Quizzer 1.

2 (Cash Equivalents)

1. An item that should be excluded from cash and cash equivalents on the December 31, 2005 balance sheet of Haydee Company is
a. A customer’s check denominated in foreign currency.
b. A check issued by Haydee Company on December 30, 2005, but dated January 10, 2006.
c. A P1,000,000 time deposit which matures in 4-months
d. A P100,000 balance in the company’s current account maintained as a payroll fund.

2. Which of the following is not a basic characteristic of a system of cash control?

a. Use of a voucher system
b. Combined responsibility for handling and recording cash
c. Daily deposit of all cash received
d. Internal audits at irregular intervals

3. Which is false concerning measurement of cash and cash equivalents?

a. Cash is measured at face value
b. Cash in foreign currency is measured at the current exchange rate
c. If a bank or financial institution holding the funds of the company is in bankruptcy or financial difficulty, cash should be written
down to estimated realizable value.
d. Cash equivalents should be measured at maturity value, meaning face value plus interest

4. If material, deposits in foreign bank which are subject to foreign exchange restriction shall be classified
a. Separately as current asset with appropriate disclosure
b. Separately as non-current asset with appropriate disclosure
c. Separately as current asset without appropriate disclosure
d. Separately as non-current asset without appropriate disclosure

5. Which of the following statements in relation to the cash short or over account is true?
a. It would be impossible to have cash shortage or overage if employees were paid in cash rather than by check
b. The entry to account for daily cash sales for which a small amount of cash shortage existed would include a debit to cash short or
over account
c. If the cash short or over account has a debit balance at the end of the period it must be debited to an expense account
d. A credit balance in a cash shorty or over account should be considered a liability because the short changed customer will
demand return of this amount.

6. What happens when a petty cash is in use?

a. Expenses paid with petty cash are recorded when the fund is replenished
b. Most small amounts are paid from cash receipts before they are deposited
c. Petty cash is debited when the fund is replenished
d. Petty cash fund is credited when the fund is replenished.

7. The petty cash fund account under the imprest fund system is debited
a. Only when the fund is created
b. When the fund is created and every time the fund is replenished
c. When the fund is created and when the size of the fund is increased
d. When the fund is created and when the fund is decreased

8. Unreleased checks (checks drawn before the end of reporting period but held for later delivery to creditors)
a. Shall be treated as outstanding checks
b. Shall be restored to the cash balance
c. Shall be treated as outstanding checks if the date is shortly after the end of the reporting period
d. Shall be treated as outstanding checks if they are ultimately encashed.

9. Which of the following is not considered a cash equivalent?

a. A three-year treasury note maturing on May 30 of the current year purchased by the entity on April 15 of the current year.
b. A three-year treasury note maturing on May 30 of the current year purchased by the entity on January 15 of the current year.
c. A 90-day T-bill
d. All of these

10. At the end of the current year, an entity had various checks and papers in its safe. Which item should not be included in cash in the
current year-end statement of financial position?
a. US $20,000 cash
b. Past due promissory note issued in favor of the entity by the president
 c. Another entity’s P150,000 check payable to the entity dated December 15 of the current year
d. The entity’s undelivered check payable to a supplier dated December 31 of the current year

11. Boggart Company had the following account balances on December 31, 2021:
Cash in bank – current account 1,250,000
Cash in bank – payroll account 250,000
Cash on hand 125,000
Cash in bank – restricted account for building construction
expected to be disbursed in 2022 750,000
Time deposit, purchased December 15, 2021 and
due March 15, 2022 500,000

The cash on hand includes a P50,000 check payable to Boggart Company, dated January 15, 2022. What should be reported as cash
and cash equivalents on December 31, 2021?
a. 1,575,000 b. 2,075,000 c. 1,625,000 d. 2,175,000

12. Eme Company had the following account balances on December 31, 2021:
Cash in bank P4,500,000
Cash on hand P250,000
Cash restricted for addition to plant expected
to be disbursed in 2022 P3,200,000

Cash in bank includes P1,200,000 of compensating balance against short-term borrowing arrangement. The compensating balance
is not legally restricted as to withdrawal by Eme Company. In the December 31, 2021 statement of financial position, what total
cash should be reported under current assets?
a. 3,550,000 b. 4,500,000 c. 4,750,000 d. 7,950,000

13. Aki Company shows the following account balances in their financial records as of December 31, 2022:

Checking account at Chinabank (P20,000); Checking account at Landbank P500,000; Payroll account BPI P100,000; Foreign bank
account-restricted P750,000; Postage stamps, P22,000; employees postdated checks P30,000; IOU from president’s brother
P75,000; traveler’s check P50,000; no sufficient fund check P18,000; petty cash fund (P16,000 in currency and expense receipts for
P84,000) P100,000 and cashier’s check P36,000.

