Far Eastern University

INSTITUTEOF ACCOUNTS, BUSINESS AND FINANCE

Department of Accountancy & Internal Auditing

INTERMEDIATE ACCOUNTING 1
POST-TEST1- CASH AND CASH EQUIVALENTS

GENERAL INSTRUCTIONS
1. Complete the information above.
2. Only BACK TEXT is allowed to be used for your answers.
3. Any form of cheating will be dealt with accordingly.
4. Failure to comply with the above rules will merit a grade of “F”.

QUIZ PROPER PART 1 – MCQ (20 POINTS)

Instructions: Select the best answer among the given choices. Write only the letter of your choice on the space
provided before each number.

Problem 1 (SCP)
The following cash items are presented by Bahamas Company:

Credit line (PNB) P 500,000

Bounced check from customers 10,000
Undeposited coins and currencies 20,000
Time Deposit – restricted for current use 500,000
Money market funds 750,000
BPI Checking Account No. 54321 400,000
Amount segregated to pay creditors 300,000
Amount earmarked for construction of building 2,000,000

1. How much should Bahamas Company report as “Cash” in its December 31, 2019 statement
of financial position?
A. P 720,000
B. P 1,220,000
C. P 2,690,000
D. P 2,710,000

Solution:
Credit line (PNB) P -
Bounced check from customers (NSF Check) -
Undeposited coins and currencies 20,000
Time Deposit – restricted for current use (Cash Equivalent) -
Money market funds (Cash Equivalent) -
BPI Checking Account No. 54321 400,000
Amount segregated to pay creditors 300,000
Amount earmarked for construction of building (NCA – Investment) -
Reported as Cash at December 31, 2019 SFP P 720,000
(Letter A)

Problem 2 (Adapted from IA Book)

The following data of Data Corporation are available as of year-end of 2019:

Correct cash balance in checking account with BDO P 320,000

Overdraft in current account with Metrobank 20,000
Cash earmarked for plant expansion 150,000
Cash surrender value of life insurance policy 32,000
Cash advances in the hands of salesmen for liquidation 12,000
Currency and coins in petty cash box 580

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 2. How much cash should Data Corporation report as cash on the statement of financial
position at year-end of 2019?
A. P 332,580
B. P 320,580
C. P 322,000
D. P 302,000

Solution:
Correct cash balance in checking account with BDO P 320,000
Overdraft in current account with Metrobank (Current Liability) -
Cash earmarked for plant expansion (NCA – Investment in Fund) -
Cash surrender value of life insurance policy (NCA – Investment) -
Cash advances in the hands of salesmen for liquidation (Advances to Salesman) -
Currency and coins in petty cash box 580
Reported as Cash at December 31, 2019 SFP P 320,580
(Letter B)

Problem 3 (PHILCPA Adapted)

The current asset section of BBC Company’s statement of financial position as at December 31, 2019 reported
its cash account with a balance of P 701,500 which consists of the following items:

Bond sinking fund cash P 150,000

Checking account in PNV (A check of P 3,200 is still
outstanding per bank statement) 315,500
Currency and coins awaiting deposit 113,500
Deposit in a bank closed by BSP 100,000
Petty Cash Fund (of which P 2,500 is in the form of
Paid vouchers) 10,000
Receivables from officers and employees 12,500
P 701,500

3. Question 3:
The correct cash balance for the statement of financial position as at December 31, 2019 is
A. P 404,500
B. P 436,500
C. P 554,500
D. P 589,000

Solution:
Bond sinking fund cash (NCA – Investment) P -
Checking account in PNB (A check of P 3,200 is still
outstanding per bank statement) 315,500
Currency and coins awaiting deposit 113,500
Deposit in a bank closed by BSP (NCA – Other Asset) -
Petty Cash Fund (of which P 2,500 is in the form of
Paid vouchers) (P 10,000 – P 2,500 paid vouchers) 7,500
Receivables from officers and employees (Receivable) -
Correct cash balance for SFP as at December 31, 2019 P 436,500
(Letter B)

Notes:
The outstanding check of P 3,200 is not deducted from the PNB Checking account it is the balance per book in
which the said amount is already deducted.

