200
ANALYSIS OF ACCOUNTS & AUDIT OF CASH
EXERCISE 1
1. If prepaid insurance amounted to P15,000 at the beginning of the period and total insurance
premium paid during the period amounted to P18,000, what would be the ending balance
of prepaid insurance if insurance expense for the period amounted to P6,000?
Answer: P27,000
Solution:
Prepaid Insurance beg.
P15,000
Add: Payment
18,000
Less: Insurance Exp.
(6,000)
Prepaid Insurance End
P 27,000
2. If beginning and ending interest receivable were P16,000 and P5,000, respectively. Total
interest received for the period amounted to P52,000, how much would be the amount of
interest income for the period?
Answer: P41,000
Solution:
Interest receivable end
P 5,000
Add: Collection
52,000
Less: Interest receivable beg.
(16,000)
Interest income
P41,000
3. Assuming salaries payable at the beginning and at the end of the period amounted to
P12,000 and P38,000 respectively. Salaries paid during the period totaled P183,000. How
much would be the salaries expense for the period?
Answer: P 209,000
Solution:
Salaries Payable, end
P 38,000
Add: Payment
183,000
Less: Salaries Payable, beg.
(12,000)
Salaries Expense
P 209,000
4. Assume all rent revenues are received in advance and accounted for as unearned rent.
Beginning and ending balances of unearned rent are P14,000 and P6,000, respectively. If
total rent collections for the period amounted to P45,000, what would be the amount of
rent income for the period.
Answer: P53,000
201
Solution:
Unearned Revenue, beg.
Add: Collection
Less: Unearned Revenue, end
Rent Income
P 14,000
45,000
(6,000)
P 53, 000
EXERCISE 2
JGS maintain its accounting records on the cash basis. During 2015, he collected P95,000
from his clients and paid P67,000 in expenses. Upon examination of additional evidence, the
following information was obtained:
Accounts receivable
Unearned service revenue
Accrued expenses
Prepaid expenses
1. What is the total revenue in 2015?
a. P95,000
b. P86,000
01/01/2015
P4,000
P7,000
P13,000
P 8,000
12/31/2015
P15,000
P14,000
P 2,000
P12,000
c. P104,000
d. P101,000
Answer: P99,000
Solution:
AR/ Unearned Revenue
AR beg- 4,000
15,000- AR, end
USR, end- 14,000
7,000- USR, beg
95,000- collection
P 99,000- Total revenue
2. What is the total expense of JGS in 2015?
a. P67,000
b. P61,000
c. P29,000
d. 42,000
Answer: P 52,000
Solution:
Prepaid Exp. / Accrued Exp.
Prepaid Exp., beg- 8,000
12,000- Prepaid Exp., end
202
Accrued Exp.,end- 2,000
Collection-
13,000- Accrued Exp. Beg
67,000
P52,000
3. The correct net income of JGS, for the year 2015 is:
a. P63,000
b. P80,000
c. P64,000
d. P77,000
Answer: P 47,000
Solution:
Total revenue in
Less: total expense
Net Income
P 99,000
(52,000)
P47,000
EXERCISE 3
The following data have been abstracted from the financial statement of Prentiss, Inc., a
calendar year merchandising corporation:

Balance sheet data:
Trade accounts receivable-net
Inventory
Accounts Payable




December 31, 2014
84,000
150,000
(95,000)
December 31,2015
78,000
140,000
(98,000)
Total sales for 2015 were P1, 200, 000 and for 2015 were P1,100,000. Cash sales were
20% of total sales each year.
Cost ratio is 70% of sales.
Variable general and administrative (G&A) expenses for 2015 were P120,000. They have
varied in proportion to sales and have been paid 50% in the year incurred and 50% the
following year. Unpaid G&A expenses are not included in accounts payable above.
Fixed general and administrative expenses including P35,000 depreciation and P5,000 bad
debt expense totaled P100,000 each year. The amount of such expenses involving cash
payments were paid 80% in the year incurred and 20% in the following year. Each year
there were a P5,000 bad-debt estimate and a P5,000 write-off. Unpaid G&A expenses are
not included in accounts payable above.
1. How much cash was collected during 2015 resulting from total sales in 2014 and 2015?
a. P961,000
b. P966,000
c. P1,201,000
d. P1,206,000
Answer: c
203
Solution:
AR
Beginning- 84,000
Sales1,200,000
78,000- End
5,000- Write-off
P 1,201,000
2. How much was the total credit sales in 2014?
a. P960,000
b. P964,800
c. P220,000
d. P880,000
Answer: d
Solution:
Sales 2014
Cash sales (20% of 1,100,000)
Credit sales
P 1,100,000
220,000
P 880,000
3. How much cash was disbursed during 2015 for purchases of merchandise?
a. P818,700
b. P827,000
c. P838,500
d. P847,000
Answer: b
Solution:
Accounts payable beg.
