Chapter 1 - Audit of Cash and Cash Equivalents

PROBLEM NO. 1 - Rev Justice Corporation

Requirement No. 1
Cash on hand, per trial balance 372,000
NSF check (60,000)
Post dated check received (30,000)
Cash on hand, as adjusted 282,000
Requirement No. 2
Petty cash fund per total 10,300
Employees' vales (1,600)
Currency in envelope marked "collections for charity" (1,200)
Unreplenished petty cash vouchers (800)
Petty cash fund, as adjusted 6,700
Requirement No. 3
BPI current account, per trial balance 950,000
Unreleased check 50,000
Post dated check delivered 86,000
BPI current account, as adjusted 1,086,000
Requirement No. 4
Cash on hand (see no. 1) 282,000
Petty cash fund (see no. 2) 6,700
BPI current account (see no. 3) 1,086,000
Security Bank current account no. 1 1,280,000
Security Bank current account no. 2 (40,000) 1,240,000
PNB time deposit (assumed can be preterminated) 300,000
Cash and cash equivalents, as adjusted 2,914,700
Note: The P500,000 PNB savings account will be presented separately from
cash and cash equivalents since it has been earmarked for the acquisition
of a noncurrent asset.
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO. 2
BANK BOOKS
Unadjusted balances, December 31 106,000 203,000
Add (deduct):
a) Customer's uncollectible check (NSF) (30,000) AJE No. 1
b) Dishonored note receivable
(including P2,000 protest fee) (62,000) AJE No. 2
c) Book error in recording collection (P15,400 - P14,500) 900 AJE No. 3
d) Book errors in recording disbursements
Check no. 142 (P12,425 - P12,245) - under (180) AJE No. 4
Check no. 156 (P3,290 - P32,900) - over 29,610 AJE No. 5
e) December bank service charges (1,830) AJE No. 6
f) Note collected by bank (including interest income
of P1,000 and net of service charge of P500) 25,500 AJE No. 7
g) Deposits in transit 24,000
h) Outstanding checks (35,000)
I) Bank error in recording deposit (20,000)
j) Petty cash fund (10,000) AJE No. 8
k) Stolen cash sales to be recovered from insurance co. (60,000) AJE No. 9
l) Double counted deposit - NSF (20,000) AJE No. 10
Adjusted balances, December 31 75,000 75,000
Adjusting J ournal Entries
1) Accounts receivable 30,000
Cash in bank 30,000
2) Accounts receivable 62,000
Cash in bank 62,000
Notes receivable - discounted 60,000
Notes receivable 60,000
3) Cash in bank 900
Accounts receivable 900
4) Accounts payable 180
Cash in bank 180
5) Cash in bank 29,610
Accounts payable 29,610
6) Bank service charge 1,830
Cash in bank 1,830
7) Cash in bank 25,500
Bank service charge 500
Notes receivable 25,000
Interest income 1,000
8) Petty cash fund 10,000
Cash in bank 10,000
9) Claims from insurance co. 60,000
Cash in bank 60,000
10) Accounts receivable 20,000
Cash in bank 20,000
BoomPanes COMPANY
Bank Reconciliation
December 31, 2014
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO. 3
Beginning Receipts Disb Ending
Unadjusted bank balances 230,000 420,000 500,000 150,000
Undeposited collections
November 200,000 (200,000)
December 120,000 120,000
Outstanding checks
November (80,000) (80,000)
December 60,000 (60,000)
Erroneous bank debits
November 10,000 (10,000)
December (20,000) 20,000
Erroneous bank credits
November (40,000) (40,000)
December (30,000) (30,000)
NSF check redeposited (10,000) (10,000)
Adjusted bank balances 320,000 290,000 410,000 200,000
Unadjusted book balances 227,000 270,000 407,000 90,000
Customers' note collected by bank
November 100,000 (100,000)
December 120,000 120,000 AJE No. 1
Bank service charges
November (2,000) (2,000)
December 3,000 (3,000) AJE No. 2
NSF checks
November (5,000) (5,000)
December 7,000 (7,000) AJE No. 3
Adjusted book balances 320,000 290,000 410,000 200,000
- - - -
Adjusting journal entries:
1) Cash in bank 120,000
Note receivable 120,000
2) Bank service charge 3,000
Cash in bank 3,000
3) Accounts receivable 7,000
Cash in bank 7,000
Ngan Company
Proof of Cash
For the month of December, 2014
Chapter 1 - Audit of Cash and Cash Equivalents
