AUDIT OF CASH
The bank statement for the checking account of MAGANDA Corporation showed a December
31, 2019 balance of P1,563,870. Information that might be useful in preparing a bank
reconciliation is as follows:
a. Outstanding checks were P135,750.
b. The December 31, 2019, cash receipts of P56,250 were not deposited in the bank until January 2,
2020.
c. One check written payment of rent for P24,600 was correctly recorded by the bank but was
recorded by Matagumpay as P26,400 disbursement.
d. In accordance with prior authorization, the bank withdrew P45,000 directly from the checking
account as payment on a mortgage note payable. The interest portion of that payment was P35,000.
Maganda has made no entry to record the automatic payment.
e. Bank service charges of P2,400 were listed on the bank statement.
f. A deposit of P87,500 was recorded by the bank on December 13, but it did not belong to Maganda.
The deposit should have been made to the checking account of Maganda, Inc.
g. The bank statement included a charge of P9,750 for an NSF check. The check was returned with
the bank statement and the company will seek payment from the customer.
h. Maganda maintains a P35,000 petty cash fund that was appropriately reimbursed at the end of
December.
i. According to instruction for Maganda on December 30, the bank withdrew P1,050,000 from the
account and purchased Treasury Bills for Maganda. Maganda recorded the transaction in its books
on December 31 when it received notice from the bank. Half of the treasury bills mature in two
months and the other half in six months.
What amount of cash and cash equivalents should be reported in the current asset section of
the balance sheet on December 31, 2019?
A. P1,921,870
B. P2,481,870
C. P1,956,870
D. P2,446,870
Audit| jipb162021