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1.Which of the following is not considered cash for financial reporting purposes?
a. supplies.
b. cash because they represent the equivalent of money.
c. investments.
d. none of these.
4.Which of the following items should not be included in the Cash caption on the balance sheet?
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. All of these are not true.
9.A Cash Over and Short account
1. D 4. D 7. D 10. B 13. A
2. B 5. D 8. C 11. C 14. D
3. D 6. D 9. C 12. D 15. D
1. On January 1, 2014, Mann Company borrows $2,000,000 from National Bank at 11% annual interest.
In addition, Mann is required to keep a compensatory balance of $200,000 on deposit at National Bank which
will earn interest at 5%. The effective interest that Mann pays on its $2,000,000 loan is
Solution:
2,000,000*11% = 220,000
200,000*(11%-5%) = 12,000
232,000
232,000/2,000,000 = 11.6%
2. The statement of financial position of Kwarta Company shows cash of 330,820. The following items were
found to comprise this total amount:
Solution:
Book balance 330,820
Sinking Fund Cash (35,000)
Short-term treasury bill (52,000)
Unreplenished petty cash expense ( 250)
Correct cash balance 243,570
Or
3. In your cash count of the petty cash fund of Canyon Company as of July 4, 2014, you found the following
composition of its petty cash fund:
Bills and coins counted 2,450.00
The petty cash fund has an imprest balance of 10,000. The company’s reporting period ends on June
30.
Solution:
Bills and coins counted 2,450
PCV dated July 2012 (undisbursed as of June 2012) 800
Correct cash balance 3,250
4. In reconciling the book and bank balance of the cash account of Perlas Corporation, you discover the
following for the month of December 2014:
A paid check for 40,000 was recorded in the cash book as 4,000.
Assuming no other errors were noted, what is the amount of the outstanding checks at December 31,
2014?
Solution:
Balance per bank statement 400,000
Add: Receipts not yet deposited 100,000
Bank service charge 1,000
DAIF 22,000
Error (40,000-4,000) 36,000
Balance per book statement (387,000)
Outstanding checks 172,000
5. In preparing its May 31, 2014 bank reconciliation, Dogg Co. has the following information available:
Solution:
Balance per bank statement 30,000
Add: Deposit in transit 5,400
Less: Outstanding checks 4,900
Correct cash balance 30,500
6. The cash account shows a balance of $45,000 before reconciliation. The bank statement does not include a deposit of
$2,300 made on the last day of the month. The bank statement shows a collection by the bank of $940 and a
customer's check for $320 was returned because it was NSF. A customer's check for $450 was recorded on the
books as $540, and a check written for $79 was recorded as $97. The correct balance in the cash account was
Solution:
Balance per book statement 45,000
Collection by the bank 940
NSF (320)
Error (90)
18
Correct cash balance 45,548
7. Tanner, Inc.’s checkbook balance on December 31, 2014 was $21,200. In addition, Tanner held the following items in
its safe on December 31.
(1) A check for $450 from Peters, Inc. received December 30, 2014, which was not included in the
checkbook balance.
(2) An NSF check from Garner Company in the amount of $900 that had been deposited at the bank, but
was returned for lack of sufficient funds on December 29. The check was to be redeposited on January
3, 2015. The original deposit has been included in the December 31 checkbook balance.
The proper amount to be reported on Tanner's balance sheet for cash at December 31, 2014 is
Solution:
Checkbook balance 21,200
Collection 450
NSF returned (900)
Coin and currency on hand 1,450
Total cash 22,200
8. Green Company’s general ledger showed a balance of 2,205,600 in its cash account on December 31,
2014. Included in this balance are the following items:
750,000.0
Savings account 0
IOUs 1,200.00
500,000.0
Cash sinking fund 0
Solution:
Balance per book statement 2,205,600
Customer’s NSF checks (20,000)
IOUs (1,200)
Postage stamps (600)
Cash in Sinking fund (500,000)
Customer’s postdated check (5,400)
Travel advances (4,000)
Correct cash balance 1,674,400
9. Sandy, Inc. had the following bank reconciliation at March 31, 2014:
47,500
Deposits $46,700
Disbursements 49,700
All reconciling items at March 31, 2014cleared the bank in April. Outstanding checks at April 30, 2014 totaled
$6,000. There were no deposits in transit at April 30, 2007. What is the cash balance per books at April 30, 2014?
Solution:
April
Mar 31 Receipts Disbursements April 30
Balance per bank 37,200 46,700 49,700 34,200
Deposit in transit:
March 10,300 (10,300)
April
Outstanding check:
March (12,600) (12,600)
April 6,000 (6,000)
Adjusted bank bal 34900 36,400 43,100 28,200
10. The following data related to Jennifer Services Incorporated were gathered:
31-Dec-
30-Nov-2014 2014
270,311.0
Balance per books 0
294,771.0
Balance per bank statement 0 148,986.00
Other information:
Receipts and disbursements per books during December are P1,072,850 and P1,195,536.50,
respectively.
Total credits reflected in the bank statement amounted to P1,065,620.
Check #137412 for P2,300 recorded by depositor as P3,200 in error.
Customer check for P5,947 deposited on December 28, 2014 was found to be uncollectible.
Interest for P625 chargeable to Jennyfer Services was erroneously charged by the bank to the
company.
No sufficient fund checks in the amount of P5,000 was returned by the bank and redeposited by
the company during December. No entry was made on the books for the return or redeposit.
Solution:
11. You are attempting to determine an apparent cash shortage that you believe resulted from an
employee’s theft. You have assembled the following information for the month of March:
Solution:
12. Enipr Company had the following account balances at December 31, 2014:
Cash on Hand and in Bank 5,000,000.00
Cash restricted for bond payable due on June 30, 2013 2,000,000.00
Saving deposit set aside for dividend payable on June 30, 2012 1,000,000.00
In the December 31, 2014 statement of financial position, what total amount should be reported
as “cash and cash equivalents”?
Solution:
13. During the audit of Maganda Company on December 31, 2014, the following data are
gathered:
4,000,000.0
Balance per book 0
1,200,000.0
Deposit in transit 0
1,500,000.0
Customer note collected by bank 0
1,000,000.0
Depositor's note charged to account 0
Solution:
4,300,000
14. The “cash” account in Jen Company’s ledger on December 31, 2014 showed a balance of P
5,250,000 which included the following:
Petty Cash Fund 50,000.00
2,500,000.0
Cash in Bank 0
1,000,000.0
Cash in Sinking Fund 0
5,250,000.0
0
At what amount should Jen Company report as “cash” in the December 31, 2014 statement of
financial position?
Solution:
Petty Cash Fund 50,000.00
3,650,000.00
15. Leona Company had the following account balances on December 31, 2014:
Cash in Bank- current account 4,000,000
The cash on hand includes a P 200,000 customer check payable to Leona Company, dated
January 15, 2015. What should be reported as “cash and cash equivalents” on December 31,
2014?
Solution:
7,800,000