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CPA REVIEW SCHOOL OF THE PHILIPPINES

M a n i l a
AUDITING PROBLEMS
AUDIT OF CASH - QUIZZERS
PROBLEM NO. 1
In connection with your examination, the Pon! Co"#an$ presented to you the following
information regarding its Cash in Bank account for the month of December, 2005
a! Balances per bank statements "o#ember $0, %&0',(00, and December $&,
%&&5,200)
b! Balances of cash in bank account in company*s books "o#ember $0, %(2,'25, and
December $&, %&&$,+00)
c! ,otal receipts per books were %&,&&0,-50 of which %.,050 was paid in cash to a
creditor on December 2+)
d! ,otal charges in the bank statement during December were %&,0-+,(50)
e! /ndeposited receipts were "o#ember $0, %+5,$00 and December $&, %50,.00)
f! 0utstanding checks were "o#ember $0, %&$,$'5, and December $&, %-,.50, of
which a check for %2,500 was certified by the bank on December 2.)
g! "12 checks returned, recorded as reduction of cash receipts, were
3eturned by bank on December, recorded also in December, %5,200)
3eturned by bank on December but recorded in 4anuary, %+,$00
h! Collections by bank not recorded by Company were %.0,'50 in "o#ember and
%5(,200 in December)
i! Bank ser#ice charges not entered in company*s books were "o#ember $0, %$,'50
and December $&, %2,&00)
5! 6 check for %+,'50 of 2ound Company was charged to %ound Company in error)
k! 6 check drawn for %+,200 was erroneously entered in the books as %2,+00)
QUESTIONS:
Based on the abo#e and the result of your audit, answer the following
&) 7ow much is the ad5usted cash balance as of "o#ember $0, 20058
a) %&0',(00 b) %&$-,'25 c) %'5,('5 d) %&$',225
2) 7ow much is the ad5usted book receipts for December, 200+8
a) %&,&02,$50 b) %&,&&$,.00 c) %&,05.,-50 d) %&,&0(,+00
$) 7ow much is the ad5usted book disbursements for December, 200+8
a) %&,0(+,'25 b) %&,0'(,.'5 c) %&,0(-,-25 d) %&,0(+,'25
+) 7ow much is the ad5usted cash balance as of December $&, 200+8
a) %&5(,.50 b) %&5$,-00 c) %&.5,200 d) %&.$,+00
5) 7ow much is the cash shortage of December $&, 200+8
a) %&,(00 b) %-,500 c) %+,'50 d) %0
SUGGESTED ANSWERS: B% B% C% D% D
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PROBLEM NO. *
9our audit senior instructed you to prepare a four column proof of cash receipts and
disbursements for the month of 6ugust, 2005)
,he bank reconciliation prepared by F+an, Co"#an$ at 4uly $& is reproduced below :6ll
book ad5ustments were recorded in 6ugust!)
Bank balance %52,000 Book balance %+0,000
6dd deposit in transit, 4uly $& -00
6dd
%roceeds of note
recei#able collected by
bank in 4uly (,000
Deposit made in bank on
4uly $& not recorded in
books until 6ugust &,000
,otal 52,-00 ,otal +-,000
;ess outstanding checks ;ess bank ser#ice charge &00
"o) +$. %200
+50 &,(00
+5& &,+00
+5+ .00 +,000 )
6d5usted balance %+(,-00 6d5usted balance %+(,-00
/pon in<uiry about the client*s 6ugust $& bank reconciliation, you were informed that it has
been lost and that the client is too busy at this time to prepare another) 9our senior told
you to get the 6ugust bank statement and paid checks and to prepare the 6ugust $&
reconciliation so that you may complete the 6ugust proof of cash)
,he 6ugust bank statement is reproduced below
=apuso Bank
6ccount "ame 2ranc Company
Da-. D./i-0 C+.!i-0
4uly $&
6ugust & &,(00 -00
6ugust . &,+00
6ugust - .00 &0,000
6ugust &2 &+0
DM
&+0
6ugust &5 &,000
6ugust 20 '00 &+,000
6ugust 2' &,++0
6ugust 2- &00
EC
&00
EC
6ugust $& ++0
SV
6ugust $& $00
DM
&,(20
SV > 1er#ice Charges? DM > Debit @emo? EC > Arror Corrected? CM > Credit @emo
,he paid checks accompanying this bank statement :all clearing in 6ugust! were :checks
listed in order of payment by bank!)
