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CASH AND CASH EQUIVALENTS- Datumanguda, Ugokan
Theories
1. A cash equivalent is a short-term, highly liquid investment that is readily convertible into
known amount of cash and
a. Is acceptable as a meant to pay current liabilities.
b. Has a current market value that is greater than its original cost.
c. Bears an interest rate that is at least equal to the prime rate of interest at the date of
liquidation.
d. Is so near its maturity that it presents insignificant risk of change in interest rate.
2. Which of the following should not be included in “cash”?
a. Coins and currency
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand
3. Which item should be excluded from cash and cash equivalents?
a. The minimum cash balance in the entity’s current account which is maintained to
avoid service charges.
b. A check issued by the entity on December 27 of the current year but dated January 15
of next year.
c. Time deposit which matures in one year.
d. A customer’s check denominated in a foreign currency.
4. In which account are customers’ postdated checks received classified?
a. Accounts receivable
b. Prepaid expenses
c. Cash
d. Accounts payable
5. Deposits held as compensating balance
a. Usually do not earn interest.
b. If legally restricted and held against short-term credit may be included as cash.
c. If legally restricted and held against long-term credit may be included among current
assets.
d. None of the above.
6. In reimbursing the petty cash fund, which of the following statements is true?
a. Cash is debited
b. Petty cash is debited
c. Petty cash is credited
d. Expense accounts are debited
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7. The internal control feature that is specific to petty cash is
a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system
8. What is the major purpose of an imprest petty cash fund?
a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the petty cashier
d. To effectively control cash disbursements
9. Which is not considered as 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 treasury bill
d. A 60-day money market placement
10. 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 noncurrent asset with appropriate disclosure.
c. Be written off as an extraordinary loss.
d. As part of cash and cash equivalents.
11. Cash set aside for a particular purpose is
a. Immediately classified as noncurrent asset
b. May be classified as current or noncurrent asset depending on the purpose for its
establishment
c. Still classified as current asset regardless of the purpose of the establishment
d. Recorded in off-balance sheet records
12. Deposits in foreign bank which are subject to foreign exchange restriction should be
classified
a. Separately as current asset with appropriate disclosure.
b. Separately as noncurrent asset with appropriate disclosure.
c. Be written off as loss.
d. As part of cash and cash equivalents.
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13. Which of the following should be considered “cash”?
a. Certified check
b. Postdated check
c. Undelivered check
d. Stale check
14. In which account are postage stamps classified?
a. Receivables
b. Prepaid expenses
c. Cash
d. Payables
15. How is interest earned on cash equivalents shown in statement of cash flows?
a. As an operating activity
b. As an investing activity
c. As a financing activity
d. As a noncash investing and financing activity
16. Which of the following statements in relation to an imprest petty cash is incorrect?
a. The imprest petty cash system in effect adheres to the rule of disbursement by check.
b. Entries are made to the petty cash account only to increase or decrease the size of the
fund or to adjust the balance if not replenished at year-end.
c. The petty cash account is debited when the fund is replenished.
d. The petty cash und is reported as part of current assets.
17. When an imprest petty cash fund is used, which of the following statements is true?
a. The balance of the petty cash fund should be reported in the statement of financial
position as a long-term investment.
b. The petty cashier’s summary of petty cash payments serves as a journal entry that is
posted to the appropriate general ledger account.
c. The reimbursement of the petty cash fund should be credited to the cash account.
d. Entries that include a credit to the cash account should be recorded at the time the
payments from the petty cash fund are made.
18. Which of the following statements in relation to petty cash fund is false?
a. Each disbursement form petty cash should be supported by a petty cash voucher.
b. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund
out of the general cash account.
c. At any time, the sum of the cash in the petty cash fund and the total of petty cash
vouchers should equal the amount for which the imprest petty cash fund was
established.
d. With the establishment of an imprest petty cash fund, one person is given the
authority and responsibility for issuing checks to cover minor disbursements.
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19. It is a practice of opening the books of accounts beyond the close of the reporting period
for the purpose of showing a better financial position and performance.
a. Window dressing
b. Kiting
c. Lapping
d. None of the above
20. It consists of misappropriating a collection from one customer and concealing this
defalcation by applying a subsequent collection made from another customer.
a. Window dressing
b. Kiting
c. Lapping
d. None of the above
21. What is the entry to record increase in fund under imprest fund system?
a. Petty cash fund
xx
Cash in bank
xx
b. Cash in bank
xx
Petty cash fund
xx
c. Cash on hand
xx
Accounts receivable
xx
d. Petty cash fund
xx
Accounts receivable
xx
22. Which of the following statements is incorrect 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 entity is in bankruptcy or
financial difficulty, cash shall be written down to estimated realizable value
d. Cash equivalents shall be measured at maturity value, meaning face value plus
interest
23. Bank overdraft generally should be
a. Reported as a deduction from current assets.
b. Reported as a deduction from cash.
c. Netted against cash and a net cash amount reported.
d. Reported as a current liability.