What is the correct cash balance to be reported in the balance sheet of Aki Company on December 31, 2022?
a. P582,000 b. P686,000 c. P702,000 d. P704,000

14. The cash account in the current asset section of Mavis Company showed a balance of P555,000. It was found to include the
following items:

Petty cash fund (P1,000 is in the form of paid vouchers) P5,000; checking account balance per bank statement (a P25,000 check is
still outstanding) P255,000; undeposited receipts (including a post-dated check for P5,000) P120,000; currencies and coins awaiting
deposit P55,000; bond sinking fund cash P100,000; check drawn by manager, returned by bank marked NSF P20,000. What is the
correct cash balance for Mavis Company?
a. P404,000 b. P429,000 c. P430,000 d. P529,000

15. Account of the petty cash fund of Mema Company showed its composition as follows:
Currency and coin 16,500
Paid vouchers
Transportation 3,000
Gasoline 2,000
Office supplies 2,500
Postage stamps 1,500
Due from employees 6,000
Customer’s check returned by bank and marked NSF 5,000
Check drawn by entity to the order of the petty cash custodial 13,500
What is the correct amount of petty cash fund for statement presentation purposes?
a. 50,000 b. 35,000 c. 30,000 d. 45,000

16. The December 31, 2021 trial balance of Ferson Company includes the following accounts:
Petty cash fund 12,500
Current account – PNB 1,000,000
Current account – Allied (overdraft) (62,500)
 Money market placement – BPI 250,000
Time deposit – Metrobank 500,000

The petty cash fund includes unreplenished December 2021 petty cash expense vouchers for P3,750 and an employee check for
P1,250 dated January 31, 2022.

A check for P25,000 was drawn against PNB current account dated and recorded December 29, 2021 but mailed to payee on
January 15, 2022.

The Money market placement was acquired on Dec. 27, 2021 and will mature on February 28, 2022.

The Metrobank time deposit is set aside for land acquisition in early 2022. What amount should be reported as cash and cash
equivalents on December 31, 2021?
a. 1,282,500 b. 1,287,500 c. 1,032,500 d. 1,220,000

17. Sky corporation has supplied you with the following list of its bank accounts and cash at December 31, 2022: Checking account
(compensating balance of P15,000 with no restriction) P48,000; savings account 2%, P30,000; certificate of deposit 6 months, 10%
due on April 20, 2023 P60,000; money market (30-day certificate) current rate 9.75% P40,000; Payroll account P20,000; certificate
of deposit 3 months 10% due February 15, 2023 P75,000 and Petty cash P1,500. What should be the balance to be reported as Cash
and Cash equivalents in the December 31, 2022 statement of financial position of Sky Corporation?
A. P139,500 b. P199,500 c. P214,500 d. 274,500

18. Snow Company had the following transactions all through our the year 2022 which is its first year of operations:
Sales (90% collected in first year) P1,500,000
Bad debt written off 60,000
Disbursements for cost and expenses 1,200,000
Disbursements for income taxes 90,000
Purchases of fixed assets 400,000
Depreciation on fixed assets 80,000
Proceeds from issuance of ordinary share 500,000
Proceeds from short-term borrowings 100,000
Payments on short term borrowings 50,000
What is the cash balance at December 31, 2022
a. P150,000 b. P170,000 c. P210,000 d. P280,000

19. Fanty Company’s checkbook balance on December 31, 2021 was P2,000,000. In addition, Fanty held the following items in its sage
on that date:
 Check payable to Fanty, dated January 2, 2021 in payment of a sale made in December 2020, not included in December 31 book
balance 800,000.
 Check payable to Fanty, deposited January 15, and included in December 31 book balance, but returned by bank on December 30
stamped NSF. The check was redeposited on January 2, 2022 and cleared a week later. 200,000.
 Check drawn on Fanty’s account, payable to vendor, dated on December 31, 2021, but not yet mailed until January 10, 2022.
120,000. The amount was not included in the checkbook balance.
What is the amount to be reported as cash in December 31, 2021?
a. 1,920,000 b. 2,120,000 c. 2,600,000 d. 2,720,000

20. The following information is shown in the accounting records of Brep Company:

What is the cash balance on December 31, 2023 of Brep Company?

324,000 b. 447,000 c. 758,000 d. 915,000