10,2019

___ 150 P188,700 (7,050) P181,650

_____ P181,650 _____--P181,650

P25,800 1,260 2,550 450 P30,060

PI,155 60 165 870

P2,250

P22,800 (450) (2,160)

20,190 22,440 P7,620

Problem 1-35 The bookkeeper-cashier of the TANYING COMPANY absconded on the evening of April 16, 2019, apparently with a large portion of the company's cash. He had taken with him certain accounting records, including the cash journals and the general ledger. You are called upon to ascertain, if possible, the shortage with which the missing employee may be charged. you obtained the following information from the available subsidiary journals, ledgers, and other data. Balances at close of business. April 16, 2019: Accounts receivable Accounts payable Cash in bank, less checks outstanding Transactions, January 1 - April 16, 2019: Sales, per receivable clerk Cash sales Sales allowances in customers' accounts Cash purchase of furniture, per dealer's invoice 3,000 Total merchandise purchases Expenses paid, supported by paid invoices and payrolls Cash dividend declared, P50,OOO (of which, P 10,000 remains unpaid)

P442,550 207,300 98,830

P5,876,170 none 3,615,260 3,615,260 1,865,830 40,000

A check for P 100,000 had been cashed by the bookkeeper shortly before his departure. Although the signature on the check had been obviously forged, it was paid by the bank and returned with other canceled checks. A statement of financial position prepared from the books and other files follows: Tanying Company Statement of Financial Position December 31, 2018 ASSETS Cash P 32,670 Accounts receivable 226,230 Inventory (at cost) 440,350 Furniture P74,560 Less: Accumulated depreciation 31 800 42,760 Total assets P742,010 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable P114,720 Share capital 500,000 Retained earnings 127 290 Total liabilities and shareholders' equity P742,010 1. What is the total amount paid for merchandise purchases? A.P3,615,260 C.P 3,522,680 B.P3,293,240 D. P3,707,840 2. What is the total amount of collections from sales? A. P5,641,520 C.P6,074,160 B. P5,659,850 D. P6,092,490 3. What is the total amount of cash disbursements from January 1 April 16, 2019? A. P5,524,090 C. P5,431,510 B. P5,202,070 DP5,432,510 4. What is the cashier's accountability (correct cash balance beforeshortage) on April 16, 2019? A. P242,680 C. P143,850 B. P98,830 D.P 43,850 5. What is the amount of cash shortage chargeable against the cashier? A. PIOO,OOO C. P143,850 B. P43,850 D. P242,680 SOLUTION 1-35 1. Accounts payable, Dec, 31, 2018 P 114,720 Purchases 3,615,260 Total Accounts payable, April 16, 2019 (207,300) Payments for merchandise purchases Answer: C 2. Accounts receivable, Dec. 31, 2018 P 226,230 Net sales (P5,876,170–P18,330) 5,857,840 Total 6,084,070 Accounts receivable, April 16, 2019 (442,550) Collections from sales P5 641 520

Answer: A 3. Payments for purchases Furniture Expenses Dividends Total cash disbursements Answer: C 4. Cash balance, Dec. 31, 2018 Collections Disbursements Cash balance, April 16, 2019 (accountability) Answer: AAUDHINC, PROBLFNs

P3,522,680 3,000 1,865,830 40,000 P5,431,510 P 32,670 5,641,520 (5,431,510) P242,680

5. Cash accountability 242,680 Cash accounted (98,830) Total shortage 143,850 Shortage chargeable against bank (100,000) Shortage chargeable against the cashier P 43,850 Answer: B PROBLEM 1-36 The JUNNEL COMPANY had weak internal controls over its cash transactions. Facts about its cash position at November 30, 2018, were as follows: The cash books showed a balance of P94,508, which included undeposited receipts. A credit of P500 on the banks records did not appear on the books of the company. The balance per bank statement was P77,750. Outstanding checks were no. 8420 for P581, no. 8422 for P750, no. 8430 for PI,266, no. 8621 for P954,no. 8623 for PI,034, and no. 8632 for P726. The cashier stole all undeposited receipts in excess of P 18,972 and prepared the following reconciliation: Balance per books, Nov. 30, 2018 Add: Outstanding checks 8621 8623 8632 Less: Undeposited receipts Balance per bank, Nov. 30, 2018 Less: Unrecorded credit True cash, Nov. 30, 2018