Add: purchases
Less: AP, end
Payments
P95,000
830,000
(98,000)
P827,000
4. How much was the total purchases of merchandise in 2015?
a. P840,000
b. P287,000
c. P838,500
d. P830,000
Answer: d
Solution:
Merch. Inv.
Add: COS
Less: MI, end
Payment
Total
P 150,000
840,000
(140,000)
(20,000)
P 830,000
COS= 840,000 (70% of 1,200,000)
204
5. How much cash was disbursed during 2015 for variable and fixed general and
administrative expenses?
a. P175,000
b. P180,000
c. P215,000
d. P220,000
Answer: a
Solution:
Variable G & A Exp.
Fixed G&A Exp.
Unpaid Exp. (100T *20%)
Total
P 120,000
35,000
20,000
P 175,000
EXERCISE 4
The work-in process inventory of ABC Paints was completely destroyed by fire on April 1,
2015. You were able to establish the physical inventory figures as follows:
January 1, 2015
30,000
100,000
140,000
Raw materials
Work in process
Finished goods
April 1, 2015
60,000
120,000
Sales from January 1 to March 31, were P300,000. Purchases are raw materials were P100,000
and freight on purchases, P10,000. Direct labor during the period was P80,000. It was agreed
with the insurance adjusters that an average gross profit rate of 32.5% be used and that
manufacturing overhead was 45% of direct labor cost.
1. The value of goods manufactured and completed as of April 1, 2015:
a. P120,000
b. P180,000
c. P190,000 d. P182,50 e. None of these.
Answer: d
Solution:
FG, end.
Add: COGS (300T*6.75%)
Less: FG, beg.
Total CGM
2. Raw material used were:
a. P50,000
b. P70,000
c. P80,000
P 120,000
202,500
(140,000)
P 182,500
d. P90,000
e. None of these.
Answer: c
Solution:
RM, beg.
P 30,000
205
Add: RM-Purch.
Freight-in
Less: RM, end
RM-used
100,000
10,000
(60,000)
P 80,000
3. The total value of goods put in process amounted to:
a. P296,000
b. P300,000
c. P336,000 d. P316,000
e. None of these.
Answer: a
Solution:
Raw M aterials
Direct Labor
FOH
TMC
Add: WIP, beg
Goods put into process
P 80,000
80,000
36,000
P196,000
100,000
P296,000
4. The work in process inventory destroyed as computed by the adjuster would be:
a. P113,500 b. P131,500
c. P173,500
d. P121,500
e. None of these.
Answer: a
Solution:
Total value of goods put into process
P 296,000
Less: Cost of Goods Manufactured
(182,500)
WIP Inventory destroyed
P 113,500
EXERCISE 5
You were engaged to audit the financial statement of Frost, Inc. on January 15, 2016. Presented
below is a copy of the trial balance as of January 2 and December 31, 2015 given by the
company’s account.
Cash
Accounts Receivable
Merchandise inventory
Unexpired insurance
Land
Buildings
Acc. Depreciation-bldg
Trial Balance
January 2, 2015
Debit
Credit
P500,000
124,000
230,000
3,500
150,000
200,000
P70,000
Trial Balance
December 31, 2015
Debit
Credit
P187,000
245,000
2,000
150,000
206
Equipment
Acc. Depreciation-eqiuip
Accounts Payable
Advances from Customers
Salaries Payable
Utilities Payable
Capital stock- P100 par
80,000
P1,287,500
24,000
173,000
9,000
6,000
5,500
1,000,000
P1,287,500
P86,790
5,500
15,950
9,650
1,000,00
No formal books have been kept during 2015. The following information has been gathered from
the checkbooks, deposit slips and other sources:
1. Most balance sheet account balances at December 31, 2015 have been determined and
recorded on the worksheet.
2. Cash receipts for the year are summarized as follows:
Advances from customers
Cash sales and collections on accounts receivable (after sales
discounts of P15,200 and sales returns and allowances of P19,400)
Sale of equipment costing P50,000 on which P10,000
of depreciation had accumulated
P 7,000
1,265,400
45,000
P1,317,400
3. Cash disbursement for the year are summarized as follows:
Insurance premiums
P 8,250
Purchase of equipment
180,000
Addition to building
46,000
Cash purchase and payments on accounts payable
( after purchase discounts of P11,500 and purchase returns
and allowances of P18,000)
820,500
Salaries paid to employees
430,700
Utilities
18,500
Dividends paid
15,000
Total cash disbursement
P1518,950
4. Dividends of P0.75 per share declared on June 30, September 30, and December 31.
5. Depreciation expense for 2015 was: building P4,000, equipment P17,500.
6. Bad debts are estimated to be 1.2% of total sales for the year. The ending accounts
receivable balance of P187,000 has been reduced by P6,500 for specific accounts which
were written off as uncollectible.