"o) +50 %&,(00 "o) +55 %&,000 "o) +5( %&,++0
+5& &,+00 +5. '00 +5- &,(20
+5+ .00
,he check register re#ealed that the last check issued in 6ugust was no) +.0 for %&,000
and that check no) +5' was for %2,+00)
Cash recei#ed for the period 6ugust 2& through $& of %-,+00 was deposited in the bank on
1eptember &)
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,he debit memo on 6ugust &2 and 6ugust $& were customer "12 checks returned by the
bank) ,he check on 6ugust &2 was immediately redeposited without entry) ,he check
returned on 6ugust $& was redeposited by the client in the bank on 1eptember & without
entry)
QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the abo#e
data, you are to pro#ide the answers to the following
&) 7ow much is the unad5usted book receipts for 6ugust8
a) %25,&+0 b) %+2,+00 c) %$5,5+0 d) %+$,$00
2) 7ow much is the unad5usted book disbursements for 6ugust8
a) %(,+.0 b) %-,'+0 c) %(,'.0 d) %(,$.0
$) 7ow much is the ad5usted book receipts for 6ugust8
a) %$$,.+0 b) %$$,+50 c) %$+,+00 d) %$$,+00
+) 7ow much is the ad5usted book disbursements for 6ugust8
a) %-,&00 b) %(,-00 c) %-,200 d) %-,$+0
5) 7ow much is the ad5usted cash balance as of 6ugust $&, 20058
a) %'$,-+0 b) %'$,0.0 c) %'$,+00 d) %'$,200
SUGGESTED ANSWERS: B% A% D% A% D
PROBLEM NO. 1
9ou were able to obtain the following information in connection with your audit of the Cash
account of the Pi0o Co"#an$ as of December $&, 2005
"o#ember $0 December $&
a) Balances per bank %'+2,(00 %''+,.-.
b) Balances per books .&-,$0+ .'0,$-2
c) 0utstanding checks 25+,0-. $00,&(+
d) ,he bank statement for the month of December showed total credits of %5,+0&,(00
while the cash receipts per books totaled %-,$+&,'(0)
e) "12 checks are recorded as a reduction of cash receipts) "12 checks which are
later redeposited are then recorded as regular receipts) Data regarding "12 checks
are as follows
&) 3eturned by the bank in "o#) and recorded by the company in Dec), %&,000)
2) 3eturned by the bank in Dec) and recorded by the company in Dec), %25,000)
$) 3eturned by the bank in Dec) and recorded by the company in 4an), %-,200)
f) Check of 1opi Company amounting to %-,2-2 was charged to the company account
by the bank in error on December $&)
g) 6 bank memo stated that the company*s account was credited for the net proceeds of
,@*s note for %(,0.0) ,his is not yet recorded on the books)
h) ,he company has hypothecated its accounts recei#able with the bank under an
agreement whereby the bank lends the company (0B of the hypothecated accounts
recei#able) ,he company performs accounting and collection of the accounts)
6d5ustments of the loan are made from daily sales reports and deposits)
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i) ,he bank credits the company account and increases the amount of the loan for (0B
of the reported sales) ,he loan agreement states specifically that the sales report
must be accepted by the bank before the company is credited) 1ales reports are
forwarded by the company to the bank on the first day following the date of sale) ,he
bank allocates each deposit (0B to the payment of the loan, and 20B to the
company account) ,hus, only (0B of each day*s sales and 20B of each collection
deposits are entered on the bank statement) ,he company accountant records the
hypothecation of new accounts recei#able :(0B of sales! as a debit to Cash and a