P94,508 p 954 1,034 726

2,214 96,722 18,972 77,750 500 P77,250

1. What is the correct amount of cash that should be on hand for deposit on November 30, 2018? A. P23,069 C. P22,569 B. P18,972 D.P22,069 2. How much was stolen by the cashier? A. P3,597 C. P4,097 B. P3,097 D. P O 3. The cashier attempted to conceal his theft by

I. Not listing all outstanding checks. Il. Underfooting outstanding checks shown on the reconciliation. Ill. Adding an item to the bank balance that should be deducted from the book balance. A. I and Il only C. I and Ill only B. Il and Ill only D. l, Il, and Ill 4. Taking only the information giveny which of the following internal control deficiencies allowed the cashier to steal cash and conceal his theft? A. The cashier is also responsible for preparing the reconciliation. B. No one other than the cashier is responsible for tracing cash receipts to the deposits in the bank. C. Both A and B. D, Neither A nor B. 5. What is the adjusted cash balance as of November 30, 2018? A. P95,008 C. P94,008 B. P91, D. P87,814 SOLUTION 1-36 1.Cash balance per books, Nov. 30 P94,508 Add:Bank credit 500 Adjusted cash balance (on hand and in bank) 95,008 Less: Adjusted bank balance: Bank balance, Nov. 30 P77,750 Less: Outstanding checks No. 8420 P 581 8422 750 8430 1,266 8621 954 8623 1,034 8632 726 5,311 72,439 Cash that should be on P22,569 Answer: C 2. Cash that should be on hand for deposit (see no. 1) P22,569 Cash reported 18 972 Amount of theft P3,597 Answer: A 3. The cashier attempted to conceal his theft by: 1. Not listing all outstanding checks. 2. Underfooting outstanding checks shown on the reconciliation. 3. Subtracting an item from the bank balance that should be added to book balance. Answer: A 4. The following internal control deficiencies are noticeable: 1. The cashier is also responsible for preparing the cash reconciliation.

2. No one other than the cashier is responsible for tracing cashreceipts to the deposits in the bank. Answer: C 5. Book Bank Unadjusted balances P94,508 P77,750 Unrecorded credit 500 Outstanding checks (5,311) Undeposited receipts _______ 18,972 Corrected balances 95,008 9 91,411 Cash shortage (amount of theft) (3,597) ____ --Adjusted cash balances P91,411 P91,411 Answer: B PROBLEM 1-37 Presented below is the cash receipts book of APPLE, INC.: CASH RECEIPTS BOOK June 1-30, 2018 Accounts Cash Sales Net Date Receivable Sales Discount Cash June 1 Cash Sales P 800 P 800 10 BA P 3,200 P 64 3,136 15 BO 6,000 120 5,880 2 BE 4,800 96 4,664 20 Cash Sales 2,400 2,400 25 BU 10,800 216 10,504 26 BO 4,000 4,000 26 BE 12,000 240 11,680 30 BO 3,600 3,600 30 BA 800 _____ _____ 800 P45,200 P3,200 P936 P47,464 The following are the company's accounts receivable subsidiaryledgers. All the debits represent sales. The credit terms are 2%-10 days, net 30 days. BA BO June 3 3,200 June 10 3,200 june 2 6,000 June 15 6,000 4 4,800 30 800 9 4,000 26 4,000 15 3,600 30 3,600 BU

BE

June 2 6,00

| June 2

10 4,800 |

June 15 4,800| June 20 4,800 16 12,00 |

1. What is the correct amount of cash receipts in June? A. P47,800

C. P48,OOO

B. P47,600

D. P47,664

2. What is the cash shortage on June 30?

26 12,000

A. P336

C. P200

B. PO

D. P536

SOLUTION 1-37 1. Cash receipts per book

P47,464

Understatement of cash receipts by: Recording sales discounts for collections made beyond the discount period: June 15