24. Which of the following is classified as “cash and cash equivalents”?
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a.
b.
c.
d.
Sinking fund
Preference share redemption fund
Travel fund
Insurance fund
25. A cash over and short account
a. Is credited when the petty cash fund proves out over.
b. Is credited when the petty cash fund proves out short.
c. Is debited when the petty cash fund proves out over.
d. Is a contra account to cash.
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Problem Solving
1. On December 31, 2017, Pot Company had the following balances in the bank:
Checking account #101
Time Deposit- 30 days
150-day treasury bill, acquired on Oct. 1,
2017, due on Feb. 1, 2018
180-day treasury bill, due April 2, 2018
90-day treasury bill, due Feb. 28, 2018
2,000,000
300,000
575,000
400,000
150,000
What amount should Pot Company report as cash and cash equivalents?
a. 3,425,000
b. 2,450,000
c. 3,025,000
d. 2,850,000
Checking account #101
Time Deposit- 30 days
90-day treasury bill, due Feb. 28, 2018
Cash and Cash Equivalents
2,000,000
300,000
_____150,000
P2,450,000
2. Wing Company had the following balances on December 31, 2015:
Cash in bank- current account
Cash on hand
Cash in bank- restricted account for
building construction expected to be
disbursed in 2016
Time deposit, purchased Nov. 5, 2015,
and due Feb. 1, 2016
4,500,000
2,150,000
5,000,000
300,000
The cash on hand included a P150,000 check payable to Wing, dated Jan. 7, 2016.
What total amount should be reported as cash and cash equivalents on December 31,
2015?
a. 6,650,000
b. 6,950,000
c. 6,800,000
d. 7,300,000
Cash in bank- current account
Cash on hand
Time deposit
Cash and Cash Equivalents
4,500,000
2,000,000
___300,000
P6,800,000
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3. At year-end, Krisha Company reported cash and cash equivalents which comprised the
following:
Cash on hand
Demand deposit
Postdated customer check
Traveler’s check
Manager’s check
Money order
Petty cash fund
30,000
15,000
7,500
11,250
15,600
12,000
3,500
What total amount should be reported as “cash” at year-end?
a. 79,250
b. 60,350
c. 87,350
d. 64,500
Cash on hand
Demand deposit
Traveler’s check
Manager’s check
Money order
Petty cash fund
Cash
30,000
15,000
11,250
15,600
12,000
____3,500
P87,350
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4. On December 31, 2014, Mitch Company reported cash 2,950,000 with the following
details:
Undeposited collection
Cash in bank- Metrobank checking
account
Undeposited check from a customer, dated
January 7, 2015
Cash in bank- Metrobank fund for payroll
Cash in bank- Metrobank money market
instrument, 90 days
Cash in foreign bank restricted
Total
300,000
450,000
100,000
525,000
875,000
__700,000
2,950,000
On December 31, 2014, what is the correct amount of cash and cash equivalents?
a. 2,150,000
b. 2,950,000
c. 2,075,000
d. 2,850,000
Undeposited collection
Cash in bank- Metrobank checking
account
Cash in bank- Metrobank fund for payroll
Cash in bank- Metrobank money market
instrument, 90 days
Cash and Cash Equivalents
300,000
450,000
525,000
____875,000
P2,150,000
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5. Paidu Company provided the following information on December 31, 2018:
Cash on hand
Security Bank current account
BDO current account no. 1
BDO current account no. 2 (overdraft)
BSP treasury bill-60 days
500,000
890,000
670,000
(75,000)
150,000
The cash on hand included a customer postdated check of P95,000 and postal money
order of P120,000. A check for P150,000 in payment of account was drawn against
Security Bank current account, dated January 20, 2019 but recorded December 31, 2018.
