CASH AND CASH EQUIVALENTS

Problem 3: The December 31, 2020 trial balance of Frenchhens Company included the following accounts: Cash on
hand P1,000,000; Petty cash fund 40,000; Cash in bank at Metrobank 2,700,000; Cash in bank at Landbank – 60-day
time deposit 4,000,000; BSP treasury bills - 30 days 6,000,000

 The Cash on hand included a customer postdated check of P200,000 and a postal money order of P80,000
 The Petty cash fund included an unreplenished petty cash vouchers for P4,000 and an employee check for
P6,000 dated January 6, 2021.
 A check for P400,000 was drawn against Metro bank account, dated January 31, 2021, delivered to the payee
and recorded December 31, 2020.
 The Landbank time deposit is set aside for the acquisition of Land to be used as a factory site.

3. What total amount of Cash and Cash Equivalents should be reported in the Statement of Financial Position on
December 31, 2020?
a. 3,930,000
b. 9,530,000
c. 9,930,000
d. 13,930,000
9. Cash or Cash on Hand and In Banks on the balance sheet may include the following items:
(1) Currency or cash items on hand
(2) Deposits in foreign countries which are subject to foreign exchange restrictions
(3) Short-term placements of excess cash which can be preterminated
(4) Postdated checks
(5) Cash set aside for the acquisition or construction of noncurrent assets
(a) 1, 2 and 3 only (c) 1 and 3 only
(b) 2, 3 and 5 only (d) not given

10. Balances representing cash, accounts receivable, and payable denominated in other than the local currency should
be translated for consolidation at the:
(a) historical rate (c) forward rate
(b) spot rate (d) current rate

11. The cash balance reported in the balance sheet normally will not include:
(a) small amounts of cash (petty cash) kept on hand in the office.
(b) checks received from customers and deposited in the bank.
(c) money orders.
temporary investments due in one year.

15. Which of the following is not considered cash for financial reporting purposes?
(a) petty cash funds and change funds (c) coin, currency and available funds
(b) money order and certified checks (d) postdated checks and IOUs

16. Which of the following items in a cash drawer at November 30 is not cash?
(a) money orders (c) a customer check dated December 1
(b) coins and currency (d) a customer check dated November 28

17. If a financial institution has cash funds in a company, which is in bankruptcy, and the amount recoverable is
estimated to be lower than the face amount, cash should be:
i. eliminated from the balance sheet.
ii. written down to its discounted or present value.
iii. written down to estimated realizable value.
iv. stated at face amount.

18. If the deposit is legally restricted as to withdrawal, the compensating balance related to a long-term long is shown
as:
(a) cash (c) long-term investment
 (b) other asset (d) current liability

19. Each of the following measures strengthens internal control over cash receipts except:
i. the use of a voucher system.
ii. preparation of a daily listing of all checks received through the mail.
iii. the deposit of cash receipts intact in the bank on a daily basis.
iv. the use of cash registers.

20. Which of the following is not a basic characteristic of a system of cash control?
i. use of a voucher system
ii. combined responsibility for handling and recording cash
iii. daily deposit of all cash received
iv. internal audits at irregular intervals

21. The following statements relate to the petty cash fund. Which statement is true?
i. The amount of coins and currency in the petty cash fund is the same before the fund is reimbursed as it is
afterwards.
ii. Entries to record the replenishment of the imprest petty cash fund result in debit to various expense accounts
and a credit to the petty cash funds.
iii. At any time, the sum of the cash in the petty cash fund and the total petty cash vouchers should equal the
amount for which the imprest petty cash fund was established.
iv. Under the imprest petty cash system, it is not necessary to adjust unreplenished petty cash expenses at end of
the year.

22. Expenses paid out of the petty cash is recorded under two systems of accounting for petty cash:
Imprest system Fluctuating system

(a) When paid When paid

(b) When replenished When paid
(c) When paid When replenished
(d) When replenished When replenished

23. In reimbursing the petty cash fund, which of the following is true?
(a) cash is debited. (c) petty cash is credited.
(b) petty cash is debited. (d) expense accounts are debited.

