Audit of Cash and Cash Equivalents BA 123 Exercise Set

Kevin Durant (Petty Cash)

As the representative of Kevin Durant and Associates, CPAs, you are auditing the books of Efiltsew
Company, Inc. as of December 31, 2008. On January 4, 2009, at 8:45 am, you began counting the petty
cash fund and other cash, which might be on hand with the cashier. You found bank notes, coins, checks,
vouchers, and so forth as disclosed below:

Bills: 5 P20’s
Coins:
P5.00 pieces: - 2 loose
P1.00 pieces: - 6 loose
P0.50 pieces: 4 rolls and 14 loose ( 20 pieces to a roll)
P0.25 pieces: - 3 rolls and 22 loose (50 pieces to a roll)

Checks:
Maker Date Payee Amount
Jaz Garcia, the Manager 12/24/2008 Efiltsew Company, Inc. P2,250.00
Froi Lan, petty cash cashier 12/22/2008 Efiltsew Company, Inc. 1,775.00

IOUS:
Eva Nor, clerk 10/21/2008 P125.00
Joe Sep, messenger 12/20/2008 115.00
Wen Na, accountant 12/23/2008 210.00

Unreplenished Petty Cash Voucher

Payee Date Account Charged Amount
SeaLand and Air Co. 12/15/2008 Freight-in P136.50
Mikel Son, cleaning crew 12/17/2008 Advances to Employees 25.00
Office Warehouse 12/18/2008 Supplies 112.50
Office Warehouse 12/20/2008 Supplies 200.00
Jess Toni, messenger 12/21/2008 Miscellaneous expense 102.00
Office Warehouse 12/21/2008 Supplies 83.50

Total petty cash accountability amounted to P2,000.

Further investigation also disclosed that the cash sales of January 2, 2009 amounted to P5,515 as shown
by the sales records while the Cash Receipts Book and the Bank Deposit Slip showed that only P5,415 was
deposited in the bank on January 3, 2009. You also found that the pay envelope of the following
employees had been opened and the money removed. Each envelope was marked “Unclaimed” and
opened.
Pat. Lim week ended 12/30/2008 P1,450
Chris Tan week ended 12/23/2008 P1,550.

Required: Based on the above information:

1. Prepare the necessary working papers to compute for the audited cash balance.
2. Prepare the adjusting journal entries.
Audit of Cash and Cash Equivalents BA 123 Exercise Set

Plaridel Glass (Petty Cash)

Mila Lim is the cashier of the Plaridel Glass Company. As representative of the Reyes, Tan and Associates,
CPAs, you were assigned to verify her cash on hand in the morning of January 4, 2012. You began to count
at 9:00AM in the presence of Miss Lim. In the course of your counting, you found currencies in paper bills
and coins together with checks, vouchers and other items, which are mentioned below:

Bills 2 fifties & 9 twenties

Coins
₱10.00 13 loose
5.00 5 loose
1.00 74 loose
0.25 5 rolls and 32 loose (50 pieces to a roll)
0.1 10 rolls and 15 loose (50 pieces to a roll)
0.05 16 rolls and 9 loose (40 pieces to a roll)
Checks
Maker Date Payee Amount
Jose Cruz, Asst. Manager 12/23/11 Plaridel Glass Co. ₱60.00
Mila Lim, Cashier 12/26/11 Plaridel Glass Co. 40.00
[Link]
A. David, Janitor 12/20/11 ₱35.00
R. Tirao, Clerk 12/22/11 25.00
Pedro Munar, 12/24/11 15.00
Bookkeeper

Petty Cash Vouchers for Replenishment

Payee Date Account Charged Amount
L. Bilbao, Messenger 12/16/11 Advances to employees ₱10.00
Rosario & Co. 12/17/11 Supplies 14.50
Victory Liner 12/18/11 Freight-in 18.25
Bureau of Posts (Stamps) 12/18/11 Supplies 30.00
A. Vallo, Carpenter 12/20/11 Repairs 45.00
B. Tello 12/21/11 Miscellaneous expense 15.40

Your investigation also disclosed the following:

1. The balance of petty cash fund per books is ₱900.
2. Cash sales of January 2, 2012 amounted to ₱865 per sales records while cash receipts book and
deposit slip showed that only ₱765 was deposited in the bank on January 3, 2012.
3. The following employees’ pay envelopes had been opened and the money removed. Each envelope
was marked “unclaimed”.
N. Roy ₱33.25
G. Gloria 24.75

Required:
1. Prepare working papers showing your cash count.
2. Prepare necessary adjusting journal entries in the books of the company.
Audit of Cash and Cash Equivalents BA 123 Exercise Set

Eveready's Service, Inc. (Bank Reconciliation)

The books of Eveready's Service, Inc. disclosed a cash balance of P68,757 on June 30. The bank statement
as of June 30 showed a balance of P54,780. Additional information that might be useful in reconciling the
two balances follows:
(a) Check number 748 for P3,000 was originally recorded on the books as P4,500.
(b) A customer's note dated March 25 was discounted on April 12. The note was
dishonored on June 29 (maturity date). The bank charged Eveready's account for
P14,265, including a protest fee of P42.
(c) The deposit of June 24 was recorded on the books as P2,895, but it was actually a
deposit of P2,700.
(d) Outstanding checks totaled P9,885 as of June 30.
(e) There were bank service charges for June of P210 not yet recorded on the books.
(f) Eveready's account had been charged on June 26 for a customer's NSF check for
P1,296.
(g) Eveready properly deposited P600 on June 3 that was not recorded by the bank.
(h) Receipts of June 30 for P13,425 were recorded by the bank on July 2.
(i) A bank memo stated that a customer's note for P4,500 and interest of P165 had
been collected on June 27, and the bank charged a P36 collection fee.

Prepare a bank reconciliation statement, using the form reconciling bank and book balances to the correct
cash balance.

Mississippi River Company (Comprehensive Bank Reconciliation)

On January 10, 2015, you started the audit of the financial records of the Mississippi River Company for
the year-ended December 31, 2014. From your investigation, you discovered the following:

a. The bookkeeper acts also as the cashier. Her December 31, 2014, year-end cash reconciliation
contained the following items:
Cash per ledger, 12/31/2014 P61,400
Cash per bank, 12/31/2014 64,850
Checks outstanding 5,220
Nadi Co. check charged by bank in error 12/20/2014; 150
corrected by the bank on 01/05/2015
Cash in transit, credited by bank on 01/02/2015 720

b. The cash account balances per ledger as of 12/31/2014 were:

Cash P61,400
Petty cash 150

c. The count of the cash on hand at the close of the business on January 10, 2015, including the petty
cash, was as follows:
Currency and coins` P385
Expense voucher 20
Employees’ IOU’s dated 01/05/2015 55
Customers’ checks in payment of account 290
Audit of Cash and Cash Equivalents BA 123 Exercise Set

d. From January 2, 2015 to January 10, 2015, the date of your cash count, total cash receipts appearing
in the cash records were P8,600. According to the bank statement for the period from January 2,2015
to January 10,2015, total deposits were P7,600.
e. On July 5, 2014, cash of P400 was received on account from a customer; the allowance for doubtful
accounts was charged and Accounts Receivable was credited.
f. On December 5, 2014, cash of P300 was received on account from a customer; Inventory was charged
and Accounts Receivable was credited.
g. Cash of P730 received during 2014 was not recorded.
h. Checks received from customers from January 2, 2015 to January 10, 2015, totaling P420, were not
recorded but were deposited in the bank.
i. On July 1, 2014, the bank refunded interest of P20 because a note of the Mississippi River Company
was paid before maturity. No entry was made for the refund.
j. In the cashier’s petty cash, there were receipts for collection from the customers on January 9, 2015,
totaling P850; these were unrecorded and undeposited.
k. In the outstanding checks, there is one for P50 made payable to a trade creditor; investigation shows
that this check had been returned by the creditor on June 14, 2014 and a new check for P100 was
issued in its place; the original check for P50 was made in error as to amount.
Required: a. Compute the correct bank balance as of 12/31/2014.
i. Compute the cash shortage as of 12/31/2014.
ii. Compute for the cash shortage for the period 01/01/2015 to 01/10/2015.

