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AUDITING PROBLEMS – REVIEW


CASH & CASH EQUIVALENTS

PROF. U.C. VALLADOLID


Multiple Choice:
Identify the letter of the choice that best completes the statement or answers the question.

1. The “CASH” account of Angel Corporation’s ledger on December 31, 2017 showed the following:
a. Petty cash fund (including P7,500 unreplenished
voucher of which P2,400 is dated January 3, 2018) P15,000

b. Redemption Fund Account – PNB 500,000

c. Traveler’s check 100,000

d. Money order 10,000

e. Treasury bill, purchased December 1, 2017 (due on Feb. 1, 2018) 50,000

f. Time deposit acquired December 31, 2017 due on March 31, 2018 50,000

g. 180-day Treasury bill, due March 15, 2018 120,000

h. Note receivable in the possession of a collecting agency 20,000

i. PNB – Checking Account #211-009-091 325,900

j. Cash on hand, including customer postdated check of P15,000 23,000

k. Savings deposit, earmarked for acquisition of equipment 210,000

l. A check payable to San Ignacio Incorporated, dated January 5, 2018,


that was deducted in the December 31 PNB Checking Account

#211-009-091 50,000

m. Bond Sinking Fund (used to finance the maturing long-term obligation


on March 31, 2018) 150,000

n. Overdraft in PNB Checking Account #211-099-085 ( 50,000)


o. Check #801 in payment to Accounts Payable, dated Dec. 31, 2017
not mailed until January 5, 2018 20,000

p. Advances to Officers/Employees for Seminars (no liquidation is


required) 80,000
q. Money market placement (due June 30, 2018) 600,000
r. Listed stock held as temporary investment 100,000
s. Check #789 in payment to Suppliers, dated January 5, 2018 and
recorded December 31, 2017. 35,000
t. Customers’ certified checks 10,000
u. Pension Fund 150,000
TOTAL P 2,568,900
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What Angel Corporation’s adjusted cash and cash equivalents balance at December 31, 2017 is:

a. 618,800 b.767,900 c. 673,800 d. 723,800 e. 768,800

2. The cash account of the Cristine Corporation as of December 31, 2017 consists of the following:

On deposit in current account with Real Bank P 900,000


Cash collection not yet deposited to the bank 350,000
A customer’s check returned by the bank for insufficient fund 150,000
A check drawn by the Vice-President of the
Corporation dated January 15, 2018 70,000
A check drawn by a supplier dated December 28, 2017
for goods returned by the Corporation 60,000
A check dated May 31,2017 drawn by the Corporation against the
Piggy Bank in payment of customs duties. Since the importation
did not materialize, the check was returned by the customs
broker. This check was an outstanding check in the reconciliation
of the Piggy Bank account 410,000
Petty Cash fund of which P5,000 is in currency; P3,600
in form of employees’ I.O.U. s; and P1,400 is supported
by approved petty cash vouchers for expenses all dated
prior to closing of the books on December 31, 2017 10,000
Total 1,950,000
Less: Overdraft with Piggy Bank secured by a Chattel
mortgage on the inventories 300,000
Balance per ledger P1,650,000

At what amount will the account “Cash” appear on the December 31, 2017 balance sheet?
a) 1,315,000
b) 1,495,000
c) 1,425,000
d) 1,725,000

3. An examination on the morning of January 2, 2018 by the auditor for the Kaila Company discloses the following items in
the petty cash drawer:

Postage stamps P 220.00


Currency and coins 1,156.60
IOUS from members of the office staff 1,210.00
An envelope containing collections for a gift for a departing
employee, with office names attached 350.00
Petty cash vouchers for miscellaneous expenses (including a
PCV for stamps purchased for 450.00) 985.00
Employee's check postdated January 15, 2018 1,500.00
Employee's check marked "DAIF" 1,890.00
Check drawn by Kaila Company to Petty Cash 3,450.00
P 10,761.60
The ledger account discloses a P10,500 balance for Petty Cash.

