SELF-TEST PRACTICE PROBLEMS

PROBLEM NO. 1
In your audit of the cash account of Yen Company, you are required to prepare a four-
column reconciliation of receipts, disbursements, and balances using the adjusted
balance method and to submit adjusting journal entries as of September 30, 2020.
August 31 September 30
a) Balances per bank P14,010 P19,630
b) Balances per books 13,290 18,195
c) Deposits in transit 2,740 3,110
d) Outstanding checks 4,260 3,870
e) Bank collections not in books 1,200 1,600
f) Bank charges not in books 950 640
g. Of the checks outstanding on September 30, one check for P700 was certified at
the request of the payee.
h. Receipts for September, per bank statement – P281,070.
i. September disbursements, per cash journal – P274,635.
j. NSF check from customer was charged by the bank on September 28, and has
not been recorded – P800.
k. NSF check returned in August and recorded in September, P1,050.
l. NSF check returned and recorded in September, P900.
m. Check of Yin Company charged by the bank in error, P2,010.
n. Receipt on September 6 paid out in cash for travel expenses, P750.
o. Error in recording customer’s check on September 20, P165 instead of P465.
p. Error in disbursements journal for September, P3,250 instead of P325.
You noted in your audit that that the NSF checks returned by the bank are recorded as a
reduction on the cash receipts journal instead of recording it at cash disbursements
journal; redeposits are recorded as regular cash receipts.
PROBLEM NO. 2
You obtained the following information on the current account of Baht Company during
your examination of its financial statements for the year ended December 31, 2020.

The bank statement on November 30, 2020 showed a balance of P76,500. Among the
bank credits in November was customer’s note for P25,000 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 P300 and a P10,000 check
which was charged by the bank in error against Baht Co. account. Also in November you
ascertained that there were deposits in transit amounting to P20,000 and outstanding
checks totaling P42,500.

The bank statement for the month of December showed total credits of P104,000 and
total charges of P51,000. The company’s books for December showed total receipts of
P183,900, disbursements of P101,800 and a balance of P121,400. Bank debit memos
for December were: No. 143 for service charges, P400 and No. 145 on a customer’s
returned check marked “DAIF” for P6,000.

On December 31, 2020 the company placed with the bank a customer’s promissory note
with a face value of P30,000 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, 2021.

A check for P990 was recorded in the company cash payments books in December as
P9,900.

QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answers to the following:
1. How much is the undeposited collections as of December 31, 2020?
a. P84,900 b. P54,900 c. P44,900 d. P34,900
2. How much is the outstanding checks as of December 31, 2020?
a. P47,990 b. P90,490 c. P99,400 d. P90,790
3. How much is the adjusted cash balance as of November 30, 2020?
a. P54,000 b. P64,000 c. P44,000 d. P39,300
4. How much is the adjusted bank receipts for December?
a. P158,900 b. P128,900 c. P118,900 d. P108,900
5. How much is the adjusted book disbursements for December?
a. P56,490 b. P98,990 c. P107,900 d. P99,290
6. How much is the adjusted cash balance as of December 31, 2020?
a. P156,410 b. P93,910 c. P55,000 d. P48,910
PROBLEM NO. 3
Your audit senior instructed you to prepare a four-column proof of cash receipts and
disbursements for the month of December, 2020.

The bank reconciliation prepared by Ringgit Company at November 30 is reproduced

below:

Unadjusted bank balance P96,800 Unadjusted book balance P58,640

Add: deposit in transit 18,000 Add: CM - Note collected 40,320
Total 114,800 Total 98,960
Less outstanding checks: Less: DM bank charges 160
No. 276 P2,400
282 7,200
284 4,800
285 1,600 16,000 .
Adjusted bank balance P98,800 Adjusted balance P98,800

The December bank statement, which has a beginning balance of P96,800, is reproduced
below:

May Bank
Account Name: Ringgit Company
Date Debits Credits
December 01 P18,000
December 02 P7,200 40,000
December 04 24,000
December 06 48,000
December 08 400,000 CM83
December 10 40,000 DM97
December 11 56,000
December 16 20,000
December 18 64,000
December 21 72,400
December 28 36,000 80,000
December 31 4,000 DM98 64,000 CM84
Totals P131,200 P842,400
DM97 – Customer’s DAIF check CM83 – Note collected by the bank
DM98 – Service Charges CM84 – Account collected by the bank

The company’s cash receipts and cash disbursements journals for the month of
December 2020 are provided below:

Cash Receipts Journal Cash Disbursements Journal

Date OR No. Amount Date Check No. Amount
Dec. 01 415 P40,000 Dec. 01 286 P16,000
05 416 48,000 03 287 24,000
 10 417 56,000 10 288 32,000
17 418 64,000 14 289 20,000
20 419 72,000 20 290 28,000
30 420 80,000 23 291 36,000
31 421 88,800 26 292 40,000
28 293 44,000
. 31 294 48,000
Total P440,800 Total P304,000

The company’s Cash in Bank ledger appears below:

Cash in Bank
Balance P58,640 12/31/2020 CDJ P304,000
12/01/2020 GJ 40,320
12/10/2020 GJ (CM83) 400,000
12/31/2020 CRJ 440,800

QUESTIONS:
Based on the application of the necessary audit procedures and appreciation of the
above data, you are to provide the answers to the following:
1. How much is the outstanding checks as of December 31, 2020?
a. P208,000 b. P232,800 c. P216,800 d. P224,000
2. How much is the adjusted book receipts for December, 2020?
a. P985,200 b. P771,600 c. P913,200 d. P904,800
3. How much is the adjusted book disbursements for December, 2020?
a. P347,840 b. P348,000 c. P332,000 d. P339,200
4. How much is the adjusted cash balance as of December 31, 2020?
a. P664,000 b. P688,800 c. P680,000 d. P672,800
5. How much is the cash shortage as of December 31, 2020?
a. P24,240 b. P23,840 c. P15,840 d. P0
PROBLEM NO. 4
In connection with the audit of the financial statements of Rupee Company for the year
ended December 31, 2020, you performed a surprise count of the petty cash fund and
undeposited collections under the custody of Ms. Au at 8:15 a.m. on January 3, 2021.
Your count disclosed the following:

Bills and Coins

Bills Coins
P100 10 pieces P1.00 410 pieces
50 80 pieces 0.50 324 pieces
20 70 pieces 0.25 64 pieces
10 54 pieces

Unused postage stamps – P730

Checks
Date Payee Drawer Amount
Dec. 30 Cash Ms. Au P 2,400
Dec. 30 Rupee Company Emong De Leon 28,000
Dec. 31 Rupee Company Apol Boba, sales manager 3,360
Dec. 31 Rupee Company Datu Macmod 35,600
Dec. 31 Rupee Company Tom Guts 16,600
Dec. 31 German Corp. Rupee Company 54,000
(not endorsed)

Expense Vouchers
Date Payee Description Amount
Dec. 23 Apol Boba, Cash advance for trip to P14,000
sales manager Baguio City
Dec. 27 Central Post Office Postage stamps 3,240
Dec. 29 Messengers Transportation 300
Dec. 29 PC Express Computer repair 1,600

Other items found inside the cash box:

a) Two pay envelopes which had been opened and the contents aggregating P15,000
representing unclaimed salaries had been removed.
b) The sales manager’s liquidation report for his Baguio trip:
Cash advance received on Dec. 23 P14,000
Less: Hotel accommodation P9,000
Bus fare for two 800
Cash given to Pedro, salesman 600 10,400
Balance P 3,600
Accounted for as follows:
 Cash returned by Pedro to the sales manager P 240
Personal check of sales manager 3,360
Total P 3,600