Compute the following in 2015:
1. Total sales
a. P1,373,500
b. P1,380,000
c. P1,369,500
d. P1,373,000
Answer: b
207
Solution:
Accounts Receivable end
Add: collection
Sales discount
Sales ret& allow.
Write-off
Less: AR beginning
Gross Sales
P187,000
1,265,400
15,200
19,400
6,500
(124,000)
P1,369,500
Gross sales
Add: GS frm adv. Frm Cust.
Total sales
2. Total purchases
a. P936, 210
b. P906,710
Adv. Frm cust.,beg P9,000
add: collection
7,000
less: end
(5,500)
Gross sale
P10,500
P1,369,000
10,500
P1,380,000
c. P734,290
d. P763,790
Answer: d
Solution:
Accounts Payable, end
P86,790
Add: Payments
820,500
Purch. Discounts 11,500
Purch. Ret. & allow.
18,000
Less: AP, beg
(173,000)
Purchases
P763,790
3. Cost of goods sold
a. P719,290
b. P748, 790
c. P689,290
d. P718,790
Answer: a
Solution:
Net Purchases
P763,790
Less: sales disc.
(11,500)
Sales ret & allow.
(18,000)
Total Purchase
P734,290
Add: beg inventory
230,000
Less: end inventory
(245,000)
Cost of Goods Sold
P719,290
4. Gain or (loss) on sale of equipment
a. (P5,000)
b. P10,000
c. P5,000
d. P0
Answer: c
Solution:
Equipment sold @
P 45,000
208
Cost of equip. (50T less dep’n 10T)
Gain on sale
5. Insurance expense
a. P8,250
b. P6,750
(10,000)
P5,000
c. P6,250
d. 9,750
Answer: d
Solution:
Prepaid insu., beg.
Add: Payment
Less: Prep. Insu, end
Insurance Expense
6. Salaries expense
a. P434,850
b. P430,700
P 3,500
8,250
(2,000)
P 9,750
c. P440,650
d. P420,750
Answer: c
Solution:
Salaries payable, end
Add: Payment
Less: Salaries payable, beg
Salaries Expense
7. Utilities expense
a. P28,150
b. P14,350
P 15,950
430,700
(6,000)
P440,650
c. P18,500
d. P22,650
Answer: d
Solution:
Utilities payable, end
Add: Payment
Less: Util. pay., beg
Utilities Expense
8. Bad debt expense
a. P16,482
b. P16,560
P 9,650
18,500
(5,600)
P 22,650
c. P16,398
d. P16,434
Answer: b
Solution:
Total sales
x Bad debt exp.
Bad debt expense
9. Net income
a. P120,000
b. P154,600
P1,380,000
1.2%
P16,560
c. P113,578
d. P148,178
Answer: a
209
Solution:
Gross sales
Less: SD
SRA
Net sales
Less: COS
Gross Profit
Less: Insu. Exp.
Sal. Exp.
Util. Exp
BD Exp.
Dep’n
Add: Gain
Net Income
10. Dividend
a. P15,000
P1,380,000
(15,200)
(19,400)
P1,345,400
(719,290)
P626,110
(9,750)
(440,650)
(22,650)
(16,560)
(21,500)
5,000
P120,000
b. P7,500
c. P30,000
d. P22,500
Answer: d
Solution:
Capital Stock
Per par
P 1,000,000
100
= 30,000 x 0.75
= P 22,500
11. Allowance for bad debts
a. P9,982
b. P10,060
x 3mos (June 30 to Sept. 30)
c. P9,898
d. P9,934
Answer: b
Solution:
Bad Debt Expense
Write- off
Allowance for bad debts
P16,560
(6,500)
P10,060
EXERCISE 6
SAVERS, a retailer, maintained inadequate records. You were engaged to prepare an income
statement for the year ended December 31, 2014. Purchases of merchandise were paid by check,
but most other items of cost were paid out of cash receipts. Weekly, the amount of cash on hand
was deposited in a bank account. No record was kept of cash in bank nor was a record kept of
sales. Accounts receivable was recorded only by keeping a copy of the charge tickets, and copies
of these tickets are given to the customers when they pay their accounts.
210
Savers had started in business on January 1, 2014 with P200,000 cash and a building which had a
cost of P150,000 of which one third was the value of the building site. The building depreciated
4% a year. An analysis of the bank statements showed total deposits, including the original cash
investment of P1,305,000. The balance in a bank per bank statement on December 31, 2014 was
paid by the bank until January. Cash on hand December 31 was P3,340.
An inventory of merchandise taken on December 31, 2014 showed P167,100 of merchandise on
a cost basis. Tickets for account receivable totaled P12,700, but P1,230 of that amount is
probably not collectible. Unpaid suppliers’ invoices for merchandise amounted to P37,800.