P120

Jun 25

216

336

Overfooting the sales discounts column (P936 - P736

200 *

Cash receipts as corrected

48,000

To balance, the following extensions to the "Cash" column are understated: Correct

June 20 (4,800-96) June 25 (10,800-P216) June 26 (P12,000-P240)

Amount

Amount

Extended

Understatement

P4,704

P4,664

P40

10,504

80

10,584 11,760

Total

11,680

80 P200

Answer: C 2. Cash receipts as corrected

P48,OOO

Cash receipts per book

47,464

Cash shortage, June 30

P536

Answer: D PROBLEM 1-38 You started the audit of the financial statements of ARCHIE, INC. on January 15, 2019, for the year ended December 31, 2018. The general ledger shows cash account balance of P247j200 as at December 31, 2018. The following items are included in the December 31, 2018, reconciliation prepared by the cashier: Cash per records, December 31, 2018

P247,200

Cash per bank statement, December 31, 2018

264,095

Outstanding checks

25,325

Check of Tsikoy Co., charged by bank in error on December 28, 2018; corrected by bank on January 2, 2019

750

Deposit in transit

3,500

From January 2, 2019, to January 15, 2019, the date of your cash count, total cash receipts appearing in the cash records amounted to P53,500. During the same period, the bank had credited total deposits of P47,965. The following cash and cash items were on hand at the close of business on January 15, 2019: Currency

PI,425

Customers' checks

1,950

Expense vouchers

375 P3,750

Your further investigation revealed the following: a. Cash received on account from customers: DATE

AMOUNT

07/05/18

P4,OOO

ENTRY MADE Allowance for bad debts

4,000

Accounts receivable 12/10/18

P3,OOO

Inventory Accounts receivable

12/15/18

P3,500

4,000 3,000 3,000

Not recorded

b. Unrecorded but deposited checks received from customers from January 2, 2019, to January 15, 2019, totaled P2,OOO. c. The cashier presented receipts for collections from customers on January 10, 2019, totaling P4,500; these were unrecorded and undeposited. 1. What adjusting entries would you provide for items (a) through (c)? 2. What is the total cash shortage as of December 31, 2018? A. P21,180

C. P14,680

B.P16,180

D. P4,180

3. What is the total cash shortage as of January 15, 2019? A. P26,465 C. P27,965 B. P18,430 D. P24,930 SOLUTION 1-38 1. ADJUSTING JOURNAL ENTRIES: a. 1. Cash

4,000

Allowance for bad debts 2. Cash

4,000

3,000

Inventory 3. Cash

3,000 3,500

Accounts receivable b.4. Cash

3,500 2,000

Accounts receivable c. 5. Cash

2,000 4,500

Accounts receivable 2.

4,500 Book

Unadjusted balances

247,200

Bank 264,095

Outstanding checks

(25,325)

Bank error

750

Deposit in transit

3,500

AJE 1

4,000

2

3,000

3

3 500

______

Corrected balances

P257,700

P243,020

SHORTAGE as of Dec. 31, 2018

(14,680)

________-

Adjusted balances

P243,020

P243,020

Answer: C 3.Deposit in transit, Dec. 31, 2018 Add: Company collections, Jan. 2-15, 2019

P3,500

Per records

P53,500

AJE 4

P2,OOO

5

4, 500

6 500

Total

60 000 63,500

Less: Deposits credited by bank, Jan. 2-15, 2019

47 965

Deposit in transit, Jan. 15, 2019

15,535

Cash and cash items per count on Jan. 15, 2019

(3,750)

Cash shortage, Jan. 2-15, 2019

P11,785

Add: Cash shortage as of Dec. 31, 2018 (see no. 2)

14,680

Total shortage as of January 15, 2019

P26,465

Answer: A PROBLEM 1-39 Computation of Cash Shortage The LEINOR COMPANY does not have adequate controls over its cash transactions. During an audit, you found the following data concerning its cash position at December 3.1, 2018. 1. On the companys records the cash balance is PI 73,500. 2. A credit ofP2,500 fora note collected by the bank does not appear on the company's records. 3. The bank statement balance is P 135,000. 4. Outstanding checks are as follows: Number