What total amount of cash and cash equivalents should be reported on December 31,
2018?
a. 2,285,000
b. 1,895,000
c. 1,920,000
d. 2,190,000
Cash on hand (500,000-95,000)
Security Bank current account
(890,000 + 150,000)
BDO current account no. 1
BDO current account no. 2
BSP treasury bill-60 days
Cash and cash equivalents
405,000
1,040,000
670,000
(75,000)
____150,000
P2,190,000
6. Far Company had cash in bank of P300,000, petty cash fund of P15,000, cash restricted
for plant expansion fund of P2,500,000, and a bank overdraft in a second account at
another bank of P50,000. What total amount of cash should be reported?
a. 265,000
b. 315,000
c. 2,815,000
d. 2, 765,000
Cash in bank
Petty cash fund
Cash
300,000
__15,000
P315,000
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7. Mhezzy Company provided the following data at year-end:
Cash balance in checking account with
First Bank
Overdraft in checking account with
Second Bank
Currency and coins in petty cash fund
Cash in a special fund for plant expansion
700,000
(230,000)
5,080
2,500,000
What total amount should be reported as cash at year-end?
a. 475,080
b. 700,000
c. 705,080
d. 2,975,080
Cash balance in checking account with First Bank
Currency and coins in petty cash fund
Cash
700,000
____5,080
P705,080
8. Shai Company reported a total cash and cash equivalent of P6,325,000 on December 31,
2014, which includes the following information:
 Two certificates of deposits, each totaling P500,000. These certificates of deposit
have maturity of 120 days.
 A check that is dated January 12, 2015 in the amount of P125,000.
 A commercial paper of P2,100,000 which is due in 120 days.
 Currency and coins on hand amounted to P7,700.
Shai Company has agreed to maintain a cash balance of P500,000 in one of its bank at all
times and it is not available for withdrawal and to ensure future credit availability (this
amount was included in the above balance).
How much is the correct amount of cash and cash equivalents that Shai Company should
report in its December 31, 2014 statement of financial position?
a.
b.
c.
d.
2,600,000
3,100,000
5,200,000
6,200,000
Balance reported
Certificate of deposit
Postdated check
Compensating balance
Commercial paper
Correct cash and cash equivalents
6,325,000
(1,000,000)
(125,000)
(500,000)
(2,100,000)
P2,600,000
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9. Jayrs Corporation’s checkbook balance on December 31, 2016 was P160,000. On the
same date, Jayrs held the following items in its safe:
 A P5,000 check payable to Jayrs, dated January 2, 2015, was not include in the
December 31 checkbook balance.
 A P3,500 check payable to Jayrs which was deposited December 19 and included
in the December 31 checkbook balance, was returned by the bank on December
30 marked NSF. The check was redeposited on January 2, 2017 and cleared on
January 9.
 A P25,000 check payable to supplier and drawn on Jayrs’ account, was dated and
recorded on December 31, but was not mailed until January 19, 2017.
In its December 31, 2016 statement of financial position, how much should Jayrs report
as cash?
a.
b.
c.
d.
156,600
161,500
181,500
185,000
Balance per checkbook
Undelivered check
NSF check
Correct cash balance
160,000
25,000
___(3,500)
P181,500
10. Following were the account balances of Ana Company at December 31, 2019:
Cash on hand
Cash in current and savings accounts
Cash set aside for plant expansion
(expected for payment in 2020)
187,500
3,375,000
2,400,000
Cash in current and savings accounts includes P50,000 as holdout against short-term loan
arrangements. There are no legal restrictions as to withdrawal by Ana on these holdouts.
What is the total cash that should be reported in the current asset section of Ana‘s
December 31, 2019 statement of financial position?
a. 2,662,500
b. 3,375,000
c. 3,562,000
d. 5,962,000
Cash on hand
Cash in current and savings accounts
Total cash
187,500
___3,375,000
P3,562,000
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11. On October 1, Mariam Corporation established an imprest petty cash fund for P15,000 by
writing a check drawn against its general checking account. On Oct. 1, the fund contained
the following:
Currency and coins
Transportation
Telephone
Postage
3,000
4,700
4,400
2,900
On October 1, the entity wrote a check to replenish the fund. What is the amount of
replenishment under imprest fund system?
a. 15,000
b. 13,000
c. 12,000
d. 11,000
Transportation
Telephone
Postage
Total replenishment
4,700
4,400
____2,900
P12,000
12. Dawdaw Company had the following balances on December 31, 2010:
Cash in checking account
Cash in money market account
Treasury bill, purchased Nov. 1, 2010
maturing Jan. 31, 2011
Time deposit purchased Dec. 1, 2010
maturing Feb. 28, 2011
400,000
350,000
2,750,000
1,100,000
What amount should be reported as cash and cash equivalents on Dec. 31, 2010?
a. 750,000
b. 3,500,000
c. 3,850,000
d. 4,600,000
Cash in checking account
Cash in money market account
Treasury bill, purchased Nov. 1, 2010
maturing Jan. 31, 2011
Time deposit purchased Dec. 1, 2010
maturing Feb. 28, 2011
Cash and cash equivalents
400,000
350,000
2,750,000
____1,100,000
P4,600,000
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13. The controller of the Shrek Corporation is trying to determine the amount of cash and
cash equivalents to be reported on its December 31, 2017, statement of financial position.
