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    Cash and Cash Equivalent: Problem 1

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    Ab C
    1. The document provides financial information for Nelson Trading Company as of December 31, 2006 regarding cash and cash equivalents, including bank balances, book balances, receipts and disbursements. 2. After applying necessary audit procedures, several errors and omissions were noted regarding uncashed checks, unrecorded transactions, and incorrect bookings. 3. The document also provides a bank reconciliation for December 31, 2006 for another company, noting outstanding checks, unrecorded collections, and an unexplained difference between the bank and book balances.

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    Cash and Cash Equivalent: Problem 1

    Uploaded by

    Ab C
    284 views4 pages
    1. The document provides financial information for Nelson Trading Company as of December 31, 2006 regarding cash and cash equivalents, including bank balances, book balances, receipts and disbursements. 2. After applying necessary audit procedures, several errors and omissions were noted regarding uncashed checks, unrecorded transactions, and incorrect bookings. 3. The document also provides a bank reconciliation for December 31, 2006 for another company, noting outstanding checks, unrecorded collections, and an unexplained difference between the bank and book balances.

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    Original Title

    Audit of Cash

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    1. The document provides financial information for Nelson Trading Company as of December 31, 2006 regarding cash and cash equivalents, including bank balances, book balances, receipts and disbursements. 2. After applying necessary audit procedures, several errors and omissions were noted regarding uncashed checks, unrecorded transactions, and incorrect bookings. 3. The document also provides a bank reconciliation for December 31, 2006 for another company, noting outstanding checks, unrecorded collections, and an unexplained difference between the bank and book balances.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    284 views4 pages

    Cash and Cash Equivalent: Problem 1

    Uploaded by

    Ab C
    1. The document provides financial information for Nelson Trading Company as of December 31, 2006 regarding cash and cash equivalents, including bank balances, book balances, receipts and disbursements. 2. After applying necessary audit procedures, several errors and omissions were noted regarding uncashed checks, unrecorded transactions, and incorrect bookings. 3. The document also provides a bank reconciliation for December 31, 2006 for another company, noting outstanding checks, unrecorded collections, and an unexplained difference between the bank and book balances.

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    © All Rights Reserved
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    of 4

    CASH AND CASH EQUIVALENT

    Problem 1
    In connection with the general examination of the accounts of Nelson Trading Company at
    December 31, 2006, you obtained the information and data as shown below relative to your
    verification of Cash.

    The record kept by the accountant showed the following:

    (a) Balances at the end of the month:

    December 1, 2006 December 31, 2006

    Per Bank Statement P 54,000 P101,100

    Per Books 50,400 70,215

    Undeposited collections 3,300 7,200

    Outstanding checks 6,900 * 12,000 *

    * Composed of the following #6515 510 #6552 P 1,800

    6517 2,250 6553 5,700

    6518 2,400 6554 2,550

    6519 1,740 6555 1,950

    (b) Totals for the month of December, 2006:


    Cash Book:

    Receipts P 425,550

    Disbursement 405,735

    Bank Statement

    Receipts P 444,225

    Disbursement 397,125

    After application of the necessary auditing procedures, the following were noted:
    a. Footing of disbursement should be P 404,235, instead of P 405,735.
    b. Bank service charge of P15 for December has not been booked.
    c. Cancelled checks (returned together with the December bank statement) include the
    following which were charged in the statement:
    1. Check #6530 dated December 15, 2006 for P2,400 - this was issued as
    replacement of check # 6518 which was returned by the payee because of
    certain erasures. No entry has been made to record the cancellation of check
    #6518.
    2. Check #6517 for P225 - this was erroneously recorded on the books as P2,250.
    3. Check of Neil Trading for P900 - this was charged by bank in error.
    d. Proceeds from sale of stocks amounting to P23,250 (cost is P18,000) transmitted
    directly by the broker to the bank and credited on December 31, 2006. No entry has
    been made on the books to record this sale of stock investment.
    e. The company failed to record disbursement for payment of accounts payable at
    December 31, 2006 for P1,500.

    Questions

    1. The adjusted cash receipts per ledger of NELSON TRADING COMPANY at December 31,
    2006 is:
    a. P 448,800 b. P 448,125 c. P 444,225 d. P 425,550

    2. The adjusted cash disbursement per bank of NELSON TRADING COMPANY at December
    31, 2006 is:
    a. P 401,325 b. P 402,000 c. P 405,735 d. P 406,125

    3. The adjusted cash ledger balance of NELSON TRADING COMPANY at December 31, 2006
    is:
    a. P 91,350 b. P 95,400 c. P 97,200 d. P 97,500

    4. The adjusted cash in bank balance of NELSON TRADING COMPANY at December 31, 2006
    is:
    a. P 91,350 b. P 95,400 c. P 97,200 d. P 97,500

    5. The cash shortage of NELSON TRADING COMPANY at December 31, 2006 is:
    a. P 765 b. P 675 c. P 575 d. P 390
    Problem 2
    In connection with an audit, you are given the following bank reconciliation.

    BANK RECONCILIATION
    December 31, 2006
    Balance per ledger, 12/31/03 P 34,349.72
    Add: Collections received on the last day of
    December and charged to Cash in Bank
    on books but not deposited 5,324.50
    Debit memo for customers checks returned
    unpaid (check is on hand but no entry has been
    made on the books) 4,000.00
    Debit memo for bank service charge for December 1,000.00
    P 46,674.22
    Deduct:
    Outstanding checks P 18,625
    (see details below)
    Credit memo for proceeds of a note receivable
    which had been left at the bank for collection
    but which has not been recorded as collected 8,000
    Check for an account payable entered on books
    as P12,625 but drawn and paid by bank as
    16,225 3,600 32,225.00
    Computed balance P 14,449.22
    Unlocated difference 36,601.00
    Balance per bank (check to confirmation) P 51,050.22

    LIST OF OUTSTANDING CHECKS


    December 31, 2006
    Check No. Amount
    14344 P 5,820
    14358 1,295
    14367 3,543
    14399 2,001
    14401 4,892
    14407 5,074
    P 18,625

    Questions:

    1. The adjusted cash balance at December 31, 2006 is:


    a. P 33,749.72 b. P 34,949.72 c. P 37,749.72 d.P40,949.72

    2. The outstanding checks at December 31, 2006 is:


    a. P 15,025 b. P 18,625 c. P 19,025 d. P 22,625

    3. The cash balance of the company per record at December 31, 2006 is:
    a. Overstated by P600 c. Understated by P 3,400
    b. Overstated by P1,200 d. Overstated by P 6,600
    CORRECTION OF ERRORS

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