Cash and Cash Equivalents
In connection with your audit of the financial statements of MABAGA COMPANY for the
year ended December 31, 2020, you gathered the following information.
1. The company maintains its current account with Tsunami Bank. The bank statement
December 31, 2020 showed a balance of P638, 340.
on
Your audit of the company's account with Tsunami Bank disclosed the following:
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A check for P22,500 received from a customer whose account is current had been
deposited and then returned by the bank on December 28, 2020. No entry was made for
the return of this check. The customer replaced the check on January 15, 2021.
A check for P5,720 was cleared by the bank as P7.520. The bank made the correction
on January 2, 2021.
A check for P3,500 representing payment of an employee advance was received and
deposited on December 27, 2020, but was not recorded until January 3, 2021.
Post dated checks totaling P67,300 were included in the deposits in transit. These
represent collections of current accounts re- ceivable from customers. The checks were
actually deposited on January 5, 2021.
Various debit memos for drafts purchased for payment of impor- tation of equipment
totaling P230,000 were not yet recorded. These purchases were previously set up as
accounts payable. Said equipment arrived in December 2020.
Interest earned on the bank balance for the 4th quarter of 2020, amounting to P1,950
was not recorded.
Bank service charges totaling P1,260 were not recorded.
Deposit in transit and outstanding checks at December 31, 2012 totaled P136,250 and
P276,380, respectively.
2. Various expenses from the company's imprest petty cash fund dated December 2020
totaled P16,250, while those dated January 2021 amounted to P5,903. Another
disbursement from the fund dated December 2020 was a cash advance to an employee
amounting to P3,500. A replenishment of the petty cash fund was made on January 8,
2021.
3. The company's trial balance on December 31, 2020 includes the following accounts:
Cash in bank - Tsunami Bank
Cash in bank - Earthquake Bank (restricted
account for plant expansion, expected to
be disbursed in 2013)
Petty cash fund
Time deposit, placed December 20, 2020
and due March 20, 2021
Money market placement - Prudential Bank
P 748,320
700,000
30,000
1,000,000
4,000,000
1. What is the adjusted petty cash fund balance on December 31, 2020?
A. P4,347
C. P30,000
B. P10,250
D. P24,097
2. The petty cash shortage on December 31, 2020 is
A. P0
B. P5,903
C. P3,500
D. P4,347
3. What is the adjusted Cash in bank - Tsunami Bank balance on December 31, 2020?
A. P500,010
C. P432,710
B. P748,320
D. P429,110
4. The entry to adjust the Cash in bank - Tsunami Bank account should include a debit
to
A. Accounts receivable for P89,800.
B. Accounts receivable for P86,300.
C. Accounts payable for P228,200.
D. Interest expense for P1,950.
5. The December 31, 2020 statement of financial position should show “Cash and cash
equivalents” at
A. P6,142,960
C. P4,442,960
B. P5,439,360
D. P5,442,960
Petty Cash Fund; Bank Reconciliation
Mayora Mabaga is reviewing the cash accounting for AAA, Inc. Mayora’s review will
focus on the petty cash fund account and the bank reconciliation for the month ended
May 31, 2020. She has collected the following information from AAA’s bookkeeper for
this task.
Petty Cash Fund
1. The petty cash fund was established on May 2, 2020, in the amount of P10,000.
2. Expenditures from the fund by the custodian as of May 31, 2020, were evidenced
by approved petty cash vouchers for the following:
Various office supplies
P3,920
IOU from employees
1,200
Shipping charges
2,298
Miscellaneous expense
1,526
On May 31, 2020, the petty cash fund was replenished and increased to
P12,000; currency and coin in the fund at that time totaled P756.
Bank Reconciliation
Shore Bank
Bank Statement
Disbursements
Balance, May 1, 2020
Deposits
Note payment direct from
customer (interest of P1,200)
Checks cleared during May
Bank service charges
Balance, May 31, 2020
Receipts
Balance
P350,760
P1,120,000
37,200
P1,246,000
1,080
260,880
AAA, Inc.’s Cash Account
Balance, May 1, 2020
Deposits during May 2020
Checks written during May 2020
P 354,000
1,240,000
1,273,400
Deposits in transit are determined to be P120,000, and checks outstanding at May 31
total P34,000. Cash on hand (besides petty cash) at May 31, 2020 is P9,840.
1. What is the amount of petty cash shortage?
2. The journal entry to record the replenishment of and increase in the petty cash
fund includes a credit to
3. What amount of cash should be reported in the May 31, 2020, statement of
financial position?