Amount

1428

P5,200

1431

3,600

1445

4,080

1446

3,460

The cashier made the following reconciliation: Balance per bank statement

P135,000

Deduct: Outstanding checks: No. 1431

P3,600

1445

4,080

1446

3 460

10,140 P 124,860

Add: Undeposited collections (per count) P46,140 Collected note

2,500

Cash per books, December 31, 2018

48,640 P 173.500

1. What is the total shortage? A. P1l,200

c. P5,OOO

B. P8,700

D. P6,OOO

2. How did the cashier attempt to conceal the shortage? SOLUTION 1-39 1.

Book

Bank

Unadjusted balances

P173,500

P135,OOO

Note collected by the bank

2,500

Outstanding checks Undeposited collections

(16,340) ______

46 140

Corrected balances

PI 76,000

P164,800

SHORTAGE

(11,200)

_______-

Adjusted balances

P164 800

P164 800

Answer: A 2. Concealment of shortage: Omission of outstanding check no. 1428

P 5,200

Underfooting of outstanding checks in reconciliation (PI 1,140 - PIO,140)

1,000

Adding (instead of deducting) the unrecorded note collected by the bank

5 000

Total shortage

P1l,200

PROBLEM 1-40 Computation of Cash Shortage

The following table summarizes the cash receipts and disbursements of LOI COMPANY for the last six months of 2018: Month

Receipts

Disbursements

P102,OOO

P 60,000

August

70,000

110,000

September

120,000

68,000

July

October

172,000

92,000

November

260,000

122,000

December

280,000

180,000

Additional information: 1. Bank balance, July 1, 2018

P200,OOO

2. Bank balance, December 31, 2018

524,000

3. Outstanding checks, December 31, 2018

42,000

(No checks were outstanding on July 1) 4. Undeposited receipts, December 31, 2018 (included in the December receipts)

24,000

5. Bank deposits, July 1 through December 31

914,000

What is the total shortage? A. P0

B. P30,OO0

C. P76,OOO

D. P66,OOO

SOLUTION 1-40 Book balance, July 1 (see note 1)

P 200,000

Add: Total book receipts as corrected (see note 2)

1 004 000

Total

1,204,000

Less: Total book disbursements as corrected (see note 2)

632 000

Corrected book balance, December 31

P 572,000

Bank balance, December 31

P 524,000

Add: Undeposited receipts

24 000

Total

548,000

Less: Outstanding checks

42,000

Adjusted bank balance

506,000

Corrected book balance (accountability)

(572000)

Cash shortage

P(66,000)

Answer: D

NOTES: 1. Because there were no book and bank reconciling items on July 1, the bank balance on that date was also the cash balance per books. 2. The receipts column of the table of cash receipts and disbursements is under-footed by P40,OOO correct total - P964,OOO) while the is bursements column is overfooted by P36,000 (P668,000 — P632,000 correct total). PROBLEM 1-41 Computation of Cash Shortage In connection with the audit of the financial statements of JEMCOMPANY for the year ended October 31, 2018, you conducted asurprise count of undeposited receipts on October 31, 2018. It was witnessed by the company's cashier whose accountability on October 31 was determined to be P80,000. Your count revealed the following: Currency and coins

P48,840

Unused postage stamps

440

Checks: Date

Payee

Maker

1-22

Cash

Cashier

10-19

Jem Company

DWU, Inc.

9,400

10-28

Jem Company

PSU co.

7,840

10-31

CCP co.