Additional information:
a) The custodian is not authorized to cash checks.

b) The last official receipt included in the deposit on December 30 is No. 351 and the
last official receipt issued for the current year is No. 355. The following official
receipts are all dated December 31, 2020.
O.R. No. Amount Form of payment
352 P27,200 Cash
353 35,600 Check
354 7,200 Cash
355 16,600 Check
c) The Petty Cash balance per general ledger is P20,000. The last replenishment of
the fund was made on December 22, 2020. Unreceipted collection from Emong de
Leon, P28,000.
REQUIRED:
1. Computation of shortage or overage, if any
2. Adjusting entries as of December 31, 2005

PROBLEM NO. 5
The bank statement for the account of Rial Company as of December 31, 2020 showed
a credit balance of P20,000, while the company’s ledger balance of the cash account as
of November 30, 2020 was a debit of P40,000. During December 2020, the ledger
showed two postings; a debit of P60,000 and a credit of P39,000 from the cash receipts
and cash disbursements journal, respectively.
Your examination revealed that the cash column of the receipts book was under footed
by P6,400. The receipts book recorded only the collections from customers and did not
include a bank credit in December for P8,000, representing loan proceeds of a P10,000
promissory note.
An examination of the customers’ subsidiary ledgers showed total credits to individual
accounts amounting to P70,400. The December check disbursements journal which was
over footed by P500, records only the checks issued by the company. In the month of
December, 2020, the bank charged the company for P5,000 representing a loan
guaranteed by the client but was dishonored by the maker, the company vice president.
The December bank service charges of P1,200 were erroneously charged by the bank to
the account of Saudi Company. The bank made the correction in January, 2006. The
outstanding checks as of December 31, 2020 amounted to P5,600.
On the following morning of January 2, 2021, a cash count conducted produced the
following:
Bills and coins P5,200
Three (3) duplicate copies of Rial official
receipts, all dated Jan. 2, 2006 1,800
Checks 2,900

REQUIRED:
a. Computation of the cash shortage as of December 31, 2020.
b. Computation of maximum probable shortage as of December 31, 2020.

PROBLEM NO. 6
You were engaged to audit the books of Dinar Company. From the records of the
company, you gathered the following information:
Dinar Company started operations on October 2, 2020 with the owners investing
P150,000 cash. Monthly bank reconciliation statements have not been prepared;
however, bank statements for October, November, and December were made available
to you. Your analysis of these bank statements showed total bank credits (deposits) of
P575,000 including the owners’ initial investment and a bank loan, details of which are in
additional data. The bank statement in December, 2020 showed an ending balance of
P30,200.
Examination of the paid checks disclosed that checks totaling P4,500 were issued by the
company in December, 2020, and were presented for payment only in January, 2021.
Cash count of the cashier’s accountability amounted to P6,300. You were told by the
cashier that P5,000 of these, in checks, were cash sales on December 29, 2020,
deposited on January 3, 2021. The balance, in currency and coins, represents petty cash.
Additional information are as follows:
a. Accounts receivable subsidiary ledgers had a total balance of P70,000 at December
31, 2020. P5,000 of this was ascertained to be uncollectible.
b. Suppliers’ unpaid invoices for merchandise totaled P15,000; while an account for
store fixtures bought for P50,000 had an unpaid balance of P5,000.
c. Merchandise inventory at December 31, 2020 amounted to P30,000 but P5,000 of
these were spoiled with no resale value.
d. The bank statement in October showed a bank credit for P98,000, dated October 2,
2020. Inquiry from the cashier disclosed that the amount represents proceeds of a
90-day, discounted bank note. P80,000 of this loan was paid by check in December,
2020.
e. Operating expenses paid during the period totaled P180,000; while merchandise
purchases amounted to P250,000.
f. The gross profit rate is 120% of cost.

REQUIRED:
Compute for the cashier’s shortage at December 31, 2020.