credit to the bank loan as of the date of sales) 0ne hundred percent of the collection
on accounts recei#able is recorded as a cash receipt? (0B of the collection is
recorded in the cash disbursements books as a payment on the loan) In connection
with the hypothecation, the following facts were determined
Included in the undeposited collections is cash from the hypothecation of accounts
recei#able) 1ales were %&.2,000 on "o#ember $0, and %&.-,000 at December
$&, the balance was made up of from collections of %&2(,++0 which was entered
on the books in the manner indicated abo#e)
Collections on accounts recei#able deposited in December, other than deposits in
transit, totaled %+,(00,000)
5) Interest on the bank loan for the month of December charged by the bank but not
recorded in the books, amounted to %2+,5.0)
QUESTIONS:
Based on the abo#e and the result of your audit, answer the following
&) 7ow much is the ad5usted cash balance as of "o#ember $0, 20058
a) %.&(,$0+ b) %5&+,.2+ c) %+((,'0+ d) %$5-,&0+
2) 7ow much is the ad5usted book receipts for December, 20058
a) %5,+2',+(( b) %-,$'0,2+0 c) %-,505,++0 d) %-,$50,2.0
$) 7ow much is the ad5usted book disbursements for December, 20058
a) %-,255,--2 b) %-,2+.,'00 c) %-,$+-,+52 d) %5,+0.,'00
+) 7ow much is the ad5usted cash balance as of December $&, 20058
a) %50-,+-2 b) %.&2,2++ c) .02,-52 d) %.$.,(0+
5) 7ow much is the cash shortage as of December $&, 20058
a) %&-,-(0 b) %20,550 c) %-',200 d) %0
SUGGESTED ANSWERS: C% B% B% B% D
PROBLEM NO. 2
,he R#ia3 Co+#o+a-ion was organiCed on 4anuary &5, 2005 and started operation soon
thereafter) ,he Company cashier who acted also as the bookkeeper had kept the
accounting records #ery haphaCardly) ,he manager suspects him of defalcation and
engaged you to audit his account to find out the extent of the fraud, if there is any)
0n "o#ember &5, when you started the examination of the accounts, you find the cash on
hand to be %25,'00) 2rom in<uiry at the bank, it was ascertained that the balance of the
Company*s bank deposit in current account on the same date was %&$&,.+0) Derification
re#ealed that the check issued for %-,2.0 is not yet paid by the bank) ,he corporation
sells at +0B abo#e cost)
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9our examination of the a#ailable records disclosed the following information
Capital stock issued at par for cash %&,.00,000
3eal state purchased and paid in full &,000,000
@ortgage liability secured by real state +00,000
2urniture and fixtures :gross! bought on which there
is still balance unpaid of %$0,000 &+5,000
0utstanding notes due to bank &.0,000
,otal amount owed to creditors on open account 2$&,+20
,otal sales &,.&5,0+0
,otal amount still due from customers +2.,-00
In#entory of merchandise on "o#ember &5 at cost +.-,.00
Axpenses paid excluding purchases $0$,'(0
QUESTIONS:
Based on the abo#e and the result of your audit, compute for the following as of "o#ember
&5, 2005
A B C D
&) Collections from sales &,.&5,0+0 2,0+&,-+0 &,&5$,.00 &,&((,&+0
2) %ayments for purchases &,20',20+ -22,&(0 &,(5+,.20 &,$-&,'(0
$) ,otal cash disbursements $,2'$,+00 2,.25,-(+ 2,(&0,5.0 2,$+0,-.0
+) /nad5usted cash balance &,00',&(0 5$',5(0 '+,'+0 '22,&5.
5) Cash shortage $(-,500 (5-,&00 5'+,0'. 0
SUGGESTED ANSWERS: D% D% C% B% A
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