24. A cash short or over account:

(a) is not generally accepted.
(b) is debited when the petty cash fund proves out over.
(c) is debited when the petty cash fund proves out short.
(d) is a contra account to cash.

25. Bank reconciliations are needed to:

(a) be sure that all cash receipts are being used efficiently.
(b) assist in determining if cash projects have been correct.
(c) be sure products are not being sold below cost.
(d) identify differences between cash balances reported by the company and its bank.

26. In the process of preparing a bank reconciliation:

(a) outstanding checks should be added to the bank balance of cash.
(b) outstanding checks should be subtracted from the book balance of cash.
(c) all of the reconciling items shown on a bank reconciliation must be entered in the accounting records after the
reconciliation is completed.
(d) items that appear on the reconciliation as corrections to the book balance of cash should be entered in the
accounting records.

27. The reconciling item in bank reconciliation that will result in an adjusting entry by the depositor is:
(a) outstanding checks (c) bank error
(b) deposit in transit (d) bank service charges
28. What is the adjusting entry for a customer NSF check?
(a) debit cash and credit accounts receivable (c) debit service charge and credit cash
(b) debit accounts receivable and credit cash (d) no adjustment is necessary

29. An adjustment to a company’s reported cash balance is needed if:

(a) its bank has incorrectly recorded a check.
(b) a check has been written that has not yet been received by its bank.
(c) a notice of a bank service charge is received with its bank statement.
(d) There was a deposit in transit at the end of the period.

30. On Dream Company’s bank reconciliation at the end of May, the amount of P500 is deducted from the bank
statement balance as a step in determining the adjusted cash in bank balance that should appear on the balance
sheet. A possible explanation for this P500 deduction is:
(a) a check deposited by Dream has been returned by the bank marked NSF.
(b) the bank has collected a note for the account of the company.
(c) a deposit in transit in the amount of P500.
(d) the bank erroneously credited Great Company’s deposit on Dream Company’s bank statement.

31. Which of the following statements is false?

(a) Deposits in transit will cause the balance shown in the depositor’s cash ledger account to be greater than the
balance reported in the bank statement, all other things being equal.
(b) Bank service charges not yet entered in the depositor’s accounting records will cause his balance of cash to
be higher than that reported by the bank, all other things being equal.
(c) Outstanding checks of a depositor will cause the balance of the cash account in his books to be lower than the
balance reported by the bank, all other things being equal.
(d) An error made by the bank in crediting an amount to a depositor’s account requires a correcting journal entry
in the depositor’s own records.

32. Blue Company has the following cash balances at December 31, 2002:
Undeposited coins and currency P 35,000
Unrestricted demand deposits 1,450,000
Company checks written (and deducted from the demand
deposits amount) but not scheduled to be delivered
until January 6, 2003 180,000
Time deposits restricted for use (expected use in 2003) 3,000,000
The unrestricted demand deposits included P150,000 compensating balance but not legally restricted as to
withdrawal. How much should Blue report as cash in its December 31, 2002 balance sheet?
(a) P1,665,000 (b) P1,515,000 (c) P1,520,000 (d) P1,335,000

33. The balance sheet of Mall Company as of December 31, 2002 showed the cash amount of P87,300. It was found
to include the following items:
Postal money orders from customers P2,400
Notes receivable in the possession of a collecting agency 3,200
Receipts for expenses advanced for the account of
certain suppliers 1,600
Customer’s postdated checks 1,500
Customer’s checks returned by the bank marked “NSF” 1,800
Currencies and coins on hand 600
Traveler’s check 500
Checks in payment of accounts, still in the safe of the
cashier, awaiting instructions for delivery to payees 6,000
Petty cash fund (P160 in currency and P840 in expense
receipts) 1,000
The correct cash balance for the balance sheet is:
(a) P82,500 (b) P76,500 (c) P81,660 (d) P72,360
34. A cash count on the morning of January 2, 2002 showed the following items in the petty cash box of Tray
Corporation:
Currencies and coins counted P12,560
Envelope containing contributions to employee’s party 90,000
Approved and paid petty cash vouchers 14,500
Employee’s IOUs 180,000
Company check for fund replenishment 92,000
The petty cash fund was established for an amount of P300,000. What is the correct amount of petty cash on the
balance sheet as of December 31, 2002?
(a) P300,000 (b) P12,560 (c) P104,560 (d) P13,500

