REFRESHER COURSE

AUDIT OF CASH AND CASH EQUIVALENTS

Revisited, Renewed, Reformed

PROBLEM 1
In the course of our audit of Edilberto Inc.’s cash in bank for the year ended December 31,
2014, you ascertained the following information:
30-Nov 31-Dec
Cash per books 82,350 201,425
Cash per bank statements 535,410 689,085
Undeposited collections 41,005 64,400
Outstanding checks 138,590 150,560
Bank service charges 3,600 3,000
Insufficient fund check (note a) 41,250
Company's notes receivable collected by bank 359,075 404,500

The bank statement and the company’s cash records show the following totals:
1,091,86
Checks and debit memos per bank statement 5
Cash receipts per cash records ?
Cash disbursement per cash records ?
1,245,54
Deposits and credit memos per bank statement 0

Note a: The insufficient fund check was redeposited in the same month. No entries were made
to take up the return and redeposit in the books.

Requirements:
1. What is the unadjusted book receipt in December?
a. 1,227,685 c. 1,160,660
b. 1,182,260 d. 823,185
2. What is the unadjusted book disbursements in December?
a. 1,059,585 c. 1,063,785
b. 1,063,185 d. 1,066,185
3. What is the adjusted book balance on November 30?
a. 434,825 c. 441,425
b. 437,825 d. 445,025
4. The adjusted bank receipts in December should be:
a. 1,268,935 c. 1,265,335
b. 1,268,337 d. 1,245,540
5. The adjusted bank disbursements in December should be:
a. 1,103,835 c. 1,097,835
b. 1,105,035 d. 1,091,865
6. What is the adjusted book balance on December 31?
a. 561,075 c. 605,325
b. 602,925 d. 644,175

PROBLEM 2
You were able to gather the following from the December 31, 2018 trial balance of RHEA INC.
in connection with your audit of the company:

Petty cash fund 50,000

Cash on hand 1,500,000
Cash in bank-Metrobank current 4,000,000
Cash in bank-BDO Acct No. 1 3,160,000
Cash in bank-BDO Acct No. 2 (160,000)
Cash in bank-Coco bank savings 4,500,000
Time deposit-BPI 2,000,000

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AUDITING PROBLEMS: CASH AND CASH EQUIVALENTS AP-1001
 REFRESHER COURSE-AUDITING PROBLEM: QUIZZERS

The petty cash fund consisted of the following items as of December 31, 2018:
Currency and coins 10,000
Employees' vales 8,000
Currency in an envelope marked "collections for charity" with names attached 6,000
Unreplenished petty cash vouchers 6,500
Check drawn by RHEA, payable to the petty cashier 20,000
Unused postage stamps 1,500
52,000
Cash on hand represents undeposited collections as of December 31, 2018 and includes the
following items:
a. Customer’s check for P160,000 returned by bank on December 26, 2018 due to
insufficient fund but subsequently redeposited and cleared by the bank on January 3,
2019.
b. Customer’s check for P80,000 dated January 2, 2019, received on December 29, 2018.
c. A customer check for P90,000 dated June 1, 2018 received on the same date and yet to
be deposited since the same has been missing.
d. Postal money orders received from customers, P100,000.

Included among the checks drawn by RHEA against the Metrobank current account and
recorded in December 2018 are the following:
a. Check written on December 29, 2018 dated January 2, 2019, delivered to payee on
December 29, 2018, P160,000.
b. Check written and dated December 29, 2018 and delivered to payee on January 2,
2019, P200,000.

The credit balance in the BDO Current Account No. 2 represents checks drawn in excess of the
deposit balance. These checks were still outstanding at December 31, 2018.

The savings account deposit in Coco Bank has been set by the board of directors for acquisition
of new computers. This account is expected to be disbursed in the next 3 months from the
balance sheet date.

The time deposit with BPI was purchased on November 1, 2018 and shall mature on November
1, 2019.

Determine the audited balances of the following:

1. Petty cash fund
a. 30,000 c. 10,000
b. 36,000 d. 24,500
2. Petty cash shortage/overage
a. 4,000 short c. 2,000 over
b. 5,500 short d. 500 over
3. Cash on hand
a. 1,070,000 c. 1,260,000
b. 1,170,000 d. 1,500,000
4. Cash in bank-Metrobank current
a. 4,000,000 c. 4,200,000
b. 4,160,000 d. 4,360,000
5. Cash and cash equivalents to be reported in the 2018 balance sheet
a. 8,560,000 c. 10,560,000
b. 8,566,000 d. 15,060,000

PROBLEM 3
The Victory Inc. had poor internal control over its cash transactions. Data pertaining to its cash
position at October 31, 2018 were as follows:

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AUDITING PROBLEMS: CASH AND CASH EQUIVALENTS AP-1001
REFRESHER COURSE-AUDITING PROBLEM: QUIZZERS

The cash book showed a balance of P197,054.64. This included undeposited receipts. A credit
of P3,624.00 on the bank records for a customer deposit made directly through the banks for
payment of account. A P1,224.00 bank debit also prepared in the bank statement for service
charges for the month of October. These were not yet recorded on the books. The bank
statement had a balance of P173,898.00

Further audit procedures revealed the following outstanding checks:

Number 210 1,418.40
218 1,560.00
219 3,039.00
223 2,288.52
225 4,881.60
227 1,983.48

Cash on hand amounted to P32,310.24 which appeared to be the undeposited collection per
books. The client suspects that cashier misappropriated all undeposited receipts in excess of the
amount prepared as undeposited receipts. The cashier tried to conceal the misappropriation by
preparing the following reconciliation:

Balance per books, October 31, 2018 197,054.64

Add: Outstanding checks
Number 223 2,288.52
225 4,881.60
227 1,983.48 9,153.60
Unrecorded debit 1,224.00
207,432.24
Less: Undeposited receipts 32,310.24
Balance per bank, October 31, 2018 175,122.00
Unrecorded credit 3,624.00
Correct cash balance, October 31, 2018 171,498.00

1. What is the correct cash balance?

a. 175,122.00 c. 191,037.24
b. 179,498.24 d. 199,454.64
2. How much did the cashier misappropriate?
a. 15,171.00 c. 8,417.40
b. 9,153.60 d. 2,400.00

PROBLEM 4
You obtained the following information on the current account of Bugoy Corp. during your
examination of its financial statements for the year ended December 31, 2018.

The bank statement on November 30, 2018 showed a balance of P918,000. Among the bank
credits in November was customer’s note for P300,000 collected for the account of the
company which the company recognized in December among its receipts. Included in the bank
debits were cost of checkbooks amounting to P3,600 and a P120,000 check which was charged
by the bank in error against Bugoy’s account. Also in November you ascertained that there were
deposits in transit amounting to P240,000 and outstanding checks totalling P510,000.

The bank statement for the month of December showed total credits of P1,248,000 and total
charges of P612,000. The company’s books for December showed total debits of P2,206,800,
total credits of P1,221,600 and a balance of P1,456,800. Bank debit memos for December
were: No. 121 for service charges, P4,800 and No. 122 on a customer’s returned check marked
“Refer to Drawer” for P72,000.

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AUDITING PROBLEMS: CASH AND CASH EQUIVALENTS AP-1001
REFRESHER COURSE-AUDITING PROBLEM: QUIZZERS

On December 31, 2018 the company placed with the bank a customer’s promissory note with a
face value of P360,000 for collection. The company treated this note as part of its receipts
although the bank was able to collect on the note only in January 2019.

A check for P11,880 was recorded in the company cash payments books in December as
P118,800.

1. How much is the undeposited collections as of December 31, 2018?

a. 1,018,800 c. 658,800
b. 538,800 d. 418,800
2. How much is the outstanding checks as of December 31, 2018?
a. 575,880 c. 1,085,880
b. 1,192,800 d. 1,089,480
3. How much is the adjusted cash balance as of November 30, 2018?
a. 648,000 c. 528,000
b. 768,000 d. 471,600
4. How much is the adjusted cash balance as of December 31, 2018?
a. 1,876,920 c. 660,000
b. 586,920 d. 1,126,920

PROBLEM 5
Following the information pertains to the Cash in Bank account of Mango Company for the
month of April, 2018.

a. Balances per bank statement March 31, P21,560 and April 30, P23,040.
b. Balances of Cash in bank account in company’s books: March 31, 16,545, and April 30,
P22,680.
c. Total receipts per books were P222,190 of which 1,210 was paid in cash to a creditor on
April 16.
d. Total charges in the bank statement during April were P218,970.
e. Undeposited receipts were: March 31, P9,060 and April were P218,970.
f. Outstanding checks were: March 31, P2,675 and April 30, P1,930, of which a check for
P500 was certified by the bank on April 22.
g. NSF checks returned, recorded as reductions of cash receipts were:
1. Returned by Bank in April, recorded also in April, P1,040
2. Returned by Bank in April but recorded in May P860
h. Collections by Bank not recorded by company were P12,150 in March, and P11,640 in
April.
i. Bank service charges not entered in company’s books were: March 31, P750, and April
30 P420.
j. A check for P950 of Marang Company was charged to Mango Company in error.
k. A check drawn for P840 was erroneously entered in the books as P480.

Prepare a four-column reconciliation of receipts, disbursements and bank and book balances for
March and April 2018.

/rac

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AUDITING PROBLEMS: CASH AND CASH EQUIVALENTS AP-1001