The following information is provided:
 Balances in the company’s account at the Monte Bank:
Checking account- P540,000
Savings account- P884,000
 Undeposited customer checks of P208,000
 Savings account at the BPI with a balance of P350,000. This account is being
used to accumulate cash for future plant expansion (in 2019).
 P800,000 balance in a checking account at the BPI.
 Treasury bills; 30-day maturity bills totaling P600,000, and 180-day bills totaling
P800,000.
What total amount of cash and cash equivalent should be reported in the current asset
section of the 2017 statement of financial position?
a.
b.
c.
d.
3,032,000
2,432,000
2,932,000
2,332,000
Checking account in Monte Bank
Savings account in Monte Bank
Undeposited customer check
Check account in BPI
Treasury bills with 30-day maturity
Cash and cash equivalents
540,000
884,000
208,000
800,000
_____600,000
P3,032,000
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14. The auditor for Pasaol Corporation examined the petty cash fund immediately after the
close of business July 31, 2016, the end of the company’s natural business year. The petty
cash custodian presented the following during the count:
Currency
Petty cash vouchers
A check drawn by Pasaol payable to the
petty cash custodian
Psotage stamps
An employee’s check, returned by bank,
marked NSF
An envelope containing currency for a gift
for a retiring employee
1,650
3,960
7,200
300
1,000
1,890
The general ledger shows an imprest petty cash fund balance of P16,000. How much is
the petty cash shortage or overage?
a. 2,190 overage
b. 2,190 shortage
c. 1,890 shortage
d. 1,890 overage
Currency
Petty cash vouchers
Replenishment check
Employee’s NSF check
Petty cash accounted
Petty cash fund per ledger
Petty cash shortage
1,650
3,960
7,200
_1,000
13,810
(16,000)
(P2,190)
15. Based on the information given in #14, what is the adjusted balance of the petty cash
fund at July 31, 2016?
a. 10,740
b. 3,540
c. 7,200
d. 8,850
Currency
Replenishment check
Adjusted petty cash balance
1,650
__7,200
P8,850
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16. Ali Company’s checkbook balance at December 31, 2012 was P180,000. In addition, Ali
held the following items in its safe on that date:
 Check payable to Ali dated January 2, 2013 in payment of a sale made in
December 2012, included in December 31 checkbook balance, P65,000.
 Check payable to Ali deposited December 15 but returned by the bank marked
NSF, P20,000.
 Check drawn on Ali’s account, payable to a vendor, dated and recorded on
December 30 but not yet mailed to payee as of December 31, 2012, P15,000.
What is the correct balance of the company?
a.
b.
c.
d.
180,000
110,000
115,000
95,000
Checkbook balance
Postdated check
NSF check
Undelivered check
Correct cash balance
180,000
(65,000)
(20,000)
___15,000
P110,000
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17. A school supplies enterprise, operating on a calendar-year basis, has the following data in
its accounting records:
Cash
Accounts receivable
Inventory
Accounts payable
Sales
Cost of goods sold
Operating expenses
January 1
93,000
105,000
169,000
77,000
December 31
?
138,000
191,000
87,600
890,000
530,000
203,000
What is the expected cash balance for December 31?
a. 271,600
b. 184,400
c. 205,600
d. 294,400
Sales
Cost of goods sold
Operating expenses
Net Income
Increase in Accounts Receivable
Increase in Inventory
Increase in Accounts Payable
Increase in Cash
Cash, January 1
Cash, December 31
890,000
(530,000)
(203,000)
157,000
(33,000)
(22,000)
___10,600
112,600
__93,000
P205,600
18. Mama Corporation had the following account balances on Dec. 31, 2013:
Cash on hand and in bank
Cash restricted for bonds payable due on
June 30, 2014
Savings deposit set aside for dividends
payable on June 30, 2014
3,450,000
5,230,000
4,910,000
What is the total amount that should be reported as cash and cash equivalents?
a. 3,450,000
b. 8,360,000
c. 8,680,000
d. 13,590,000
Cash on hand and in bank
Cash restricted for bonds payable
Savings deposit
3,450,000
5,230,000
__4,910,000
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Cash and cash equivalents
P13,590,000
19. Antok Company had the following account balances on December 31, 2015:
Cash in bank
Cash on hand
Petty cash fund
Cash restricted for additional plant in 2016
670,000
310,500
35,000
1,400,000
Cash in bank included P200,000 of compensating balance against short-term borrowing
arrangement. The compensating balance is not legally restricted as to withdrawal. What
amount should be reported as “cash” on December 31, 2015?
a. 815,500
b. 1,015,500
c. 2,215,500
d. 2,415,500
Cash in bank
Cash on hand
Petty cash fund
Cash
670,000
310,500
______35,000
P1,015,500
20. Puyat Company reported the following information at year-end:
 Share investment of P1,000,000 that are very actively traded in the stock market.