During the year, SAVERS had borrowed P100,000 from his bank but repaid by check P50,000
principal and P1,000 interest. He had taken from the collections cash for personal expenses of
P48,000. Expenses paid in cash were as follows:
Utilities
Advertising
Sales Help (part time)
Supplies, stationary, etc.
Insurance
Real estate taxes
P5,540
500
5,900
1,000
2,340
3,500
Store fixtures with a list price of P70,000 were purchase early in January on one year installment
basis. During the year, check for the down payment and all maturing installments totaled P56,000.
At December 31, the final installment of P15,250 remains unpaid . the fixtures have an
estimated useful life of ten years.
Compute the following items:
1. Sales
a. P1,087,820
b. P1,075,120
c. P1,095,000
d. P1,086,270
Answer: a
Solution:
Total deposit
Initial investment
Loan proceeds
Accounts Receivable
Cash
Expenses
Cash Collection
Sales
2. Cost of Sales
a. P1,004,300
b. P1,037,200
P1,305,000
(200,000)
(100,000)
12,700
3,340
18,780
48,000
P1,087,820
c. P1,071,500
d. P870,000
Answer: b
211
Solution:
Deposit
Balance
Disbursement
Check payment
Down-payment fix
Accounts Payable
Outstanding check
Purchases
Ending Inventory
Cost of Sales
3. Operating expense
a. P31, 010
b. P18,780
P1,305,000
( 53,000)
1,252,000
(51,000)
(56,000)
37,800
21,500
1,204,300
(167,100)
P1,037,200
c. P32,010
d. P33,260
Answer: a
Solution:
Building (150T x 2/3 x 4%)
Fixtures (70,000/10yrs)
Bad Debts
Expenses
Operating Expenses
4. Interest expense
a. P0.00
b. P1,000
P4,000
7000
1,230
18,780
P31,010
c. P2,250
d. P1,250
Answer: c
Solution:
Store Fixtures
P70,000
(56,000)
P14,000
(15,250)
P1,250
1,000
Interest Expense
5. Net income
a. P17,400
P2,250
b. P17,360
c. P12,128
d. P6,781
212
Answer: b
Solution:
Sales
COS
OpEx
Int. Exp.
Net Income
P1,087,820
(1,037,200)
(31, 010)
(2,250)
P17,360
EXERCISE 7
The cash account in the ledger of JAMIE Company had a balance of P105,600 at December 31,
2015. An examination of the account, however, disclosed the following.
a. The sales book was left open up to January 5, 2016, and cash sales totaling P15,000 were
considered as sales in December.
b. Checks of P9,300 in payment of liabilities were prepared before December 31, 2015,
recorded in the books, but not mailed or delivered to payees.
c. Post-dated checks totaling P7,800 are being held by the cashier as part of cash. The
company’s experience shows that post-dated checks are eventually realized.
d. Customer’s check for P1,500 deposited with but returned by Bank “NSF”, on December
27, 2015. Return was not recorded in the book.
e. The cash account includes P40,000 earmarked for the purchase of a mini-computer which
will soon be delivered.
Required:
1. What is the cash balance to be shown on the balance sheet December 31, 2015?
Answer: P 90,600
Solution:
Per Book:
P105,600
(15,000)
9,300
(7,800)
(1,500)
Cash Balance 12/31/15 P90,600
EXERCISE 8
213
The cash account of SELF DEFENSE, CO. disclosed a balance of book on October 31. The Bank
statement as of October 31 showed a balance of P44,894. Upon comparing the statement with the
cash records, the following facts were developed:
a. The company’s account were charged on October 26 for customers uncollectible check
amounting to P11,000.
b. A two-month, 17% P50,000 customers note dated August 25, discounted on October 12,
was dishonored October 25 and the bank charged the company P55,000 which included a
protest fee of P5,000.
c. A customer’s check for P10,350 was entered as P1,350 by both the depositor and the bank
but was later corrected by the bank.
d. Check No. 143 for P11,765 was entered in the cash disbursement journal as P1,675 and
check No. 156 for P5, 170 was entered as P51,700.
e. Bank service charges of P1,000 fo October not yet recorded on the books.
f. A bank memo stated that customer’s not for P25,000 and interest of P1,000 had been
collected on October 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 for October 31 for P16,450 were deposited November 1.
The following checks were outstanding on October 31:
No.