Jem Company

4,000

3,600

Office supplies paid out of receipts

6,400

Total per count

P8O,520

1. What is the cash shortage on October 31, 2018? A. P7,080

C. P3,080

B. P3,480

D. P7,600

2. A cash shortage may be concealed by transporting funds from one location to another or by converting negotiable assets to cash. Because of this, which of the following is vital? A. Simultaneous confirmations B. Simultaneous bank reconciliations C. Simultaneous verification D. Simultaneous surprise cash count SOLUTION 1-41 1. Cashier's accountability

P80,OOO

Accounted for as follows: Total per count Less: Cashier's stale check

P80,520 P4,000

Unreleased disbursement check

3,600

7 600

Cash shortage

72,920 P 7,080

Answer: A 2. Simultaneous verification Answer: C PROBLEM 1-42 Computation of Working Capital and Current Ratio JAM COMPANY's unadjusted trial balance at December 31, 2018, included the following accounts: Debit Cash

Credit

P 69,200

Accounts receivable

102,650

Merchandise inventory

947,160

Accounts payable

P789,715

Accrued expenses

13,214

Jam Co.'s year-end is December 31. At the end of 2018, it held its cash book open so that its statement of financial position would show a more favorable financial condition. Your audit revealed the following items:

1. The December cash book included January cash receipts of p65,460, of which P36,010 represents cash salespnd P29,450 represents collections from customers, net of 5% cash discounts. 2. The December check register included payments of accounts to suppliers of P37,240 on which discounts of P 1,240 were taken. 3. The merchandise inventory account balance was determined by physical count on December 31, 2018. 1. What are Jam's working capital and current ratio at December 31, 2018, based on balances per company books? Working

Current

Capital

Ratio

A.P316,081

1.42

B. 316,081

1.39

c. 329,295

1.42

D. 329,295

1.39

2. What are Jam's correct working capital and current ratio at December 31, 2018? Working Current

Capital Ratio

AP244,381

1.29

B.278,831

0.33

c. 330,835

1.40

D. 280,381

1.33

2. A cash shortage may be concealed by transporting funds from one location to another or by converting negotiable assets to cash. Because of this, which of the following is vital? A. Simultaneous confirmations B. Simultaneous bank reconciliations C. Simultaneous verification D. Simultaneous surprise cash count SOLUTION 1-41 1. Cashier's accountability Accounted for as follows:

P80,OOO

Total per count

P80,520

Less: Cashier's stale check

P4,000

Unreleased disbursement check

3,600

7 600

72,920

Cash shortage

P 7,080

Answer: A 2. Simultaneous verification Answer: C PROBLEM 1-42 Computation of Working Capital and Current Ratio JAM COMPANY's unadjusted trial balance at December 31, 2018, included the following accounts: Debit Cash

P 69,200

Accounts receivable

102,650

Merchandise inventory

Credit

947,160

Accounts payable

P789,715

Accrued expenses

13,214

The bank statement for the month ended March 31, 2018, shows a cash balance of P590,000. The following checks are outstanding on March 31: No. 7163 P 8,623 No. 7284 7,320 No. 7285 10,612 No. 8722 6,322 No. 8724 12,280 No. 8733 6,200 The company's general ledger shows a cash balance of P696,499 on March 31, 2018. Realizing that being the cashier-accountant of the company he can easily misappropriate collections and conceal it, Alex removed all the cash on hand in excess of P 127,301, and then prepared the following reconciliation in an effort to conceal this theft. BANK RECONCILIATION

Balance per accounting records

P696,499

Add: Outstanding checks No. 8722 No. 8724 No. 8733

P 6,322 12,280 6,200

Total

20 802 717,301

Deduct: Cash on hand

127,301

Balance per bank statement, March 31

P590,000

1. How much was taken by the cashier-accountant? A. P30,555

C. P4,OOO

B. P157,856

D. P26,555

2. What is the amount of cash that should be on hand at November 15,2018? A. P127,301

C. P157,856

B. P131,301

D. P30,555

SOLUTION 1-44 1.

Book

Bank

Unadjusted balances

P696,499

P590,OOO

Outstanding checks: No. 7163

P8,623

No. 7284

7,320

No. 7285

10,612

No. 8722

6,322

No. 8724

12,280

No. 8733

6,200

Undeposited collections Corrected balances CASH SHORTAGE Adjusted balances Answer: A

(51,357) _______ P696,499 (30,555) P665,944

127,301 P665,944 ______P665,944

2. Cash on hand

P127,301

Add: Cash shortage (see no. 1)

30 555

Cash that should be on hand, Nov. 15

P157,856

Answer: C