Problem 4 (PHILCPA Adapted)

Account of the petty cash fund showed its composition as follows:

Coins and currency P 3,300

Paid Vouchers:
Transportation P 600
Gasoline 400
Office supplies 500
Postage Stamps 300
Due from employees 1,200 3,000
Manager’s check returned by bank marked NSF 1,000

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 Check drawn by the company to the order of the
Petty Cash Custodian 2,700
P 10,000

4. What is amount of the petty cash fund balance for statement of financial position
purposes?
A. P 10,000
B. P 7,000
C. P 6,000
D. P 9,000

Solution:
Coins and currency P 3,300
Check drawn by the company to the order of the
Petty Cash Custodian 2,700
PCF balance for SFP purposes P 6,000
(Letter C)

Problem 5 (IA Book Adapted)

On April 1, 2020, Mar Company established an imprest petty cash fund for P 10,000 by writing a check drawn
against its general checking account. On April 23, 2020, the fund contained the following:

Currencies and coins P 3,000

Receipts for office supplies 4,000
Receipts for postage (still unused) 2,000
Receipts for transportation 600

On April 24, the company wrote a check to replenish the fund.

5. What is the amount of the replenishment check under the imprest fund system?
A. P 7,000
B. P 6,600
C. P 10,000
D. P 3,000

Solution:
Petty Cash fund imprest balance P 10,000
Currency and coins on hand (3,000)
Amount of replenishment check P 7,000
(Letter A)

6. How much is the petty cash shortage or overage?

A. P 300
B. P 400
C. P 700
D. P 0

Solution:
Per count:
Currencies and coins P 3,000
Receipts for office supplies 4,000
Receipts for postage (still unused) 2,000
Receipts for transportation 600
Total per count P 9,600
Per ledger (10,000)
Petty Cash Shortage P (400)
(Letter B)
Problem 6 (AICPA)
Apex Corporation’s checkbook balance on December 31, 2019 was P 160,000. The same date Apex held the
following items in its safe:

 A P 5,000 check payable to Apex, dated January 2, 2000, that was not included in the December 31
checkbook balance.
 A P 3,500 check payable to Apex, deposited December 22 and included in the December 31 checkbook
balance, that was returned by the bank on December 30 and marked NSF. The check was redeposited
January 1, 2020 and cleared January 7, 2020.
 A P 25,000 check, payable to a supplier and drawn on Apex’s account, that was dated and recorded
December 31, 2019, but was not mailed until January 15, 2020.

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 7. In its December 31, 2019 statement of financial position, Apex should report cash at:
A. P 156,500
B. P 161,500
C. P 181,500
D. P 185,000

Solution:
Unadjusted checkbook balance, 12.31.2019 P 160,000
NSF Check of customer (3,500)
Undelivered check to supplier 25,000
Cash at 12/31/2019 to be reported in SFP P 181,500
(Letter C)

NOTES:
 A P 5,000 check payable to Apex, dated January 2, 2000, that was not included in the December 31
checkbook balance. (Customer’s Post-dated check – correctly excluded)
 A P 3,500 check payable to Apex, deposited December 22 and included in the December 31 checkbook
balance, that was returned by the bank on December 30 and marked NSF. The check was redeposited
January 1, 2020 and cleared January 7, 2020. (Customer’s NSF Check – incorrectly included)
 A P 25,000 check, payable to a supplier and drawn on Apex’s account, that was dated and recorded
December 31, 2019, but was not mailed until January 15, 2020. (Undelivered check – incorrectly
excluded)

Problem 7 (AICPA)
Burr Company had the following account balances at December 31, 2019:

Cash in bank P 2,250,000

Cash on hand 125,000
Cash legally restricted for additional plant
(expected to be disbursed in 2020) 1,600,000

Cash in bank includes P 600,000 of compensating balance against short-term borrowing arrangement. The
compensating balance is not legally restricted as to withdrawal by Burr.

8. In the current asset section of Burr’s December 31, 2019 statement of financial position,
the total cash to be reported
A. P 1,775,000
B. P 2,250,000
C. P 2,375,000
D. P 3,975,000

Solution:
Cash in bank P 2,250,000
Cash on hand 125,000
Cash to reported at 1/31/2019 P 2,375,000
(Letter

Problem 8 (IA Adapted)

On December 31, 2019, Agenda Company has the following information concerning its cash and cash
equivalents and some other items:

Coins and currency P 50,000

Checks received from customers 600,000
Certificate of deposit, term: 12 months 800,000
Petty Cash Fund 4,000
Postage stamps 600
Bank Alpha, checking account balance 2,100,000
Post-dated check, customer 10,000
Money order from customer 15,000
Cash in savings account 100,000
Bank draft from customer 40,000
Utility deposit to gas company, refundable 5,000
Cash advance received from customer 8,000
NSF Check, Cocoa Company 20,000
Cash advance to company executive, collectible upon demand 200,000
Bank Bravo, checking account, overdraft 20,000