1. How much is the cash shortage or overage as of December 31, 2017?


a. P 308.40 c. P 88.40
b. P 41.60 d. P 658.40

2. How much petty cash fund shall be shown as part of "Cash" balance as of December 31, 2017?
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a. P 10,761.60 c. P 4,606.60
b. P 1,156.60 d. P 5,141.60

4. You are making an audit of the San Rafael Company for the year ended December 31, 2017. The balance of the petty
cash account on December 31, 2017 was P15,000. Your count of the imprest cash fund, made at 9:00 a.m. on January
3, 2018, in the presence of Ms G. Gonzaga revealed:

Bills and Coins:


Denomination Quantity
1,000 2
500 4
100 14
50 16
20 10
10 19
5 17
1 25
0.50 21
0.25 28

Checks:
Date Maker Bank Amount
12-28-17 Urquiola, employee PNB 3,000-
12-29-17 Sta. Maria, employee Security Bank 1,500-
12-31-17 L. Chua, customer Asia Trust 2,500-

01-02-18 A. Bobadilla, customer FEBTC 3,200-


01-12-18 C. German, employee Union Bank
(check received 12-28-17) 1,500-
(These checks were all considered good when deposited after dates shown on the checks. The first four checks were
actually deposited January 3; the German check was deposited January 13; all five checks proved to be good.)

Vouchers:
Date Voucher No. Particulars Amount
12-13-17 151 Freight out P 500-
12-28-17 183 Supplies 300-
12-29-17 184 Freight In 394.20
12-31-17 189 Freight on cabinet 741.10
01-02-18 001 Freight in 244.70
IOUs:
12-21-17 S. Dechavez, employee 300-

Sales Invoices (for cash sales; collections handled by Ms. G. Gonzaga)


Inv. # 118 December 30 1,000.40
# 129 December 31 2,500-
# 133 January 2 3,200-

(As a general rule, the petty cashier endeavoured to turn over the proceeds of cash sales to the general cashier every
Friday. Proceeds on these sales were recorded and deposited by the general cashier.)

Unused office supplies 40-

1. What is the cash shortage?


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a. 750.40 b. 802.90 c. 910.40 d. 850.90

2. Adjusting entries for the petty cash fund includes a credit to:

a. Cash Shortage 802.90 b. Petty Cash Fund 4,738.20

c. Petty Cash Fund 4,538.20 d. Cash Shortage 850.90

5. You are making an audit of the Khai Corporation for the past calendar year. The balance of the Petty Cash account at
December 31, 2018 was P1,300. Your count of the imprest cash count made at 8:30 am on January 3, 2019, in the
presence of the petty cash custodian, revealed:

Currency and coins 571.38

Checks:
Date Maker Bank
12/28/2018 Macky, vice-president PNB 360.00
12/29/2018 Andy, employee DBP 60.00
12/31/2018 Bobot, customer RCBC 153.80
01/02/2019 Neil, customer PNB 121.36
01/10/2019 Jeff, employee PNB 60.00
(check received Dec. 29)
(These checks were all considered good when deposited after dates shown on the checks. The first four
checks were actually deposited Jan. 3; the last check was deposited Jan. 11; all five checks proved to be
good.)

Vouchers:
Dec. 11 #261 Richard, shipping clerk – temporary advance for the use of the receiving department.
Your count of Mr. Richard’s fund revealed: currency – P28.80; merchandise freight bills,
P31.20. P 60.00
Dec. 28 # 301 Postage 12.00
Dec. 29 # 302 Freight bill on merchandise purchases 47.30
Dec. 31 # 305 Freight bill on office supplies 88.93
Jan. 2 # 500 Freight bill on merchandise purchases 29.36

IOU Dec. 21 Mabel, employee 36.00

Sales Invoices (for cash sales, collections handled by the petty cashier):
Invoice # 315 Dec. 30 P 120.00
328 Dec. 31 153.80
334 Jan. 2 121.36
(As a general rule, the petty cashier turn over the proceeds of cash sales to the general cashier on the 10th,
20th and last days of each month. Proceeds on these sales were recorded and deposited by the general
cashier.)

Postage Stamps:
Three one-peso stamps. The petty cashier handled postage stamps. These stamps represent the unused
stamps purchased on Voucher # 301.