Fabulous Company (Simple Proof of Cash)

The accountant for the Fabulous Company assembled the following data:
June 30 July 31
Cash account balance P 15,822 P 39,745
Bank statement balance 107,082 137,817
Deposits in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge* 72 60
Customer's check deposited July 10, returned by bank on July 16 8,250
marked NSF, and redeposited immediately; no entry made on books
for return or redeposit
Collection by bank of company's notes receivable 71,815 80,900
* (Recorded on books in month following charge or collection) ...........................

The bank statements and the company's cash records show these totals:

Disbursements in July per bank statement ................ P218,373

Cash receipts in July per Fabulous’ books ................ 236,452
Checks written in July per Fabulous’ books ............... 212,529
Receipts in July per bank statement ..................... 249,108

Prepare a 4-column bank reconciliation as of July 31, using the form that reconciles both the book and
bank balances to a correct cash amount.
Audit of Cash and Cash Equivalents BA 123 Exercise Set

Palma Hall Company

Palma Hall Company deposits all receipts and makes all payments by check. The following information is
available from the cash records:

MARCH 31 BANK RECONCILIATION

Balance per bank P26,746

Add: Deposits in transit 2,100
Deduct: Outstanding checks (3,800)
Balance per books P25,046

Month of April Results

Per Bank Per Books
Balance April 30 P28,495 P24,855
April deposits 10,784 12,889
April checks 11,100 13,080
April note collected (not included in April deposits) 3,000 -0-
April bank service charge 35 -0-
April NSF check of a customer returned by the bank
(recorded by bank as a charge) 900 -0-

Instructions
(a) Calculate the amount of the April 30:
1. Deposits in transit
2. Outstanding checks
(b) What is the April 30 adjusted cash balance?

WonderTwin

You have completed your examination of the cash on hand and in banks in your audit of the WonderTwin
Company’s financial statements for the year-ended December 31, 2008, and noted the following:

1. The company maintains a general bank account at the Continental Bank and an imprest payroll
account at the First Republic Bank. All checks are signed by the company president Allan Co.
2. Data and reconciliation prepared by Choeri Fer, the Company accountant, at November 30, 2008,
indicated that the payroll account had a P1,000 general ledger and bank balance with no in-transit
or outstanding items. The general bank account had a P12,405 general ledger balance with checks
outstanding aggregating P918 (#1403 for P575 and #1404 for P343) and one deposit of P492 in
transit.
3. Your surprise cash count on January 2, 2009 revealed customers’ checks totaling P540 and a
Continental Bank deposit slip for that amount dated December 29, 2008, were in the company
safe and that no cash was in transit to the bank at that time. Your examination of the general
account checkbook revealed Check #1416 to be the first unused check.
4. The Cash ledger for the period of December is reprinted below:
Audit of Cash and Cash Equivalents BA 123 Exercise Set

5. The December statements from both banks were delivered unopened to you. The First Republic
bank statement contained the following:
Deposits P 1,675.00
1,706.00
1,845.00
2,597.00

A total of 72 checks were paid totaling P7,823.

The bank statement of Continental Bank is reprinted below:

Audit of Cash and Cash Equivalents BA 123 Exercise Set

6. Cutoff statement were secured by you personally from both banks on January 8, 2009, and the
Continental Bank statement reproduced below:

7. You determined that the bank statements are correct except that the Continental Bank incorrectly
charged a returned check on December 21 but credited the account the same day.
8. The P362 check charged by the Continental Bank on December 28 was Check #1407 drawn
payable to Wonder Twin Company and endorsed “Wonder Twin Company by Choeri Fer”.
9. Your investigation showed that the amount credited by Continental Bank to Wonder Twin’s
account on December 29 was an unauthorized transfer from the First Republic Bank to the
Continental Bank account by the company’s bookkeeper who made no related entry in the
company’s records. The check was charged to Wonder Twin Company on January 2, 2009, on the
cut-off statement received by you from the First Republic Bank.
10. Drafts charged against the Continental Bank account were made for trade acceptances which
were signed by Allan Co and issued to a supplier.
11. On December 28, a 60 day, 6% P1,000 note was collected by Continental Bank for Wonder Twin
for a P4.00 collection fee.
12. The P12 debit memo from the Continental Bank was a charge for check printing.
13. Check #1413 was issued to replace Check #1404 when the latter was reported not received by the
vendor. Because of the delay in paying this account, Wonder Twin Company was no longer
entitled to the 2% discount it had taken in preparing the original check.
Audit of Cash and Cash Equivalents BA 123 Exercise Set

Required:

As the auditor of Wonder Twin Company, you are to prepare a 4 column bank reconciliation (proof of
cash) for the client’s Continental Bank account. Present the adjusted bank and book balances.