AJE No. 1
AJE No. 2
AJE No. 3
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO. 4
Beginning Receipts Disb Ending
Unadjusted bank balances 14,010 281,070 275,450 19,630
Deposits in transit
August 31 2,740 (2,740)
September 30 3,110 3,110
Outstanding checks
August 31 (4,260) (4,260)
September 30 3,870 (3,870)
Certified check (700) 700
Bank error - Check of Yin Company (2,010) 2,010
Cash receipts used for payment 750 750
Adjusted bank balances 12,490 282,190 273,100 21,580
Unadjusted book balances 13,290 279,540 274,635 18,195
Bank collections not in books
August 31 1,200 (1,200)
September 30 1,600 1,600 AJE No. 1
Bank service charges not in books
August 31 (950) (950)
September 30 640 (640) AJE No. 2
NSF checks
Returned in Sept., not recorded 800 (800) AJE No. 3
Returned in Aug., recorded in Sept. (1,050) 1,050
Returned and recorded in Sept. 900 900
Book errors
Customer check (P465-P165) 300 300 AJE No. 4
Disb check (P3,250-P325) (2,925) 2,925 AJE No. 5
Adjusted book balances 12,490 282,190 273,100 21,580
- - - -
Adjusting journal entries:
1) Cash in bank 1,600
Accounts/Notes receivable 1,600
2) Bank service charge 640
Cash in bank 640
3) Accounts receivable 800
Cash in bank 800
4) Cash in bank 300
Accounts receivable 300
5) Cash in bank 2,925
Accounts payable 2,925
Harthart Company
Proof of Cash
For the month of September, 2014
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO. 5
Beginning Receipts Disb Ending
Unadjusted bank balances 76,500 104,000 51,000 129,500
Add (deduct) adjustments:
Undeposited collections
November 20,000 (20,000)
December 54,900 54,900
Outstanding checks
November (42,500) (42,500)
December 90,490 (90,490)
Erroneous bank debit-November 10,000 (10,000) -
Adjusted bank balances 64,000 128,900 98,990 93,910
Unadjusted book balances 39,300 183,900 101,800 121,400
Add (deduct) adjustments:
Bank service charges
November (300) (300)
December 400 (400)
NSF checks
December 6,000 (6,000)
Customers' note collected by bank
November 25,000 (25,000)
Book errors in December
Uncollected customer's note treated as receipts (30,000) (30,000)
Error in recording a check (SB P990, AR P9,900) (8,910) 8,910
Adjusted book balances 64,000 128,900 98,990 93,910
- - - -
(3) (4) (5) (6)
Undeposited collections, December 31:
Deposit in transit, Nov. 30 20,000
Add collections in December:
December book receipts 183,900
Less receipts not representing collections in December:
Customers' note collected by bank, Nov. 30 25,000
Note with the bank treated as receipts 30,000 55,000 128,900
Total 148,900
Less deposits credited by the bank in December:
December bank receipts 104,000
Less receipts not representing deposits:
Erroneous bank debit, Nov.; corrected Dec. 10,000 94,000
54,900 (1)
Outstanding checks, December 31:
Outstanding checks, Nov. 30 42,500
Add checks issued in December:
December book disbursements 101,800
Less disbursements not representing checks for December:
Book error (SB P990, AR P9,900) 8,910
Bank service charge, Nov.; recorded Dec. 300 9,210 92,590
Total 135,090
Less checks paid by the bank in December:
December bank disbursements 51,000
Ubirhed Company
Proof of Cash
For the month of December, 2014
Chapter 1 - Audit of Cash and Cash Equivalents
Less disbursements not representing checks:
NSF checks, Dec. 6,000
Bank service charge, Dec. 400 6,400 44,600
90,490 (2)
Answers: B, B, B, B, B, B
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO. 6
11/30/14 Receipts Disb 12/31/14
Unadjusted bank balances 96,800 842,400 131,200 808,000
Deposits in transit
November 30 18,000 (18,000)
December 31 88,800 88,800
Outstanding checks
November 30 (16,000) (16,000)
December 31
(No. 276,284,285,286,288,290,292,293,294) 216,800 (216,800) (1)
Adjusted bank balances 98,800 913,200 332,000 680,000
Unadjusted book balances 58,640 881,120 * 304,000 635,760
Unrecorded CMs
November 30 40,320 (40,320)
December 31 (CM84) 64,000 64,000
Bank service charges