35. On April 1, 2002, Mighty Company established an imprest petty cash fund for P10,000 by writing a check drawn
against its general checking account. On April 30, the fund contained the following:
Currency and coins P3,000
Receipts for office supplies 4,000
Receipts for postage (still unused) 2,000
Receipts for transportation 600
On April 25, the company wrote a check to replenish the fund. What is the amount of replenishment under the
imprest fund system?
(a) P7,000 (b) P6,600 (c) P10,000 (d) P3,000

36. If a petty cash fund is established in the amount of P250, and contains P150 in cash and P95 in receipts for
disbursements when it is replenished, the journal entry to record replenishment should include credit(s) to the
following account(s):
(a) petty cash, P75 (c) cash, P95; cash short and over, P5
(b) petty cash, P100 (d) cash, P100

37. Bugoy’s checkbook balance at December 31, 2002 was P50,000. In addition, Bugoy had the following items in its
safe on that date:
1. Check payable to Bugoy, dated December 31, 2002, in payment of a sale made in December 2002 not
included in December 31 checkbook balance, P20,000.
2. Check payable to Bugoy, deposited December but returned by bank on December 30 marked NSF. The
deposit and the return were both reflected in the checkbook, P5,000.
3. Check drawn on Bugoy’s account, payable to a vendor, dated December 30 but not mailed to payee as of
December 31, 2002. The check of P3,000 is not yet recorded.
The proper amount to be shown as cash on Bugoy’s balance sheet at December 31, 2002 is:
(a) P48,000 (b) P65,000 (c) P68,000 (d) P70,000

38. The cash account of Isle Corporation has a balance of P96,000 on December 31, 2002. Your review of the cash
transactions recorded in December revealed the following:
1. Cash receipts included customer’s checks for P4,000 dated January 10, 2003.
2. Cash disbursements included:
Check of P10,000 payable to Ace Company. The check, dated December 23,
had not been paid by the bank as of December 31.
Check of P7,000 payable to King Company. The check was dated December
29 but still undelivered as of December 31.
What is the correct cash balance at December 31, 2002?
(a) P75,000 (b) P89,000 (c) P99,000 (d) P109,000
For items 25 to 29:
The current assets of Multi Company on December 31, 2001 include the following:
Cash on hand P 50,000
Petty cash fund 10,000
Cash in bank 200,000
Accounts receivable 400,000
Inventory 500,000
Marketable equity securities 145,000
Deferred charges 20,000
Total P1,325,000
A. Cash on hand includes:
3. Customer’s check of P4,000 returned by bank on December 26, 2001 due to insufficient funds but
subsequently redeposited and cleared by bank on January 5, 2002.
4. Customer’s check for P6,000 dated January 15, 2002, received December 22, 2001.
5. Postal money orders received from customers, P5,000.
6. Cash withheld from wages for income tax of employees, P15,000.

B. The petty cash fund consists of the following items on December 31, 2001:
7. Currency and coins, P2,800.
8. Employees’ vales, P2,000.
9. Currency in envelope marked “collections for birthday party”, P1,000.
10. Unreplenished petty cash vouchers, P2,000.
11. Check drawn payable to petty cashier, P2,200.

C. Included among the checks in payment of accounts payable drawn by Multi against its current account and
recorded in December 2001 are:
12. Check written and dated December 22, 2001 and delivered to payee on January 5, 2002, P10,000.
13. Check written December 26, 2001 and dated January 21, 2002, delivered to payee on December 26, 2001,
P15,000.