1. How much is the petty cash fund shortage at December 31, 2018?
a. P 216.39 b. P 123.83 c. P 98.03 d. P 95.03
2. The adjusted petty cash fund balance of Khai Corporation at December 31, 2018 is:
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a. P 900.74b. P 960.74 c. P 1,174.54 d. P 1,234.54


3. What is the amount of operating expenses found in the petty cash fund of Khai Corporation?
a. P 208.23 b. P 205.75 c. P 174.03 d. P 97.93
4. Excluding petty cash fund, the cash account of Candy Corporation is understated at December 31, 2018 by:

a. P 395.16 b. P 273.80 c. P 153.80 d. P 120.00

6. The cash in bank account of Happy Company disclosed a balance of P201,000 as of December 31. The bank statement
as of December 31 showed a balance of P106,000. Upon comparing the bank statement with cash records, the following
facts were developed.

a. The company’s account was charged on December 26 for a customer’s uncollectible check amounting to
P30,000.
b. A two-month, 17% P60,000 customer’s note dated October 25, discounted on November 25, was dishonored on
December 25, and the bank charged the company P62,000, which included a protest fee of P2,000.
c. A customer’s check for P15, 400 was entered as P14,500 by both the depositor and the bank but was later
corrected by the bank.
d. Check No. 1 142 for P12,425 was entered in the cash disbursement journal at P12,245 and check no. 156 for
P3,290 was entered as P32,900.
e. Bank service charges of P1,830 for December were not yet recorded on the books.
f. A bank memo stated that a customer’s note for P25,000 and interest of P1,000 had been collected on
December 28; and the bank charged P500. (No entry was made on the books when the note was sent to the
bank for collection).
g. Receipts on December 31 for P24,000 were deposited on January 2
h. The following checks were outstanding on Dec. 31:
No 123 P3,000 No 154 P4,000
143 2,000 157 6,000
144 7,000 159 7,000
147 3,000 169 5,000
i. A deposit of P20,000 was recorded by the bank on December 5, but it should have been recorded for Happee
Company rather than Happy Company
j. Petty cash of P10,000 was included in the Cash in Bank balance.
k. Proceed from cash sales of P60,000 for December 18 were stolen. The company expects to recover this
amount from the insurance company. The cash receipts were recorded in the books, but no entry was made for
the loss.
l. The December 21 deposit included a check for P20,000 that had been returned on December 15 marked NSF.
Happy Company had made no entry upon return of the check. The redeposit of the check on December 21 was
recorded in the cash receipts journal of Happy Company as a collection on account.

What is the total amount of cash should Happy Company report at year-end?
a. P73,000
b. P93, 000
c. P42, 670
d. P83, 000

7. The Joshtin Company had a weak internal control structure over its cash transactions. Facts about its cash position at
November 30, 2017 were as follows:

The cash books showed a balance of P 1,890,162, which included undeposited receipts. A credit memo of P 10,000 on
the bank’s records did not appear on the books of the company. The balance per bank statement was P 1,555,000.
Outstanding checks were No. 62 for P 11,625, No. 183 for P 15,000, No. 284 for P25,325, No. 8621 for P19,071, No.
8622 for P20,680, and No. 8632 for P14,528.
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The cashier stole all undeposited receipts in excess of P 379,441 and prepared the following reconciliation:

Balance per books, November 30, 2017 P 1,890,162


Add: outstanding checks
8621 P 19,071
8622 20,680
8632 14,528 44,279
P 1,934,441
Less: Undeposited receipts 379,441
Balance per bank, November 30, 2017 P 1,555,000
Deduct: Unrecorded credit memo 10,000
True cash, November 30, 2017 P 1,545,000

1. How much did the cashier steal?


a. 81,590 b. 71,950 c. 61,950 d. 71,590

2. What is the correct amount of cash to be shown on the statement of financial position on November 30,
2017?
a. 1,828,212 b. 1,448,771 c. 1,900,162 d. 1,934,441

8. The Sunshine Corporation engaged your services to audit its accounts. In your examination of cash, you find that the
Cash account represents both cash on hand and cash in bank. You further noted that there is very poor internal control
over cash.
Your audit covers the period ended December 31, 2017. You made a cash count on January 15, 2018, and cash on hand
on this date was determined to be P52,000. Examination of the cashbooks and other evidences of transaction disclosed
the following:
1. January 1 through 15, 2018 collections per duplicate receipts, P199,000.

2. Total of duplicate deposit slips, all dated January 2 through 15, P110,000, includes a deposit representing
collections of December 31.