November 30 (160) (160)
December 31 (DM98) 4,000 (4,000)
NSF check - December (DM 97) 40,000 (40,000)
Book errors
Understatement of OR no. 419
(P72,400 - 72,000) 400 400
Underfooting of CRJ (P448,800-P440,800) 8,000 8,000
Overfooting of CDJ (P288,000-P304,000) (16,000) 16,000
Adjusted book balances 98,800 913,200 332,000 680,000
- - - -
* (P40,320+P400,000+P440,800) (2) (3) (4)
1. C
2. C
3. C
4. C
5. D
FourTwo Company
Proof of Cash
For the month of December, 2014
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO. 7 - Submarine Company
Requirements No. 1 and 2
Bills and coins
Denomination Quantity Amount Total
P100.00 10 1,000
50.00 80 4,000
20.00 70 1,400
10.00 54 540
1.00 410 410
0.50 324 162
0.25 64 16 7,528
Checks
Date Drawer Amount
Dec. 30 Ms. Au 2,400
Dec. 30 Emong De Leon 28,000
Dec. 31 Apol Boba 3,360
Dec. 31 Datu Macmod 35,600
Dec. 31 Tom Guts 16,600 85,960
Unreplenished vouchers
Date Account Amount
Dec. 23 Advances 14,000
Dec. 27 Postage 3,240
Dec. 29 Transportation 300
Dec. 29 Repairs 1,600 19,140 AJE 1
Total cash and cash items counted 112,628
Less accountabilities:
Petty cash 20,000
Unclaimed salaries 15,000 AJE 3
Excess travel advance returned 3,360 AJE 4
Collections per offical receipts 86,600
Unreceipted collection from Emong De Leon 28,000 152,960 AJE 5
Cash shortage (40,332) AJE 6
Requirement No. 3
Petty cash fund per GL 20,000
Unreplenished vouchers (19,140)
Excess travel advance 3,360
Petty cash fund balance, 12/31/14 4,220
Requirement No. 4
1 Advances to officers and employees 14,000
Postage expense 3,240
Transportation expense 300
Repairs and maintenance 1,600
Petty cash fund 19,140
2 Unused postage 730
Postage expense 730
3 Cash 15,000
Salaries payable 15,000
Chapter 1 - Audit of Cash and Cash Equivalents
4 Travel expense [P9,000+P800+(P600-P240)] 10,160
Petty cash fund (personal check of sales manager) 3,360
Advances to officers and employees 13,520
5 Cash 28,000
Accounts receivable 28,000
6 Receivable from custodian 40,332
Cash 40,332
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO. 9 - Napoles Company
Requirement a:
BANK BOOKS
Unadjusted balances, December 31 20,000 61,000
Add (deduct):
Underfooting of cash receipts journal 6,400
Unrecorded loan proceeds 8,000
Overfooting of cash disbursements journal 500
Bank charge - dishonored note guaranteed (5,000)
December bank service charges (1,200) (1,200)
Outstanding checks (5,600)
Deposit in transit (P5,200-P1,800+P2,900) 6,300
Total 19,500 69,700
Cash shortage - actual (50,200)
Adjusted balances 19,500 19,500
-
Requirement b:
Actual cash shortage (see above) 50,200
GL/SL discrepancy on collections (credits to AR):
Amount per individual credits to AR sl 70,400
Less amount per general ledger, corrected 66,400 4,000
Maximum probable shortage 54,200
PROBLEM NO. 10 - Dinar Company
BANK BOOKS
Unadjusted balances 30,200 122,000 (see below)
Petty cash fund (1,300)
Outstanding checks (4,500)
Deposit in transit 5,000
Total 30,700 120,700
Cash shortage (90,000)
Adjusted balances 30,700 30,700
-
Cash receipts:
Owners' investment 150,000
Proceeds from loan 98,000
Collections from customers (see below) 414,000
Total 662,000
Cash disbursements:
Purchases (P250,000 - P15,000) 235,000
Store fixtures (P50,000 - P5,000) 45,000
Loan payment 80,000
Expenses paid 180,000 540,000
Cash balance per books, 12/31 122,000
Collections from customers:
Purchases 250,000
Less merchandise inventory, 12/31 30,000
Cost of sales 220,000
Add gross profit (P220,000 x 120%) 264,000
Sales 484,000
Less AR, 13/31 70,000
414,000
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO. 10 - CPAR Company
Nov. 30 Receipts Disb Dec. 31
Unadjusted bank balances 107,800 1,102,250 1,094,850 115,200
Undeposited receipts:
November 45,300 (45,300)
December 50,600 50,600
Outstanding checks:
November (13,375) (13,375)
December 7,150 (7,150)
Erroneous bank debit (4,750) 4,750
Payment to creditor in cash 6,050 6,050
Adjusted bank balances 139,725 1,113,600 1,089,925 163,400