39. How much is the adjusted cash on hand at December 31, 2001?
(a) P40,000 (b) P1,328,000 (c) P5,000 (d) P225,000

40. How much is the adjusted petty cash fund balance at December 31, 2001?
(a) P40,000 (b) P1,328,000 (c) P5,000 (d) P225,000

41. How much is the adjusted cash in bank balance at December 31, 2001?
(a) P40,000 (b) P1,328,000 (c) P5,000 (d) P225,000

42. How much is the correct cash balance on December 31, 2001?
(a) P270,000 (b) P265,000 (c) P275,000 (d) P280,000

43. How much is the total current assets at December 31, 2001?
(a) P1,203,000 (b) P1,328,000 (c) P1,355,000 (d) P1,225,000

44. Cure Company’s newly hired assistant prepared the following bank reconciliation on March 31, 2002:
Book balance P1,405,000
Add: March 31 deposit P 750,000
Collection of note 2,500,000
Interest on note 150,000 3,400,000
Total P4,805,000
Less: Care Company’s deposit to
our account P1,100,000
Bank service charge 45,000 1,145,000
Adjusted book balance P3,660,000
 Bank balance P5,630,000
Add: Error on check no. 123 45,000
Total P5,675,000
Less: Preauthorized payments for
light and water bills P 205,000
NSF checks 220,000
Outstanding checks 1,650,000 2,075,000
Adjusted bank balance P3,600,000

Check No. 123 was made for the proper amount of P249,000 in payment of account. However, it was
entered in the cash payments journal as P294,000. Cure authorized the bank to automatically pay its
light and water bills as submitted directly to the bank. The correct cash in bank balance is:
(a) P3,660,000 (b) P3,600,000(c) P3,630,000 (d) P2,880,000

45. If the month-end bank statement shows a balance of P36,000, outstanding checks are P12,000, a deposit of P4,000
was in transit at month-end, and a check for P500 was erroneously charged by the bank against the account, the
correct balance in the bank account at month-end is:
(a) P27,500 (b) P28,500 (c) P20,500 (d) P43,500

46. The following pertains to Mine Company on December 31, 2002:

Bank statement balance P5,000,000
Checkbook balance 5,600,000
Deposit in transit 2,000,000
Outstanding checks, including P100,000
certified check 500,000
In Mine’s December 31, 2002 balance sheet, cash should be reported at:
(a) P6,600,000 (b) P6,500,000 (c) P7,100,000 (d) P7,200,000

For items 47 and 48:

Apache Company provides the following information for the purpose of reconciling the cash balance per book with balance
per bank statement on December 31, 2001.
1. The bank statement showed a balance of P200,000 on December 31.
2. Outstanding checks as of December 31 amounted to P50,000, including a P10,000 certified check.
3. Deposit in transit on December 31 was P20,000.
4. During December, the bank charged back NSF checks of P15,000, of which P5,000 had been redeposited and cleared by
December 27.
5. On December 23, the bank erroneously credited the account of Apache for P30,000 representing proceeds of loan granted
to another company.
6. During December, the proceeds from notes collected by the bank for Apache amounted to P75,000, net of service charge
of P2,000.

47. What is the cash balance to be shown on the balance sheet on December 31, 2001?
(a) P140,000 (b) P85,000 (c) P150,000 (d) P180,000

48. What is the cash balance per Apache Company’s ledger on December 31, 2001?
(a) P200,000 (b) P85,000 (c) P150,000 (d) P180,000

49. Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation which ends with adjusted cash
balance?
a. Note receivable collected by bank in favor of the depositor and credited to the account of the depositor.
b. NSF customer check.
c. Service charge.
d. Erroneous bank debit.

50. Bank reconciliation are normally prepared on a monthly basis to identify adjustments needed in the depositor’s records and to identify bank
errors. Adjustments on the part of the depositor should be recorded for
a. All items except bank errors, outstanding checks and deposits in transit.
b. Bank errors, outstanding checks and deposits in transit.
c. Book errors, bank errors, deposits in transit and outstanding checks.
d. Outstanding checks and deposits in transit.

END OF QUIZ
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