ADAMSON UNIVERSITY

INTERMEDIATE ACCOUNTING 1
CASH & CASH EQUIVALENT - ASSIGNMENT
1. Which of the following is not considered cash for financial reporting purposes?
a. petty cash and change funds
b. money order, travelers’ checks
c. coins, currency, & available funds
d. postdated checks & IOU’s

2. Cash on Hand and In Bank on the statement of financial position excludes

a. checks drawn before the reporting date but held for later delivery to creditors.
b. petty cash fund and change fund.
c. US dollars deposited in a foreign currency depository account.
d. cash reserved for acquisition of fixed assets.

3. A bank overdraft should be

a. reported as a deduction from current assets section.
b. reported as a deduction from cash.
c. reported as a current liability when there is no valid basis for offsetting against another bank
account.
d. ignored.

4. Under which classification is “Cash Restricted for Payment of Long-term Obligations” reported?
a. Current Assets
b. Non-Current Assets.
c. Current Liabilities.
d. Non-Current Liabilities.

5. A petty cash system is designed to

a. cash checks for employees.
b. handle cash sales.
c. account small cash receipts and disbursements.
d. pay small miscellaneous expenses.

6. A Cash Short or Over account is

a. not generally accepted.
b. debited when petty cash fund proves out over.
c. debited when petty cash fund proves out short.
d. a contra account to Petty Cash Fund.

7. Which of the following is not true

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. The account Cash Short or Over, if debit balance, is presented as part of Operating Expenses.

8. Dandelion Company had the following account balances (in Phil Peso) at December 31, 2021:
Cash in Bank – 2,250,000
Cash on Hand – 125,000
Cash legally restricted for plant expansion – 1,600,000
Cash in Bank includes P600,000 of compensating balances against short-term borrowing arrangements.
The compensating balances are not legally restricted as to withdrawal by Dandelion. In the current
assets section of Dandelion’s December 31, 2021 statement of financial position, total cash should be
reported at:
a. P1,775,000
b. P2,250,000
c. P2,375,000
d. P3,975,000
Cash in Bank 2,250,000 + Cash on Hand 125,000 = 2,375,000

9. Bethany Corporation’s checkbook balance at December 31, 2021 was P50,000. In addition,
Bethany held the following items (in Phil Peso) in its safe on that date:
Check payable to Bethany dated December 31, 2021, in payment of a sale made in December 2021, not
included in December 31 checkbook balance – 20,000
Check payable to Bethany deposited on December 15 but returned by bank on December 30 marked
NSF. The deposit and the return were both reflected in the checkbook – 5,000
Check drawn on Bethany’s account, payable to a vendor, dated December 30, but not yet mailed to
payee as of December 31, 2021. The check is not yet recorded. – 3,000
The amount to be shown as Cash in Bethany’s statement of financial position at December 31, 2021 is:
a. P48,000
b. P65,000
c. P68,000
d. P70,000 (50,000 + 20,000)

If you were to journalize the above-mentioned data, your journal entries would be:
Check payable to Bethany dated December 31, 2021, in payment of a sale made in December
2021, not included in December 31 checkbook balance – 20,000
Cash 20,000
Accounts Receivable 20,000
To record receipt of check in favor of Bethany (assuming that the sale is on account)

The journal entry above signifies that Bethany’s cash account should increase by P20,000

Check payable to Bethany deposited on December 15 but returned by bank on December 30

marked NSF. The deposit and the return were both reflected in the checkbook – 5,000
Cash 5,000
Accounts Receivable 5,000
To record receipt of check that was deposited on Dec 15 (assuming that this is a collection of a
previous sale on account)

Accounts Receivable 5,000

Cash 5,000
To record return of the same check because it has no sufficient funds (nsf)

In short, it has no effect on the cash account of Bethany because the cash account was initially
debited but eventually credited

Check drawn on Bethany’s account, payable to a vendor, dated December 30, but not yet mailed to payee as of
December 31, 2021. The check is not yet recorded. – 3,000
Accounts Payable 3,000
Cash 3,000
To record the check drawn by Bethany in favor of a vendor (assuming that the purchase was
made on account)