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 IOU from employees 12,000

9. What amount of cash and cash equivalents should Agenda Company report in its
December 31, 2019 statement of financial position?
A. P 2,869,000
B. P 2,874,000
C. P 2,882,000
D. P 2,909,000

Solution:
Coins and currency P 50,000
Checks received from customers 600,000
Certificate of deposit, term: 12 months (Short-Term Investment) -
Petty Cash Fund 4,000
Postage stamps (Supplies) -
Bank Alpha, checking account balance 2,100,000
Post-dated check, customer (Accounts Receivable) -
Money order from customer 15,000
Cash in savings account 100,000
Bank draft from customer 40,000
Utility deposit to gas company, refundable (NCA – Refundable Deposit) -
Cash advance received from customer (Unearned Revenue) -
NSF Check, Cocoa Company (Accounts Receivable) -
Cash advance to company executive, collectible upon demand (Advances to Officers) -
Bank Bravo, checking account, overdraft (Current Liability) -
IOU from employees (Advances to Employees) -
Cash and Cash Equivalents to be reported in SFP at 12/31/2019 P 2,909,000
(Letter D)

Problem 9 (IA Adapted)

Western Company reported a total cash and cash equivalent of P 6,325,000 on December 31, 2019, which
includes the following:

a) Two certificates of deposits, each totaling P 500,000. These certificates of deposits have a maturity of
120 days.
b) A check that is dated January 12, 2020 in the amount of P 125,000.
c) A commercial paper of P 2,100,000 which is due in 120 days.
d) Currency and coins on hand amounted to P 7,700.

Western Company has agreed to maintain a cash balance of P 500,000 in one of its banks at all times and is not
available for withdrawal and to ensure future credit availability (this amount was included in the above balance).

10. How much is the correct amount of cash and cash equivalents that Western Company
should report in its December 31, 2019 statement of financial position?
A. P 2,600,000
B. P 3,100,000
C. P 5,200,000
D. P 6,200,000

Solution:
Cash and Cash Equivalents, unadjusted balance, 12/31/2019 P 6,325,000
Two CTD with maturity of 120 days (P 500,000 x 2) - (Short-Term investment) (1,000,000)
Customer’s Post-Dated Check (Accounts Receivable) (125,000)
Commercial paper (due in 120 days) – (Short-term Investment) (2,100,000)
Restricted compensating balance (Non-current asset) (500,000)
Cash and Cash Equivalents to be reported in SFP at 12/31/2019 P 2,600,000
(Letter A)

QUIZ PROPER PART 2 – CASH COMPOSITION (24 POINTS)

On December 31, 2019, the following data were provided to you by Alabama Corporation:

Cash in bank P 2,000,000

 Included is customer’s check No. 123456 amounting to P 50,000 which is
outstanding for 9 months.
 Check No. 501901 amounting to P 100,000 in payment of accounts payable
was dated and recorded on December 29, 2019 but mailed to creditors on
January 3, 2020.

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  Check No. 501930 amounting to P 150,000 dated January 20, 2020 in payment
of accounts payable was recorded and mailed December 29, 2019.

BPI Time Deposit – 30 days 1,000,000

BDO Time Deposit – 120 days 1,500,000

Money market placement due on April 30, 2020 (placement date – 12/1/2019) 2,000,000
Money market placement due on March 1, 2020 (placement date – 12/20/2019) 1,500,000

Savings deposit in closed bank 100,000

Sinking fund for bonds payable due June 30, 2021 1,500,000

Petty Cash Fund 20,000

 Currencies and coins, P 5,000
 Petty Cash Vouchers – unreplenished, P 13,000
 Vale Slip, P 1,500

Based on the foregoing, answer the following questions (10 POINTS):

1. What is the correct balance of cash in bank at December 31, 2019?

ANSWER P 2,200,000

2. What is the correct balance of petty cash fund at December 31, 2019?

ANSWER P 5,000

3. How much is the petty cash shortage (overage)? (2 POINTS)

ANSWER P 500 shortage

4. What is
the total cash to
be reported in the statement of financial position at December 31, 2019?

ANSWER P 2,205,000

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 5. What is the total cash equivalents to be reported in the statement of financial position at December 31,
2019?

ANSWER P 2,500,000

For succeeding questions,

write NO AJE if it does not require adjusting entry at 12/31/2019 (14 POINTS):
6. What is the adjusting entry for Check No. 123456 as 12/31/2019?
Account Names Debit Credit
Accounts Receivable 50,000
Cash in Bank 50,000
Customer’s Stale Check

7. What is the adjusting entry for Check No. 501901 at 12/31/2019?

Account Names Debit Credit
Cash in Bank 100,000
Accounts Payable 100,000
Undelivered check

8. What is the adjusting entry for Check No. 501930 at 12/31/2019?

Account Names Debit Credit
Cash in Bank 150,000
Accounts Payable 150,000
Post-dated check issued to supplier.