JP Rizal and Co. CPAs

You are a junior auditor from JP Rizal and Co. CPAs. You are assigned to Metro Tanay Malls, Inc. Your
senior assigned you to audit the cash account as of December 31,2015.

You performed a surprise cash count on January 5, 2016, the first working day of the year. Based on the
company’s records, the imprest petty cash fund to account for is P3,400. The count of the items presented
by the cashier as composing the fund was as follows:

Currency (bills and coins) P2,200

Cashed checks 500
Vouchers (made out in pencil and signed 740
by the recipients)
NSF checks (dated June 10 and 15) 260
Copy of petty cash receipt vouchers:
Return of expense advance P200
Customer payment 100

There were also unclaimed wage envelopes mingled with the petty cash fund. The envelopes were sealed
and the amounts were not shown.

The following day, the petty cash custodian produced vouchers totaling P400 and explained that these
vouchers had been temporarily misplaced the previous day. They were for wage advances to employees.

The Client maintains two bank accounts with Bank of Urban Manila and Solid East bank. The details of
the Bank of Urban Manila account are presented below:

1. Bank statement:
Balance, November 30, 2015 P124,633.62
Deposit 211,693.97
Withdrawal 188,849.95

a. Included in the bank statement was P1223.89 worth of NSF check returned by the bank.
b. Bank service charge for December amounted to P219.28.
c. One of the bulk customers paid their account directly to the bank, P18,975.
d. Interest earned for the month of December amounted to P569.25.

2. Cash receipts and disbursements books

Balance, November 30, 2015 P130,577.98
Withdrawal 188,858.93
Balance, December 31, 2015 143,030.26
Audit of Cash and Cash Equivalents BA 123 Exercise Set

3. Based on your analysis of the deposit slip file, you noted that:
a. December 31, 2015 deposit of P15,892.48 was not reflected in the December bank statement.
b. November 30 deposit amounting to P12,064.36 was recorded in the December bank
statement.

4. Based on your analysis of check register, you noted that:

a. P6,120 worth of checks issued prior to November 30, 2015 were encashed in December.
b. Of the checks issued as of December 31, 2015, P7,392.15 remains outstanding.
c. Check #7643 was erroneously recorded in the check register as P1,536.98. The cancelled
check was written for P1,356.98.

The Cash in Solid East Bank ledger accounts has a balance of P65,684.88 as of December 31, 2015. Based
on your audit, you noted that this balance included undeposited receipts as of year-end.

The December 31 bank statement from Solid East reflected a balance of P57,966. You noted that a credit
for P800.00 was not recorded in the company’s books. This pertained to a fund transfer made a customer
in payment of their account.

Based on your comparison of the check register and the bank statement, you gathered the following
outstanding checks as of year-end:

Check # Amount
00003258 P472.80
00003301 520.00
00003320 1,013.00
00003314 762.84
00003322 1,627.20
00003333 661.16

You were later provided a copy of the December bank reconciliation for the Solid East bank account:

Balance per books, December 31 P65,684.88

Add: Outstanding checks
Check # 00003314 762.84
00003322 1,627.20
00003333 661.16 3,053.20
68,736.08
Less: Undeposited receipts 10,770.08
Balance per bank, December 31 57,966.00
Unrecorded credit 800.00
True cash balance P 57,166.00

Required:
A. Petty Cash:
1. Audited petty cash balance _________.
2. Cash shortage _________.
Audit of Cash and Cash Equivalents BA 123 Exercise Set

B. Cash in Bank of Urban Manila

Using proof of cash, compute for the following:
1. Adjusted book and bank balance ________.
2. Total receipts for December _________
3. Total disbursements for December ________
4. Total undeposited receipts __________

C. Cash in Solid East Bank

1. Cash shortage _________.
2. Total undeposited receipts __________.
3. Adjusted book and bank balance _________.

D. Total Cash balance as of December 31, 2015.

E. Summary of adjusting journal entries.