Unadjusted book balances 82,725 1,110,950 1,080,275 113,400
NSF checks:
Returned, recorded in December 5,200 5,200
Returned, recorded in January 4,300 (4,300)
Unrecorded bank collections:
November 60,750 (60,750)
December 58,200 58,200
Bank service charges:
November (3,750) (3,750)
December 2,100 (2,100)
Book error in December 1,800 (1,800)
Adjusted book balances 139,725 1,113,600 1,089,925 163,400
- - - -
(1) (2) (3) (4)
1. B
2. B
3. C
4. D
5. D
December
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO.11 - ReSA Company
Franc Company
Proof of Cash
For the month of August, 2014
July 31 Receipts Disb August 31
Unadjusted bank balances 52,000 25,140 9,740 67,400
Deposits in transit:
July 900 (900)
August 9,400 9,400
Outstanding checks
July (4,000) (4,000)
August (check nos. 436, 457 and 460) 3,600 (3,600)
Erroneous bank debit, corrected (100) (100)
NSF check redeposited (140) (140)
Adjusted bank balances 48,900 33,400 9,100 73,200
Unadjusted book balances 40,000 42,400 8,460 73,940
Note collected by bank, July 8,000 (8,000)
Unrecorded deposit in July 1,000 (1,000)
Bank service charges
July (100) (100)
August 440 (440)
NSF check not redeposited 300 (300)
Adjusted book balances 48,900 33,400 9,100 73,200
- - - -
Unadjusted book receipts for August:
August collections credited by bank (P10,000 + P14,000) 24,000
Deposit in transit, August 31 9,400
Unrecorded deposit in July recorded in August 1,000
Note collected by bank in July recorded in August 8,000
42,400 1 B
August
Chapter 1 - Audit of Cash and Cash Equivalents
Unadjusted book disbursements for August:
Checks drawn in August (checks no. 455 to 460) 8,360
BSC for July recorded in August 100
8,460 2 A
Note: Nos. 1 and 2 can alternatively be solved by working back
from the adjusted bank balances.
3. D (P33,400)
4. A (P9,100)
5. D (P73,200)
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO.12 - PRTC Company
Nov. 30 Receipts Disb Dec. 31
Unadjusted bank balances 742,800 5,401,800 5,369,904 774,696
Outstanding checks:
November 30 (254,096) (254,096)
December 31 300,184 (300,184)
Erroneous bank debit (9,292) 9,292
Deposits with loan payment (P4.8M x 80%) 3,840,000 3,840,000
Undeposited collections:
December 31 128,440 128,440
Adjusted bank balances 488,704 9,370,240 9,246,700 612,244
Unadjusted book balances 619,304 9,341,780 9,290,692 670,392
NSF checks:
Returned in Nov., recorded in Dec. (1,000) 1,000
Returned and recorded in Dec. 25,000 25,000
Returned in Dec., recorded in Jan. 9,200 (9,200)
Unrecorded bank collection in Dec. 8,060 8,060
Anticipated loan proceeds from AR hypothecation
Nov. 30 sales (P162,000 x 80%) (129,600) 129,600
Dec. 31 sales (P169,000 x 80%) (135,200) (135,200)
Anticipated loan payment from undeposited collections
(P128,440 x 80%) (102,752) 102,752
Interest charge for bank loan in Dec. 24,560 (24,560)
Adjusted book balances 488,704 9,370,240 9,246,700 612,244
- - - -
(1) (2) (3) (4)
1. C
2. B
3. B
4. B
5. D
December
Chapter 1 - Audit of Cash and Cash Equivalents
PROBLEM NO.13 - CRC-Ace Corporation
1 D
Sales 1,615,040
Less: Accounts receivable, 11/15 426,900
Collections from sales 1,188,140
2 D
Cost of sales (P1,615,040/1.4) 1,153,600
Add: Merchandise inventory, 11/15 469,600
Purchases 1,623,200
Less: Accounts payable, 11/15 231,420
Payments for purchases 1,391,780
3 C
4 B
Cash receipts:
Issuance of common stock for cash 1,600,000
Mortgage note payable 400,000
Notes payable - bank 160,000
Collections from sales (see no. 1) 1,188,140
Total 3,348,140
Cash disbursements:
Purchase of real estate 1,000,000
Furniture and fixtures (P145,000 - P30,000) 115,000
Expenses paid 303,780
Payments for purchases (see no. 2) 1,391,780 2,810,560 (3)
Cash balance per books, 11/15 537,580 (4)
5 A
Per bank Per books
Unadjusted balances 131,640 537,580
Deposit in transit 25,700
Outstanding checks (9,260)
Balances 148,080 537,580
Shortage (389,500)
Adjusted balances 148,080 148,080