3. Cash book balance on December 31, 2017 is P465,000, representing both cash on hand and cash in bank.

4. Bank statement for December shows a balance of P424,000.

5. Outstanding checks at December 31:

November checks: Number 183 P 4,500


198 12,500
December check: Number 252 6,000
254 4,000
280 52,000
301 9,000
319 25,000
6. Undeposited collections at December 31, P48,000.

7. An amount of P19,000 representing proceeds of a customer’s note was credited by bank, but is not yet taken up
in the company’s books.
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8. Bank service charge for December, P1,500.

The company cashier presented to you the following reconciliation statement at December 2017, which he prepared:
Balance per books, December 31, 2017 P 456,000
Add: outstanding checks Number 252 P 6,000
254 4,000
280 25,000
301 900
319 15,000 50,900
Total P 506,900
Bank charges (1,500)
Undeposited collections (51,000)
Balance per bank P 454,400
1. How much is the amount of Cash shortage as of December 31, 2017?
a) 121,500 b) 123,500 c) 132,500 d) none of the above
2. How much is the additional shortage in January 2018?
a) 102,400 b) 85,000 c) 58,000 d) none of the above
3. Which is to be included in the audit adjusting entries at December 31, 2017?
a) Dr: Cash 1,600b) Cr: Cash 106,000 c) Cr: Loss 123,500 d) none of the above

9. Your client, Ozz Company, presented you with the following data:

Bank balances
November 30 P 2,500,000
December 31 3,100,000

Bank receipts in December 2,300,000

Book balances
November 30 P 2,390,000
December 31 3,047,000

Book receipts in December 2,206,000

Deposits in transit
November 30 58,000
December 31 47,000

Outstanding checks
November 30 97,000
December 31 46,000

NSF checks returned by bank (recorded by client in the


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month following the return)


November 15,000
December 25,000

Bank service charges (recorded by client in the month following


the month the charge)
November 10,000
December 18,000

Note collected by bank (recorded by the client in the following month)


November 76,000
December 84,000

Erroneous bank charges (corrected by the bank in the following month)


November 30 25,000
December 31 37,000

Erroneous bank credits (corrected by the bank in the following month)


November 45,000
December 50,000

1) How much is the audit adjusted balance of receipts as of December 31?


a) 2,241,000 b) 2,214,000 c) 2,421,000 d) 2,124,000 e) none of the above

2) How much is the audit adjusted balance of disbursements as of December 31?


a) 1,576,000 b) 1,657,000 c) 1,765,000 d) 1,567,000 e) none of the above

3) Which is to be included in the audit adjusting entries for December 31?


a) Cr: Cash in Bank 19,000 b) Dr: Cash in Bank 83,000
c) Dr: Accounts Receivable 19,000 d) none of the above

10. The accountant for the Joshtine 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 marked NSF, and redeposited immediately;
no entry made on books for return or redeposit
8,250
Collection by bank of company's notes receivable 71,815 80,900

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 Joshtine's books 236,452

Based on the application of the necessary audit procedures and appreciation of the above data, you are to provide the
answers to the following:

1. How much is the adjusted cash balance as of June 30?


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a. P87,565 c. P107,082
b. (P3,695) d. P 15,822

2. How much is the adjusted bank receipts for July?


a. P253,787 c. P245,537
b. P214,802 d. P232,881

3. How much is the adjusted book disbursements for July?


a. P220,767 c. P181,782
b. P212,517 d. P206,673

4. How much is the adjusted cash balance as of July 31?


a. P137,817 c. P22,513
b. P112,335 d. P120,585

5. How much is the cash shortage as of July 31?


a. P 8,250 c. P196,144
b. P71,815 d. P 0

11. You are auditing the cash in bank account of Pamela Manufacturing Company as of December 31, 2017.
Your examination revealed the following:

From the bank statement:


Balance, December 1, 2017 P 876,750
Deposits (20) 9,153,760
Check (64) plus debit memos (8,524,300)
Service charges for new checks ( 2,250)
Balance, December 31, 2017 P 1,503,960
From the company’s records:
CASH
Nov. 1 652,070 Nov. 30 CD 6,654,410
Nov. 30 CR 6,824,290 Dec. 1 – Bank reconciliation 38,400
Dec. 31 CR 9,198,720 Dec. 31 CD 8,574,610
CD – Cash disbursements
CR – Cash receipts

