1

AP - CASH & CASH EQUIVALENTS

Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
1. On December 31, 2016, the cash account of Emerson Company has a debit balance
of P3,500,000. An analysis of the cash account shows the following details:
Undeposited collections
Cash in bank-PCIB checking account
Cash in bank-PNB (overdraft)
Undeposited NSF check received from a customer,
dated December 1, 2016
Undeposited check from a customer, dated January 15, 2017
Cash in bank-PCIB (fund for payroll)
Cash in bank-PCIB (savings deposit)
Cash in bank-PCIB (money market instrument, 90 days)
Cash in foreign bank (restricted)
IOUs from officers
Sinking fund cash
Listed stock held as temporary investment

60,000
500,000
(50,000)

15,000
25,000
150,000
100,000
2,000,000
100,000
30,000
450,000
120,000
P3,500,000

Cash and cash equivalents on Emersons December 31, 2016 balance sheet should be
a. P2,760,000
c. P2,885,000
b. P2,810,000
d. P2,935,000
2. In the course of your audit of the Las Pias Corporation, its controller is attempting to determine the
amount of cash to be reported on its December 31, 2016 statement of financial position. The
following information is provided:
1. Commercial savings account of P1,200,000 and a commercial checking account balance of
P1,800,000 are held at PS Bank.
2. Travel advances of P360,000 for executive travel for the first quarter of the next year (employee
to reimburse through salary deduction).
3. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a long term
debt.
4. Petty cash fund of P10,000.
5. An I.O.U. from a company officer in the amount of P40,000.
6. A bank overdraft of P250,000 has occurred at one of the banks the company uses to deposit its
cash receipts. At the present time, the company has no deposits at this bank.
7. The company has two certificates of deposit, each totaling P1,000,000. These certificates of
deposit have maturity of 120 days.
8. Las Pias has received a check dated January 2, 2017 in the amount of P150,000.
9. Las Pias has agreed to maintain a cash balance of P200,000 at all times at PS Bank to ensure
future credit availability.
10. Currency and coin on hand amounted to P15,000.
Based on the above and the result of your audit, how much will be reported as cash and cash
equivalents at December 31, 2016?
a. P3,025,000
c. P2,575,000
b. P2,825,000
d. P5,025,000

3. An examination on the morning of January 2, 2016 by the auditor for the Joseph Company
discloses the following items in the petty cash drawer:
Postage stamps
Currency and coins
IOUS from members of the office staff
An envelope containing collections for a gift for a departing
employee, with office names attached
Petty cash vouchers for miscellaneous expenses (including a
PCV for stamps purchased for 450.00)
Employee's check postdated January 15, 2016
Employee's check marked "DAIF"
Check drawn by Joseph Company to Petty Cash

P 220.00
1,156.60
1,210.00
350.00
985.00
1,500.00
1,890.00
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, 2015?
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,
2015?
a. P 10,761.60
c. P 4,606.60
b. P 1,156.60
d. P 5,141.60
4. You were assigned to audit the Cash account of COC, Inc. as of December 31, 2015. Your cash
count of the Petty Cash Fund and undeposited collections as of that date showed the following:
Currency and coins
Expense vouchers
Employees' IOUs
Customers' checks in payment of accounts
Total

P 6,400.00
3,000.00
5,500.00
4,800.00
P 19,700.00

The amount of Petty Cash Fund per general ledger is P15,000. Upon comparing the official receipts
with the bank validated deposit slips, you noted that P5,500 was not yet deposited to the bank.
What is the amount of cash shortage?
a. P 100
b. P 800

c. P 5,400
d. P 10,200

5. From the following information, prepare a bank reconciliation statement, using the
adjusted balance method. Also, prepare adjusting entries on the books of Jostine
Company.

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Date

Check No.

Dec. 2
Dec. 18
Dec. 20
Dec. 22
Dec. 27
Dec. 29
Dec. 29
Dec. 29 CM
Dec. 31 DM

Withdrawal

Deposits

Balance

100,000
104
101
106

100,000
90,000
85,000
60,000
110,000
120,000
80,000
110,000
108,000

10,000
5,000
25,000
50,000
10,000

103

40,000
30,000
2,000
JOSTINE COMPANY

Dec 1
Dec 21
Dec 27
Dec 31

Deposit
Deposit
Deposit
Deposit

100,000
50,000
10,000
80,000

MANILA BANK
Dec 4
Dec 6
Dec 8
Dec 8
Dec 10
Dec 14
Dec 28

Check No. 101

Check No. 102
Check No. 103
Check No. 104
Check No. 105
Check No. 106
Check No. 107