Even though this journal entry signifies a decrease in the cash account of Bethany, take note
Bethany has yet to mail it as of Dec. 31, 2021. Recall the concept of Unreleased Checks. (That
unreleased checks are still included in the cash account)

10. Bataan Company had a checkbook balance on December 31, 2021 of P8,000,000, and held the
following items (in Phil. Peso) in its safe:
Check payable to Bataan dated January 5, 2022, included in December 31 checkbook balance –
2,000,000
Check payable to Bataan, deposited on December 20, and included in December 31 checkbook
balance, but returned by the bank on December 30 stamped NSF. The check was redeposited on
January 2, 2022 and cleared January 3, 2022 – 500,000
Check drawn on Bataan’s account and payable to a supplier dated and recorded December 31 but not
mailed until January 15, 2022 – 1,500,000
What amount should be reported as cash on December 31, 2021?
a. P7,000,000 (8,000,000 – 2,000,000 – 500,000 + 1,500,000)
b. P7,500,000
c. P9,000,000
d. P9,500,000

If you were to journalize the above-mentioned data, your journal entries would be:

Check payable to Bataan dated January 5, 2022, included in December 31 checkbook balance –
2,000,000
This a post-dated check issued in favor of Bataan. Hence, it could not be considered as cash yet.
It will only affect Bataan’s cash account on Jan. 5, 2022. Therefore, deduct this amount from the
P8,000,000 balance.

Check payable to Bataan, deposited on December 20, and included in December 31 checkbook
balance, but returned by the bank on December 30 stamped NSF. The check was redeposited on
January 2, 2022 and cleared January 3, 2022 – 500,000
Cash 500,000
Accounts Receivable 500,000
To record receipt of the check which was deposited on Dec. 20 (Note that this amount is already
included in the P8,000,000 balance)

Accounts Receivable 500,000

Cash 500,000
To record the check returned by the bank due to no sufficient funds (nsf)
This journal entry signifies that the cash account was decreased by P500,000 as a result of the
return. In other words, the customer still owes Bataan the said amount.

Check drawn on Bataan’s account and payable to a supplier dated and recorded December 31
but not mailed until January 15, 2022 – 1,500,000
Accounts Payable 1,500,000
Cash 1,500,000
To record check drawn by Bataan in favor of its supplier (assuming that the purchase was made
on account)
Even though this journal entry signifies a decrease in the cash account of Bataan, take note
Bataan only mailed it to the payee/supplier on Jan. 15, 2022. Recall the concept of Unreleased
Checks. (That unreleased checks are still included in the cash account)

11. On December 31, 2021, Kanzai Corporation had the following balances in the bank accounts (in
Phil. Peso) it maintains with Philippine Bank:
Checking account No. 101 – 1,750,000
Time deposit account (30 days) – 250,000
90-day Treasury bill due on Feb. 28, 2022 – 500,000
In the December 31, 2021 statement of financial position, what total amount should be reported as cash
and cash equivalent?
a. P1,900,000
b. P2,000,000
c. P2,400,000
d. P3,200,000
Checking account No. 101 – 1,750,000 = CASH
Time deposit account (30 days) – 250,000 = CASH EQUIVALENT
90-day Treasury bill due on Feb. 28, 2022 – 500,000 = CASH EQUIVALENT
Hence, a total of P2,400,000 Cash and Cash Equivalent to be reported by Kanzai

12. The petty cash fund of Six Sigma Trading at the end of the fiscal year ended June 30, 2020 is
composed of the following (in Phil. Peso):
Currencies – 3,800
Coins – 1,200
Paid Vouchers – 9,750
Check drawn by the manager, returned by bank marked NSF – 2,750
Check drawn by the company payable to the petty cash custodian, representing her salary – 12,500
The amount of petty cash fund that should be shown on the statement of financial position at June 30,
2020 of Six Sigma Trading is:
a. P5,000
b. P17,500
c. P20,250
d. P30,000