101
P 3,450
127
105
7,280
129
110
3,150
142
115
2,420
150
Required:
P 6400
7,150
3,180
13,970
1. What is the adjusted cash balance?
Answer: P14,344
Solution:
Bank balance
Receipts
Outstanding Checks
Adjusted cash balance
P44,894
16,450
(47,000)
P14,344
EXERCISE 9
The internal control procedures for cash transactions in the Alrene Co. were not adequate. Alvin,
the cashier-bookkeeper handles cash receipts, made small disbursement from cash receipts,
maintained accounting records, and prepared the monthly reconciliation of the bank account. At
214
November 30, the bank statement showed the balance of P17,500. The outstanding checks were
as follows:
No. 7062
P268.55
No. 8621
P175.19
7183
170.00
8623
341.00
7284
261.45
8632
172.80
The cash balance as shown on the Alrene Co. records was P20,258.31, and this included the cash
on hand. The bank statement for November showed a credit of P200 arising from the collection of
a note left with the bank. The company’s book did not include an entry to record the collection.
The cashier prepared the following reconciliation in an attempt to conceal his theft.
Balance per book, Nov. 30
Add: Outstanding checks
No. 8621
8623
8632
P 20,258.31
P 175.19
341.00
172.80
Less: Cash on hand
Balance per bank statement
Less: Unrecorded credit
True cash, Nov. 30
588.99
P 20,847.30
3,347.30
P 17,500.00
200.00
P 17,300.00
Required:
1. Compute the amount of cash shortage.
Answer:P1,000
Solution:
Book
20,258
200
20,458.31
Bank
17,500
1,388.99
3,347.30
19,458.31
Book Bal.
P20,458.31
Bank Bal.
(19,458.31)
Cash Shortage P1,000
215
EXERCISE 10
Old Navy Corporation was organized on January 2, 2014. You were engaged to perform a detailed
examination of the transactions to determine whether irregularities exist.
You started the examination on June 30 and surprise count conducted on this date revealed a cash
on hand of P1,285. A bank statement as of the same date disclosed a balance of P6,582. However,
further verification revealed that a check issued for P463 has not yet cleared the bank.
Based on the available records and documents you were able to obtain the following information:
1.
2.
3.
4.
5.
6.
7.
8.
Old Navy issued P50,000 par value stocks for P80,000.
P 50,000 of the total proceeds from issuance of stocks was used to acquire a real property.
The real property was mortgage to secure a bank loan of P28,000.
Other furniture and equipment were acquired for a total cost of P7,250. Of the total price,
P1,500 remains unpaid.
Outstanding purchase invoices amounted to P11,571. Inventory as of June 30 amounted to
P23,480.
Total sales for the period amounted to P80,752. Old Navy sells at 40% above cost.
Total amount still due from customers amounted to P21,345.
Various operating expenses paid totaled P15,189.
Required: Based on the above data, answer the following:
1. Cash paid to supplies for merchandise purchases.
a. P57,680
b. P81,160
c. P69,589
d. P92,731
Answer: b
Solution:
Accounts Payable
11,571
0
69,581
P81,160
2. Cash received from customers.
a. P80,752
b. P59,407
c. P102,097
d. P60,692
Answer: b
Solution:
Accounts Receivable
0
21,345
80,752
P59,407
216
3. Total cash accountability.
a. P26,879
b. P25,594
c. P34,283
d. P7,867
Answer: a
Solution:
Cash
0
80,000
28,000
59,407
50,000
5,750
69,589
15,189
P26,879
4. Cash balance to be reported on June 30 financial statements.
a. P7,867
b. P7,404
c. P6,119
d. P26,879
Answer:b
Solution:
Cash on hand
Balance disclosed
Less: check not cleared
Cash Balance
5. Cash shortage.
a. P19,475
b. P7,867
P1,285
6,582
(463)
P7,404
c. P18,190
d. P25,594
Answer: a
Solution:
Cash to be accounted for
Cash accounted for
Cash shortage
P26,879
(7,404)
P19,475
EXERCISE 11
Kournikova Co., organized on March 1, 2015, has a very poor internal control system. The
company cashier is also its accountant. After 9 months of operation, the company manager
suspects that the cashier-accountant has been misappropriating company collections. You have
been engaged to audit the company’s accounts to determine the extent of fraud, if any.
You started the audit on November 15. On that date, the cash on hand per your surprise count was
P5,140. Also on that date, the bank confirmed that the balance of the company’s current account
217
was P26,328. Your examination of the records reveals that a for P1,852 was outstanding on
November 15. The company’s mark-up is 40% of sales.