5,000
15,000
40,000
10,000
30,000
25,000
50,000

The credit made by the bank on December 29 represents the proceeds of a note received from a
customer which was given to the bank for collection by the company on December 26
6. Bank reconciliation; Computation of adjusted cash in bank balance
The books of JP's Service, Inc. disclosed a cash balance of P687,570 on December 31, 2016. The
bank statement as of December 31 showed a balance of P547,800. Additional information that
might be useful in reconciling the two balances follows:
(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(b) A customer's note dated September 25 was discounted on October 12. The note was
dishonored on December 29 (maturity date). The bank charged JP's account for P142,650,
including a protest fee of P2,650.
(c) The deposit of December 24 was recorded on the books as P28,950, but it was actually a
deposit of P27,000.
(d) Outstanding checks totaled P98,850 as of December 31.
(e) There were bank service charges for December of P2,100 not yet recorded on the books.
(f) JP's account had been charged on December 26 for a customer's NSF check for P12,960.
(g) JP properly deposited P6,000 on December 3 that was not recorded by the bank.
(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been
collected on December 27, and the bank charged a P360 collection fee.
Based on the above and the result of your audit, determine the following:
1. Adjusted cash in bank balance
a. P583,200
b. P577,200

c. P589,200
d. P512,400

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2. Net adjustment to cash as of December 31, 2016
a. P104,370
c. P 98,370
b. P110,370
d. P175,170
7. The LOL 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, 2015. You made cash count on January 15,
2016, and cash on hand on this date was determined to be P 52,000. Examination of the cashbooks
and other evidences of transaction disclosed the following:
1. January 1 through 15, 2016 collections per duplicate receipts, P 199,000.
2. Total of duplicate deposit slips, all dated January 2 through 15, P 110,000, includes a
deposit representing collections on December 31.
3. Cash book balance on December 31, 2015 is P 465,000 representing both cash on hand
and cash in bank.
4. Bank statement for December shows a balance of P 424,000.
5. Outstanding checks at December 31:
November checks:

Number

December checks:

Number

183
198
252
254
280
301
319

P 4,500
12,500
6,000
4,000
52,000
9,000
25,000

6. Undeposited collections at December 31, P 48,000.

7. An amount of P 19,000 representing proceeds of a customers note was credited by bank,
but is not yet taken up in the companys books.
8. Bank service charge for December, P 1,500.
The company cashier presented to you the following reconciliation statement at December 2015,
which he prepared:
Balance per books, December 31, 2015
Add: Outstanding checks
Number 252
254
280
301
319
Total
Bank charges
Undeposited collections
Balance per bank

P 456,000
P 6,000
4,000
25,000
900
15,000

1. What is the amount of cash shortage as of December 31, 2015?

a. 85,000
b. 123,500
c. 78,400
2. What is the amount of additional shortage in January 2016?
a. 85,000
b. 123,500
c. 78,400

50,900
P 506,900
(1,500)
(51,000)
P 454,400

d. 90,100
d. 90,100

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3. What is the adjusted balance of cash as of December 31, 2015?
a. 359,000
b. 482,500
c. 376,000

d. 465,000

4. Which of the following is the correct audit adjusting entry at December 31, 2015?
a. Bank charges
1,500
Receivable from employee
123,500
Notes Receivable
19,000
Cash in bank
106,000
b. Bank charges
Receivable from employee
Notes Receivable
Cash in bank

1,500

c.

Bank charges
Receivable from employee
Notes Receivable
Cash in bank

1,500

d. Bank charges
Receivable from employee
Notes Receivable
Cash in bank

1,500

78,400
19,000
79,900

85,000
19,000
67,500
90,100
19,000
72,600

8. The accountant for the Joshtine Company assembled the following data:
Cash account balance
Bank statement balance
Deposits in transit
Outstanding checks
Bank service charge
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
Collection by bank of company's
notes receivable

June 30
P 15,822
107,082
8,201
27,718
72

July 31
P 39,745
137,817
12,880
30,112
60

71,815

8,250
80,900

The bank statements and the company's cash records show these totals:
Disbursements in July per bank statement
Cash receipts in July per Joshtine's books

P218,373
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?
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

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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
9. Your audit senior instructed you to prepare a four column proof of cash receipts and disbursements
for the month of December, 2016.
The bank reconciliation prepared by Joshtine Company at November 30 is reproduced below:
Unadjusted bank
balance
Add: deposit in transit
Total
Less outstanding
checks:
No. 276
P2,400
282
7,200
284
4,800
285
1,600
Adjusted balance