9. What is the adjusting entry for Unreplenished Petty Cash Vouchers at 12/31/2019?
Account Names Debit Credit
Expenses 13,000
Petty Cash Fund 13,000
Unreplenished Petty Cash Vouchers

10. What is the adjusting entry for Vale Slips at 12/31/2019?

Account Names Debit Credit
Advances to Employees 1,500
Petty Cash Fund 1,500
Employees’ salary advances.

11. What is the adjusting entry for petty cash fund shortage (overage) 12/31/2019?
Account Names Debit Credit
Cash Shortage 500
Petty Cash Fund 500
Recognition of cash shortage.

12. Compound AJE for Petty Cash Fund at 12/31/2019

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 Account Names Debit Credit
Expenses 13,000
Advances to Employees 1,500
Cash Shortage 500
Petty Cash Fund 15,000
Various adjustments to petty cash fund.

QUIZ PROPER PART 3 – PROOF OF CASH (20 POINTS)

Indiana Jones Corporation provided you the following data for the month of December 2020.

November 30 December 1

Book balances 4,064,000 6,320,000

Bank balances (per bank statement received on January 5, 2021) 3,780,000 5,800,000
Bank debits 2,160,000
Book credits 2,880,000
Outstanding checks 360,000 1,184,000
Deposit in transit 160,000 996,000
Check erroneously charged by bank against Indiana Jones’ account
and corrected by the bank in subsequent month 80,000 100,000
Cost of checkbooks directly charged by bank against entity’s account 4,000 8,000
Notes receivable recorded as cash receipts by Indiana Jones when
placed with bank for collection. The note is actually collected by
bank in subsequent month and credited by bank to entity’s
account in the same month. 400,000 600,000

Required:
A. Prepare a four-column reconciliation using the adjusted balance method.
B. Prepare one adjusting entry only for December 31, 2020.

SOLUTION:
Requirement A – Proof of Cash using adjusted balance method (16 POINTS)

BEDLAM COMPANY
Proof of Cash
For the month ended December 31, 2020

DECEMBER
November 30 Receipts Disburse. December 31 AJE No.
Unadjusted bank balances 3,780,000 4,180,000 2,160,000 5,800,000
Outstanding checks – November 30 (360,000) (360,000)
Outstanding checks - December 31 1,184,000 (1,184,000)
Deposit in transit – November 30 160,000 (160,000)
Deposit in transit – December 31 996,000 996,000
Bank debit error - November 80,000 (80,000)
Bank debit error - December (100,000) 100,000
Adjusted bank balances 3,660,000 4,936,000 2,884,000 5,712,000

Unadjusted book balances 4,064,000 5,136,000 2,880,000 6,320,000

Bank Service Charge – November (4,000) (4,000)
Bank Service Charge - December 8,000 (8,000) AJE1
Notes collected by bank – November (400,000) 400,000
Notes collected by bank - December (600,000) (600,000) AJE1
Adjusted book balances 3,660,000 4,936,000 2,884,000 5,712,000

Requirement B - Adjusting Journal Entries (4 POINTS)

Date Account Names Debit Credit
2020 (AJE NO. 1)
Dec. 31 Service Charges 8,000
Notes Receivable 600,000
Cash in Bank 608,000

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 QUIZ PROPER PART 4– MCQ THEORY (6 POINTS)
For succeeding questions, select the best answer among the given choices. Write the letter that
corresponds to you answer on the space provided before each number. USE CAPITAL LETTER. (9
POINTS)

D 1. Which of the following should not be considered cash for financial reporting purposes?
A. Petty cash
B. Money Orders
C. Coins and Currencies
D. IOUs

A 2. Which Of the following should not be included as “Cash”?

A. Travel cash advance
B. Certified check
C. Personal check
D. Manager check

B 3. All of the following may be included in “Cash” except:

A. Currency
B. Money market instruments
C. Checking account balance
D. Savings account balance

B 4. Which of the following is usually considered as cash?

A. Certificate of Deposit
B. Checking account
C. Money market savings certificate
D. Treasury bill

A 5. What is the accounting treatment for customer’s post-dated check?

A. Accounts receivable
B. Prepaid expenses
C. Cash
D. Accounts Payable

C 6. Which of the following is not recorded in accounting books as accounts receivable?

A. No sufficient fund check
B. Customer’s post-dated check
C. Undelivered check to creditor
D. Credit sales to customers

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