Further examination of the company’s record reveals the following balances at November 15,
2015:
Ordinary shares
P300,000
Share premium from ordinary shares
20,000
Mortgage payable
200,000
Furniture and Fixtures (of the acquisition cost,
6,000 remains unpaid as of November 15
29,000
Notes payable- bank
32,000
Accounts payable- trade
46,284
Expenses paid (excluding purchases)
60,756
Merchandise inventory at cost
93,920
Accounts receivable- trade
85,380
Total sales
340,000
1. How much was paid for inventory purchase?
a. 157,716
b. 293,716
c. 183,636
d. 251,636
Answer: d
Solution:
Cash
320,000
151,228
80,000
23,000
32,000
60,756
254,620
P251,636 Inventory Purchase
2. How much was collected from customers?
a. 118,620
b. 254,620
c. 50,620
d. 340,000
Answer: b
Solution:
Sales
Less: A/R
Collections
P340,000
85,380
P254,620
3. How much is the cash shortage as of November 15, 2015?
a. P121,612
b. 101,612
c. 127,612
d. 206,992
Answer: a
Solution:
Cash on hand
Bal. of Company
OC
P5,140
26,328
(1,852)
218
Cash accounted
P29,616
Cash to be accounted for
P151,228
Cash accounted
29,616
Cash shortage
P121,612
EXERCISE 12
The bank statement for the account of KAMPING COMPANY at December 31, 2013 showed a
credit balance of P20,000, while the company’s ledger balance of the cash account as of
November 30, 2013 was a debit balance of P40,000. During December 2013, the ledger showed
two postings: a debit of P60,000 and a credit of P39,000 from the Cash receipts and Check
Disbursement Journal, respectively.
Your examination revealed that the cash column of the receipts book was underfooted by P6,400.
The receipts book recorded only the collections from customers and did not include bank credit
in December for P8,000, representing loan proceeds of a P10.000 promissory note.
The December Check Disbursement Journal which was overfooted by P500, records only the
checks issued by the company. In the month of December 2013, the bank charged KAMPING
COMPANY for P5,000 representing a loan guaranteed by the client but was dishonored by the
maker, the company’s vice- president. The outstanding checks as of December 31, 2013
amounted to P5,600.
In the morning of January 2, 2014, a cash count conducted disclosed a cash on hand in the form
of bills and coins totaling P38,700.
Required:
How much is the cash shortage as of December 31, 2013?
Answer: P17,800
Solution:
Book
61,000*
6,400
8,000
500
(5,000)
P70,900
*Beg. Receipt (Nov.)
P60,000
Less: Dec. R
(39,000)
Add: Nov. debit bal.
40,000
Bank
20,000
(5,600)
38,700
________
P53,100
P70,900
(53,100)
P121,612 shortage
219
Total Receipts
P61,000
EXERCISE 13
You were engaged to audit the books of accounts of E Enterprise for the year ended December
31, 2014. From the records of the Co.you gathered the following information:
E Enterprises started the operation on October 2, 2014 with E investing P200,000 cash. Monthly
bank reconciliation statements have not been prepared for 2014; however, bank statement for
October, November, and December were made available to you. Your analysis of these bank
statements revealed total bank credits (deposits) of P1,140,000 including E’s initial investment
and bank loan, details of which are in the additional data. The bank statement in December, 2014
showed an ending balance of P60,760.
Examination of the paid checks disclosed that checks totaling P9,000 were issued by the Co. in
December, 2014 and were presented for payment only in January, 2015. Cash count of the
Cashier that P10,000 of these, in checks, were cash sales on December 29, 2014, deposited on
January 3, 2015. The balance, in currency and coins, represents Petty Cash Fund.
Additional data:
1. Accounts receivable subsidiary ledger had a total balance of P140,000 at December 31,
2014. P10,000 of this was estimated to be uncollectible.
2. Supplier’s unpaid voices for merchandise totaled P30,000; while an account for store
fixtures bought on October 2, 2014 for P100,000 had an unpaid balance of P10,000.
Fixtures are depreciated at 10% per annum.
3. Merchandise inventory at December 31, 2014 amounted to P60,000.
4. The bank statement in October showed a bank credit for P190,000 dated October 2, 2014.
Inquiry from the Cashier disclosed that the amount represents proceeds of a 90-day, 20%
discounted bank note. P160,000 of this loan was paid by check in December, 2014.
5. Operating expenses paid during the period totaled P351,500; while merchandise purchases
amounted to P500,000.\
REQUIRED:
1. Petty cash fund as of December 31, 2014.
a. P12,600
b. P5,000
c. P11,600
d. P2,600
Answer: d
Solution:
Cash count
P12,600
220
Sales in cash
PCF
(10,000)
P2,600
2. Adjusted cash balance per bank.
a. P61,760
b. P51,760
c. P60,760
d. P70,760
Answer: a
Solution:
Bank Balance
Error:
Adjusted cash
3. Total sales in 2014.
a. P902,600
P60,760
1,000
P61,760
b. P910,000
c. P900,000
d. P890,000
Answer: c
Solution:
Accounts receivable
P140,000
Fixtures Purch.
100,000
Merch. Purch
500,000
Proceeds
160,000
Sales
P900,000
4. Total cash paid to suppliers for merchandise purchases.
a. P500,000
b. P470,000
c. P530,000
d. P560,000
Answer: b
Solution:
Merchandise purchase
Less: unpaid merch.