P96,800
18,000
114,800

16,000
P98,800

Unadjusted book
balance
Add: CM - Note
collected
Total
Less: DM bank
charges

Adjusted balance

P58,640
40,320
98,960
160

.
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
December 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
DM97 Customers DAIF check
CM83 Note collected by the bank
DM98 Service Charges
CM84 Account collected by the bank
The companys cash receipts and cash disbursements journals for the month of December 2016
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 companys Cash in Bank ledger appears below:

12/01/2016
12/2016/2016
12/31/2016

Balance
GJ
GJ
(CM83)
CRJ

Cash in Bank
P58,640 12/31/2016
40,320
400,000

CDJ

P304,000

440,800

QUESTIONS:
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, 2016?
a. P208,000
c. P216,800
b. P232,800
d. P224,000
2. How much is the adjusted book receipts for December, 2016?
a. P913,200
c. P904,800
b. P985,200
d. P771,600
3. How much is the adjusted book disbursements for December, 2016?
a. P347,840
c. P348,000
b P332,000
d. P339,200
4. How much is the adjusted cash balance as of December 31, 2016
a. P664,000
c. P688,800
b. P680,000
d. P672,800
5. How much is the cash shortage as of December 31, 2016?
a. P24,240
c. P23,840
b. P15,840
d. P
0
10. The Jerome Corporation was organized on January 15, 2016 and started operation soon thereafter.
The Company cashier who acted also as the bookkeeper had kept the accounting records very
haphazardly. The manager suspects him of defalcation and engaged you to audit his account to
find out the extent of the fraud, if there is any.
On November 15, when you started the examination of the accounts, you find the cash on hand to
be P25,700. From inquiry at the bank, it was ascertained that the balance of the Companys bank
deposit in current account on the same date was P131,640. Verification revealed that the check
issued for P9,260 is not yet paid by the bank. The corporation sells at 40% above cost.
Your examination of the available records disclosed the following information:
Share capital issued at par for cash
Real state purchased and paid in full
Mortgage liability secured by real state
Furniture and fixtures (gross) bought on which
there is still balance unpaid of P30,000
Outstanding notes due to bank
Total amount owed to creditors on open account
Total sales
Total amount still due from customers
Inventory of merchandise on November 15 at cost
Expenses paid excluding purchases

P1,600,000
1,000,000
400,000
145,000
160,000
231,420
1,615,040
426,900
469,600
303,780

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Based on the above and the result of your audit, compute for the following as of November 15,
2016:
1. Collections from sales
a. P1,188,140
b. P1,153,600

c. P1,615,040
d. P2,041,940

2. Payments for purchases

a. P1,854,620
b. P1,391,780

c. P1,207,204
d. P 922,180

3. Total cash disbursements

a. P2,340,960
b. P3,273,400

c. P2,810,560
d. P2,625,984

4. Unadjusted cash balance

a. P 74,740
b. P722,156

c. P1,007,180
d. P 537,580

5. Cash shortage
a. P574,076
b. P389,500

c. P859,100
d. P
0

11. The Joshtin Company had a weak internal control structure over its cash transactions. Facts about
its cash position at November 30, 2015 were as follows:
The cash books showed a balance of P 1,890,162, which included undeposited receipts. A credit of
P 10,000 on the banks 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.
The cashier stole all undeposited receipts in excess of P 379,441 and prepared the following
reconciliation:
Balance per books, November 30, 2015
Add: outstanding checks
8621
8622
8632
Less: Undeposited receipts
Balance per bank, November 30, 2015
Deduct: Unrecorded credit memo
True cash, November 30, 2015
1. How much did the cashier steal?
a. 81,590
b. 71,950

P 1,890,162
P 19,071
20,680
14,528
44,279
P 1,934,441
379,441
P 1,555,000
10,000
P 1,545,000

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, 2015?
a. 1,828,212
b. 1,448,771
c. 1,900,162
d. 1,934,441
12. You noted the following composition of John Paul Companys cash account as of December 31,
2016 in connection with your audit:
Demand deposit account
Time deposit 30 days
NSF check of customer
Money market placement (due June 30, 2017)

P2,000,000
1,000,000
40,000
1,500,000

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Savings deposit in a closed bank
IOU from employee
Pension fund
Petty cash fund
Customers check dated January 1, 2017
Customers check outstanding for 18 months
Total