Your review of last month’s bank reconciliation and the current bank statement reveals the following.
1. Outstanding checks: November 30, 2017 P254,720
December 31, 2017 335,610
2. Deposit in transit: November 30, 2017 164,220
December 31, 2017 209,180
3. Check no 359 for Office Repairs was written for P6,950 but recorded in the cash disbursements journal as P9,650. The
bank deducted the check as P6,950. The error happened in November and is not yet recorded as of December 31.
4. A check written on the account of the Pamplona Company for P5,830 was deducted by the bank from the Pamela’s
account.
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5. Included with the bank statement was debit memorandum dated December 31 for P24,750 for interest on a note(loans)
taken out by the Pamela Manufacturing Company on November 30.
6. The service charge for the new checks has not been recorded.
7. The November 30 bank reconciliation showed as reconciling items a service charge of P3,500 and a customer’s DAIF
check for P34,900.
1. How much is the audit adjusted balance of Receipts as of December 31?
a) 9,198,720 b) 9,918,270 c) 9,891,720 d) 9,189,270 e) none of the above
2. How much is the audit adjusted balance of Disbursements as of December 31?
a) 8,601,610 b) 8,610,601 c) 8,601,601 d) 8,610,610 e) none of the above
3. Which is to be included in the audit adjusting entries?
a) Dr: Cash in Bank 2,700 b) Cr: Cash in bank 2,200 c) Dr: Interest expense 20,000 d) None of the above

12. Your audit senior instructed you to prepare a four column proof of cash receipts and disbursements for the month of
December, 2017.

The bank reconciliation prepared by Joshtine Company at November 30 is reproduced below:

Unadjusted bank balance Unadjusted book


P96,800 balance P58,640
Add: CM - Note
Add: deposit in transit 18,000 collected 40,320
Total 114,800 Total 98,960
Less outstanding checks: Less: DM bank charges
160
No. 276 P2,400
282 7,200
284 4,800
285 1,600 16,000 .
Adjusted balance P98,800 Adjusted balance P98,800

The December bank statement, which has a beginning balance of P96,800, is reproduced below:
May Bank
Account Name: Joshtine Company
Date Debits Credits
December 01 P18,000
December 02 P7,200 40,000
December 04 24,000
pDecember 06 48,000
December 08 400,000 CM83
December 10 40,000 DM97
December 11 56,000
December 16 20,000
December 18 64,000
December 21 72,400
December 28 36,000 80,000
December 31 4,000 DM98 64,000 CM84
Totals P131,200 P842,400
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DM97 – Customer’s DAIF check CM83 – Note collected by the bank


DM98 – Service Charges CM84 – Account collected by the bank

The company’s cash receipts and cash disbursements journals for the month of December 2017 are provided below:

Cash Receipts Journal Cash Disbursements Journal


Date OR No. Amount Date Check No. Amount
Dec. 01 415 P40,000 Dec. 01 286 P16,000
05 416 48,000 03 287 24,000
10 417 56,000 10 288 32,000
17 418 64,000 14 289 20,000
20 419 72,000 20 290 28,000
27 420 80,000 23 291 36,000
31 421 88,800 26 292 40,000
28 293 44,000
. 31 294 48,000
Total P440,800 Total P304,000

The company’s Cash in Bank ledger appears below:

Cash in Bank
Balance P58,640 12/31/2017 CDJ P304,000
12/01/2017 GJ 40,320
12/2017/2017 GJ 400,000
(CM83)
12/31/2017 CRJ 440,800

Based on the application of the necessary audit procedures and appreciation of the above data, you are to provide the
answers to the following:

1. How much is the outstanding checks as of December 31, 2017?


a. P208,000 c. P216,800
b. P232,800 d. P224,000

2. How much is the adjusted book receipts for December, 2017?


a. P913,200 c. P904,800
b. P985,200 d. P771,600

3. How much is the adjusted book disbursements for December, 2017?


a. P347,840 c. P348,000
b P332,000 d. P339,200

4. How much is the adjusted cash balance as of December 31, 2017


a. P664,000 c. P688,800
b. P680,000 d. P672,800

5. How much is the cash shortage as of December 31, 2017?


a. P24,240 c. P23,840
b. P15,840 d. P 0