Merch. Purch
P500,000
(30,000)
P470,000
5. Cost of sales in 2014.
a. P560,000
b. P530,000
c. P440,000
d. P500,000
Answer: c
Solution:
Purchases
Less: inv., end
COS
P500,000
(60,000)
P440,000
6. Cash shortage as of December 31, 2014.
a. P14,140
b. P16,740
c. P4,140
d. P6,740
Answer: a
Solution:
Cash to be accounted for
P78,500
221
Cash accounted
Shortage
(64,360)
P14,140
EXERCISE 14
Data for the STAR RISE COMPANY are assembled as follows:
Nov. 30, 201
Dec. 31, 2015
Cash account balance
P1,000
P 3,790
Bank statement balance
6,690
10,350
Deposit in transit
400
600
Checks outstanding
1,300
1,500
Bank service charges for month, not shown
on the company’s cash book
10
40
Bank charges for N.S.F. checks not shown
On the company’s cash books
200
300
Collection by bank from STAR RISE
Company customers, not shown on the
Company’s cash books
5,000
6,000
Tapes for bank and company cash data offer the following totals:
Deposit and credit memos per bank statement, P13,800;
Canceled checks and debit memos per bank statement, P10, 140;
Cash collected from customers per cash book, P8,000; Checks issued, P10,000.
1. The unadjusted book receipts in December is:
a. P8,000
b. P13,800
c. P14,000
d. P13,000
Answer: d
Solution:
Receipts
Collections
Total unadj. receipts
P8,000
5,000
P13,000
2. The adjusted cash balance as of November 30 is:
a. P6,690
b. P1,000
c. P5,790
d. P9,450
Answer: c
3. The adjusted cash balance as of December 31 is:
a. P9,450
b. P10,350
c. p3,790
d. P5,790
Answer: a
Solution:
Nov.30,2015
Receipts
Disbursements Dec. 31, 2015
222
Bank bal.
DIT: beg.
End
OC: beg.
End
Total
6,690
400
13,800
(400)
600
10,140
600
(1,300)
P5,790
10,350
P14,000
(1,300)
1,500
P10,340
(1,500)
P9,450
EXRCISE 15
You have been asked by the proprietor of FRESH Company to verify the accountability
of the cashier-bookkeeper, who was allowed to take a vacation leave a few days ago.
a. The bank reconciliation statements prepared by the cashier-bookkeeper are presented
below:
Nov. 30, 2013:
Balance per bank statement
P21,500
Cash on hand
500
Total
P22,000
Outstanding Checks:
No.2520
P2,000
2521
1,400
2522
1,900
(3,300)
Erroneous bank charge
2,000
Erroneous bank credit
(500)
Bank balance
P20,200
Dec. 31, 2013:
Balance per bank statement
P135,000
Cash on hand
6,300
Total
P141,300
Outstanding checks:
No. 2674
P31,000
2675
10,300
2676
5,000
(41,300)
Erroneous bank charge
3,000
Erroneous bank credit
(600)
Book balance
P102,400
b. The cash in bank account in the general ledger shows the following debits and credits
during Dec. of 2013:
Cash in bank
Dec.
Dec.
223
1
2
3
12
17
23
27
31
Balance
Received frm customer
Received frm customer
Received frm customer
Received frm customer
Received frm customer
Received frm customer
Received frm customer
Total
20,200
4,500
5,000
20,000
30,000
9,000
70,000
48,500
198,200
1
5
14
24
28
Check issued
Check issued
Check issued
Check issued
Check issued
31
Balance
Total
2,000
5,200
31,000
46,000
7,600
102,400
198,200
c. The following summarized transactions were taken from the bank statement for the month
of Dec. 2013:
Balance, Dec. 1, 2013
P 16,500
Total bank credits
173,700
The total credits per bank statement include:
Collection of notes receivable
5,000
Correction of Nov. erroneous bank charge
2,000
Dec. 10 deposit of Flesh credited in error to FRESH
600
Total bank disbursement
65,200
The total disbursement per bank statement include:
Correction of Nov. erroneous bank credit
500
Dec. check of Freeze charged in error to FRESH
3,000
d. Cash on hand per count in the early morning of Jan. 2, 2014 amounted to P6,300.
e. Before leaving his company for a one week vacation, the proprietor had left several signed
bank checks that the cashier-bookkeeper had cashed for his personal use.
1. What is the adjusted cash balance on Nov. 30, 2013?
a. P16,500
b. P13,200
c. P20,200
2. What is the adjusted cash balance in Dec. 31, 2013?
a. P102,400
b. P125,000
c. P87,400
d. P14,500
d.P11,400
Answer: c
Solution:
Bank bal.
DIT: beg.
Error
OC: beg.