100,000
20,000
3,000,000
10,000
50,000
40,000
P7,760,000

Additional information follows:

a) Check of P200,000 in payment of accounts payable was recorded on December 31, 2016 but
mailed to suppliers on January 5, 2017.
b) Check of P100,000 dated January 15, 2017 in payment of accounts payable was recorded and
mailed on December 31, 2016.
c) The company uses the calendar year. The cash receipts journal was held open until January
15, 2017, during which time P400,000 was collected and recorded on December 31, 2016.
The cash and cash equivalents to be shown on the December 31, 2016 statement of financial
position is
a. P3,310,000
c. P2,910,000
b. P1,910,000
d. P4,410,000
13. The cash account of the John Paul Corporation as of December 31, 2016 consists of the following:
On deposit in current account with Montreal Bank
Cash collection not yet deposited to the bank
A customers check returned by the bank for
insufficient fund
A check drawn by the Vice-President of the Corporation
dated January 15, 2017
A check drawn by a supplier dated December 28, 2016
for goods returned by the Corporation
A check dated May 31, 2016 drawn by the Corporation
against the TD 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 TD
Bank account
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, 2016
Total
Less: Overdraft with TD Bank secured by a Chattel
mortgage on the inventories
Balance per ledger

P 900,000
350,000
150,000
70,000
60,000

410,000

10,000
1,950,000
300,000
P1,650,000

At what amount will the account Cash appear on the December 31, 2016 statement of financial
position?
a. P1,315,000
c. P1,495,000
b. P1,425,000
d. P1,725,000
14. You were able to gather the following from the December 31, 2016 trial balance of JP Corporation in
connection with your audit of the company:
Cash on hand

P 500,000

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Petty cash fund
BPI current account
Security Bank current account No. 01
Security Bank current account No. 02
PNB savings account
PNB time deposit

10,000
1,000,000
1,080,000
(80,000)
1,200,000
500,000

Cash on hand includes the following items:

a. Customers check for P40,000 returned by bank on December 26, 2016 due to insufficient
fund but subsequently redeposited and cleared by the bank on January 8, 2017.
b. Customers check for P20,000 dated January 2, 2017, received on December 29, 2016.
c. Postal money orders received from customers, P30,000.
The petty cash fund consisted of the following items as of December 31, 2016.
Currency and coins
Employees vales
Currency in an envelope marked collections for charity
with names attached
Unreplenished petty cash vouchers
Check drawn by JP Corporation, payable to the petty
cashier

P 2,000
1,600
1,200
1,300
4,000
P10,100

Included among the checks drawn by JP Corporation against the BPI current account and recorded
in December 2016 are the following:
a. Check written and dated December 29, 2016 and delivered to payee on January 2, 2017,
P80,000.
b. Check written on December 27, 2016, dated January 2, 2017, delivered to payee on
December 29, 2016, P40,000.
The credit balance in the Security Bank current account No. 2 represents checks drawn in excess of
the deposit balance. These checks were still outstanding at December 31, 2016.
The savings account deposit in PNB has been set aside by the board of directors for acquisition of
new equipment. This account is expected to be disbursed in the next 3 months after the end of the
reporting period.
Based on the above and the result of your audit, determine the adjusted balances of following:
1. Cash on hand
a. P410,000
b. P530,000

c. P470,000
d. P440,000

2. Petty cash fund

a. P6,000
b. P7,200

c. P2,000
d. P4,900

3. BPI current account

a. P1,000,000
b. P1,120,000

c. P1,080,000
d. P1,040,000

4. Cash and cash equivalents

a. P2,917,200
b. P3,074,900

c. P3,052,000
d. P3,066,000

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15. Joshtine Companys newly hired assistant prepared the following bank reconciliation on December
31, 2016:
Book balance
Add: December 31 deposit in transit
Collection of note
Interest on note
Total
Less: Jerome Companys deposit to
our account
Bank service charge
Adjusted book balance
Bank balance
Add: Error on check No. 193
Total
Less: Preauthorized payments for
water bills
NSF check
Outstanding check
Adjusted bank balance

P2,810,000
P1,500,00
0
5,000,000
300,000
2,200,000
90,000

6,800,000
9,610,000
2,290,000
P7,320,000
P11,260,000
9,000
11,269,000

P 248,000
440,000
3,219,000

3,907,000
P7,362,000

Check No. 193 was made for the proper amount P489,000 in payment of account. However it was
entered in the cash payments journal as P498,000. Joshtine authorized the bank to automatically
pay its water bill as submitted directly to the bank.
Based on the above and the result of your audit, the correct cash in bank balance as of December
31, 2016 is
a. P7,320,000
c. P7,341,000
b. P7,362,000
d. P9,541,000