 Government treasury bills of P3,000,000 with a 10-year term but purchased on
December 31 at which time they had two months to go until maturity.
 Cash of P2,100,000 in the form of coin, currency, saving account and checking
account.
 Commercial papers of P1,600,000 with term of nine months but purchased on
December 31 at which time they had three months to go until maturity.
What is the total amount of cash and cash equivalents?
a.
b.
c.
d.
6,700,000
5,100,000
4,600,000
3,200,000
Cash
Government treasury bills
Commercial papers
Cash and cash equivalents
2,100,000
3,000,000
__1,600,000
P6,700,000
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21. The cash account of Kapoy Company’s ledger on Dec. 31, 2011 showed a balance of
P4,610,500 which included the following:
Petty cash fund
Undeposited receipts, including a
postdated customer check of P350,000
Cash in bank
Cash in sinking fund
IOUs signed by employees
Total
43,500
607,000
450,000
2,600,000
__400,000
4,610,500
At what amount should Kapoy report as cash in the Dec. 31, 2011 statement of financial
position?
a. 750,500
b. 1,100,500
c. 3,350,500
d. 3,700,500
Petty cash fund
Undeposited receipts
Cash in bank
Cash
43,500
257,000
__450,000
P750,000
22. On December 31, 2019, Pagod Company had the following cash balances:
Cash in bank-current account
Petty cash fund (all funds were
reimbursed at year-end)
Time deposit-three months, due January
16, 2020
Savings deposit
4,000,000
175,000
1,300,000
800,000
Cash in bank included P500,000 of compensating balance against short-term borrowing
arrangement. The compensating balance is legally restricted as to withdrawal. What total
amount should be reported as cash and cash equivalents?
a. 6,275,000
b. 5,775,000
c. 4,975,000
d. 4,475,000
Cash in bank
Petty cash fund
Time deposit
Savings deposit
Cash and cash equivalents
3,500,000
175,000
1,300,000
____800,000
P5,775,000
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23. Okay Company provided the following information with respect to its cash and cash
equivalents on December 31, 2018:
Checking account at BPI
Checking account at Metrobank
Treasury bonds
Payroll account
Value added tax account
Foreign bank account- restricted
Postage stamps
Employee’s postdated check
IOU from president’s brother
Credit memo from a vendor for a
purchase return
Traveler’s check
NSF check
Petty cash fund (P10,000 in currency and
expense receipts for P35,000)
Money order
(100,000)
475,000
1,500,000
350,000
200,000
2,500,000
10,000
230,000
310,000
150,000
380,000
420,000
45,000
180,000
What total amount should be reported as unrestricted cash and cash equivalent on
December 31, 2018?
a. 1,630,000
b. 1,445,000
c. 1,495,000
d. 1,595,000
Checking account at Metrobank
Payroll account
Value added tax account
Traveler’s check
Petty cash fund
Money order
Unrestricted cash and cash equivalent
475,000
350,000
200,000
380,000
10,000
____180,000
P1,595,000
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lOMoARcPSD|12528915
24. Kengkoy Company had cash in bank of P2,000,000, petty cash fund of P37,500, cash
sinking fund of P2,100,000, and money order of P310,000. How much should be reported
as cash?
a. 2,037,500
b. 2,310,000
c. 2,347,500
d. 4,447,500
Cash in bank
Petty cash fund
Money order
Cash
2,000,000
37,500
___310,000
P2,347,500
25. Tapos Company had cash on hand of P230,000 which included the following:
 A customer check for P43,000 returned by the bank on Dec. 28, 2016. It was
redeposited and cleared the bank on January 2, 2017.
 A customer check for P75,000 dated January 3, 2017, received December 27,
2016.
 Postal money orders received from customers, P30,000.
How much is the correct amount of cash on hand?
a.
b.
c.
d.
112,000
155,000
187,000
200,000
Cash on hand
NSF check
Postdated check
Adjusted cash on hand
230,000
(43,000)
__(75,000)
P112,000
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