Error
Nov.30,2013
16,500
2,000
Receipts
173,700
(2,000)
(600)
(500)
500
(5,300)
Disbursements
65,200
Dec. 31, 2013
125,000
(600)
(500)
(3,000)
6,300
(500)
(5,300)
46,300
3,000
6,300
(46,300)
224
Total
P13,200
P176,900
P102,700
P87,400
EXERCISE 16
The auditor for STAR Company, examined the petty cash fund immediately after the close of the
business June 30, 2013, the end of the company’s fiscal year. The following fund composition was
arrived at:
Bills and coins
Unreplenished vouchers:
Supplies
Transportation
Repairs
Stamps
Check drawn by STAR payable to Richard, cash
Custodian representing his salary
An employee check returned by bank, marked NSF
An empty envelope and a sheet of paper bearing the signatures of several
Employees, together with the list of their contributions for a gift
To a departing employee
The petty cash fund general ledger account has an imprest balance of P4,000.
Required:
P972
388
240
170
400
1,100
230
400
1. Compute the amount of cash shortage, if any.
Answer: P900
Solution:
Bills & coins
Unreplenished voucher
Chech accom.
Adv. To employees
Cash shortage
P572
1,198
1,100
230
P3,100
(400)
P900
EXERCISE 17
The following cash count sheet and additional information pertain to the accounts of Lance
Corporation for the year ended December 31, 2013.
Cash Count Date. December 16, 2013.
Currency- Details omitted
4,800
225
Unreplenished petty cash vouchers
Voucher Date
Explanation
Amount
11/20/2013
Postage stamps
100
12/04/2013
Repair of typewriter
150
12/15/2013
Transportat5ion-Messenger
60
12/15/2013
Office Supplies
90
400
Advances- all properly approved
500
Total amount counted
5,700
Accountability:
Petty cash fund
1,000
Undeposited collections
4,900
5,900
Shortage
200
1. The last replenishment of the fund was made on December 14, 2013 covering the period
from December 1 to 14, 2013.
2. Found inside the cash box were two pay envelopes which had been opened and the contents
aggregating P240 removed. The face of the envelope bore the notation “unclaimed”.
Required: Compute the amount of cash shortage.
Answer: P690
Solution:
Bills & coins
Unrep. Vouch
IOU’s
Total accounted
P4,800
150
500__
P5,450
TA
Acc
Shortage
P5,450
(6,140)
P 690
Accountable:
PCF
1000
coll.
4,900
UnE wage
240__
P6,140
EXERCISE 18
Regina Reyes is the cashier of the Maharlika Company. As representative of the ABC and
Associates, CPA’s. you were assignned to verify her cah on hand in the morning of January 4,
2014. You began the count at 9:00AM, in the presence of Miss Reyes. In the courde of your
counting, you found currencies in paper bills and coins together with checks, vouchers and other
items, which are mentioned below:
Bills
2 one hundreds, 2 fifties, 8 twenties
Coins
P1.00
0.50- 6 rolls and 12 loose
0.25- 5 rolls and 32 loose
8 loose
(20 pieces to a roll)
(50 pieces to a roll)
226
0.10- 10 rolls and 15 loose
0.05- 14 rolls and 20 loose
(50 pieces to a roll)
(40 pieces to a roll)
Checks
Maker
Kris Cruz, Asst. Mangr.
Ms. Reyes, Cashier
I.O.Us
Mr. Chew, Janitor
R. Hermosilla,Clerk
J. Salosagcol, President
Date
12/23/13
07/26/13
Payee
Maharlika Co.
Maharlika Co.
Amount
P60
40
12/20/13
12/22/13
12/24/13
Petty cash voucher for replenishment
Payee
Date
E. Sayson, Messenger
12/16/13
Fortune Co.
12/18/13
Victory Liner
12/18/13
Bureau of Posts (stamps)
12/20/13
A. Vale, Carpenter
12/20/13
B. Bo
12/21/13
35
25
15
Account Charged
Advances to employees
Supplies
Freight- in
Supplies
Repairs
Miscellaneous Exp.
Amount
P10.00
14.50
18.25
30.00
45.00
15.40
Your investigation also disclosed the following;
1. The balance of petty cash fund per books is P900.
2. The cashier is not allowed to encash personal checks.
3. Cash sales on January 2, 2014 amounted to P865 per sales records, while cash receipts
book and deposit slip showed that only 765 was deposited in the bank on January 3, 2014.
4. The following employees’ pay envelopes have been opened and the money removed. Each
envelope was marked “unclaimed”
A. King
P33.25
J. Lim
25.75
Required: Compute the amount of cash shortage.
Answer: P104.85
Solution:
Bills & coins
Adv. To E
Check
Unrepl.
Total accounted
TA
Acc
Shortage
P685
85
60
123.15`
P953.15
P953.15
(1,058)
P104.85
Accountable:
PCF
900
coll.
100
UnE wage
58__
P1,058