Currencies – 3,800
Coins – 1,200
Paid Vouchers – 9,750
Check drawn by the manager, returned by bank marked NSF – 2,750
Total of the above items is P17,500
13. On April 1, 2021, Magnanimous Corporation established an imprest petty cash fund for P10,000
by writing a check drawn against its checking account. On April 30, 2021, the fund contained the
following (in Phil. Peso):
Currency and coins – 3,000
Receipts for office supplies – 4,000
Receipts for postage still unused – 2,000
Receipts for transportation – 600
On April 30, 2021, the entity wrote a check to replenish the fund. What is the amount of replenishment
under the imprest fund system?
a. P10,000
b. P6,600
c. P7,000
d. P3,000
Established PCF 10,000 MINUS Currency and coins 3,000 = Replenishment 7,000
OR
If you were to journalize the replenishment
Office Supplies 4,000
Postage Expense 2,000
Transportation Expense 600
Cash Short or Over 400
Cash in Bank 7,000

14. In preparing its August 31, 2019 bank reconciliation, Jade Company has the following available
information (in Phil. Peso):
Balance per bank statement, 8/31/2019 – 180,500
Deposit in Transit, 8/31/2019 – 32,500
Return of customer’s NSF check, 8/31/2019 – 6,000
Outstanding Checks, 8/31/2019 – 27,500
Bank service charge for August – 1,000
At August 31, 2019, Jade Company’s correct cash balance is:
a. P185,500
b. P179,500
c. P178,500
d. P175,500

Hint: Prepare a bank reconciliation computing for the adjusted BANK balance

Unadjusted BANK balance P180,500

Add: Deposit in Transit 32,500
Less: Outstanding Checks (27,500)
------------
Adjusted BANK balance P185,500
=======

15. In preparing its August 31, 2019 bank reconciliation, Jade Company has the following available
information (in Phil. Peso):
Balance per bank statement, 8/31/2019 – 180,500
Deposit in Transit, 8/31/2019 – 32,500
Return of customer’s NSF check, 8/31/2019 – 6,000
Outstanding Checks, 8/31/2019 – 27,500
Bank service charge for August – 1,000
At August 31, 2019, Jade Company’s unadjusted cash balance per books is:
a. P185,500
b. P190,500
c. P192,500
d. P180,500

Hint: Prepare a bank reconciliation using BANK TO BOOKS method

Unadjusted BANK balance P180,500

Add: Deposit in Transit 32,500
Add: Customer’s NSF check 6,000
Add: Bank Service Charge 1,000
Less: Outstanding Checks (27,500)
------------
Unadjusted BOOKS balance P192,500
=======
To prove Nos. 14 and 15, prepare a bank reconciliation wherein BOOKS and BANK balances are
brought to their ADJUSTED balances

Bank Books
Unadjusted Balances 180,500 192,500
Add (Deduct) Reconciling Items
Deposit in Transit 32,500
Outstanding Checks (27,500)
Customer’s NSF Check (6,000)
Bank Service Charges (1,000)
------------- -------------
Adjusted Balances 185,500 185,500

Further, the necessary journal entries in the BOOKS of Jade are as follows:

Accounts Receivable 6,000

Cash in Bank 6,000
To record customer’s NSF check returned by the bank

Bank Charges 1,000

Cash in Bank 1,000
To record customer’s NSF check returned by the bank

16. During the audit of Emphatic Company on December 31, 2021, the following data (in Phil. Peso)
are gathered:
Balance per book – 4,000,000
Bank Charges – 10,000
Outstanding Checks – 950,000
Deposit in Transit – 1,200,000
Customer note collected by bank – 1,500,000
Interest on customer note – 60,000
Depositor’s note charged to account – 1,000,000
What is the adjusted book balance on December 31, 2021?
a. P4,300,000
b. P5,300,000
c. P4,250,000
d. P4,000,000

Hint: Prepare a bank reconciliation computing for the adjusted BOOKS balance

Unadjusted BOOKS balance P4,000,000

Add: Customer note collected by bank 1,500,000
Add: Interest on customer note 60,000
Less: Bank Charges (10,000)
Less: Customer check returned NSF (250,000)
Less: Depositor’s note charged to account (1,000,000)
---------------
Adjusted BOOKS balance P4,300,000
=========

Further, the necessary journal entries in the BOOKS of Emphatic are as follows:

Cash in Bank 1,500,000

Notes Receivable 1,500,000
To record customer’s note collected by the bank

Cash in Bank 60,000

Interest Income 60,000
To record interest customer’s note collected by the bank

Bank Charges 10,000

Cash in Bank 10,000
To record bank charges

Accounts Receivable 250,000

Cash in Bank 250,000
To record customer check returned as NSF by the bank

Notes Payable 1,000,000

Cash in Bank 1,000,000
To record depositor’s (EMPHATIC) note charged to account
17. During the audit of Emphatic Company on December 31, 2021, the following data (in Phil. Peso)
are gathered:
Balance per book – 4,000,000
Bank Charges – 10,000
Outstanding Checks – 950,000
Deposit in Transit – 1,200,000
Customer note collected by bank – 1,500,000
Interest on customer note – 60,000
Depositor’s note charged to account – 1,000,000
What is the unadjusted bank balance on December 31, 2021?
a. P5,550,000
b. P5,300,000
c. P4,550,000
d. P4,050,000

Hint: Prepare a bank reconciliation using BOOKS TO BANK method

Unadjusted BOOKS balance P4,000,000

Add: Customer note collected by bank 1,500,000
Add: Interest on customer note 60,000
Add: Outstanding Checks 950,000
Less: Bank Charges (10,000)
Less: Customer check returned NSF (250,000)
Less: Depositor’s note charged to account (1,000,000)
Less: Deposit in transit (1,200,000)
---------------
Unadjusted BANK balance P4,050,000
=========

To prove Nos. 16 and 17, prepare a bank reconciliation wherein BOOKS and BANK balances are
brought to their ADJUSTED balances

Bank Books
Unadjusted Balances 4,050,000 4,000,000
Add (Deduct) Reconciling Items
Deposit in Transit 1,200,000
Outstanding Checks (950,000)
Customer note collected by bank 1,500,000
Interest on customer note 60,000
Bank Charges (10,000)
Customer check returned NSF (250,000)
Depositor’s note charged to account (1,000,000)
--------------- ---------------
Adjusted Balances 4,300,000 4,300,000

Further, the necessary journal entries in the BOOKS of Emphatic are the same as the journal
entries shown above earlier.

18. Laconic Company’s bank statement for the month of April included the following information (in
Phil. Peso):
Bank service charge for April – 15,000
Check deposited by Laconic during April returned by bank and marked NSF – 40,000
Deposits made but not yet recorded by bank – 130,000
Checks written and mailed but not yet recorded by bank – 100,000
Laconic Company found a customer check for P35,000 that had not yet been recorded and had not been
deposited. The general ledger showed a bank account balance of P920,000. What is the adjusted cash
in bank on April 30?
a. P900,000
b. P865,000
c. P930,000
d. P965,000

Hint: Prepare a bank reconciliation using adjusted BOOKS balance

Unadjusted BOOKS balance 920,000

Add: Unrecorded customer check 35,000
Less: Bank service charge for April (15,000)
Less: NSF check (40,000)
------------
Adjusted BOOKS balance 900,000
=======
Further, the necessary journal entries in the books of Laconic are as follows:

Cash in Bank 35,000

Accounts Receivable 35,000
To record the unrecorded and undeposited customer’s check
Bank Charges 15,000
Cash in Bank 15,000
To record bank service charge

Accounts Receivable 40,000

Cash in Bank 40,000
To record check returned by bank as NSF

19. Laconic Company’s bank statement for the month of April included the following information (in
Phil. Peso):
Bank service charge for April – 15,000
Check deposited by Laconic during April returned by bank and marked NSF – 40,000
Deposits made but not yet recorded by bank – 130,000
Checks written and mailed but not yet recorded by bank – 100,000
Laconic Company found a customer check for P35,000 that had not yet been recorded and had not been
deposited. The general ledger showed a bank account balance of P920,000. What is the unadjusted
bank balance on April 30?
a. P900,000
b. P865,000
c. P870,000
d. P965,000

Hint: Prepare a bank reconciliation using BOOKS TO BANK method

Unadjusted BOOKS balance 920,000

Add: Unrecorded customer check 35,000
Add: Outstanding Checks 100,000
Less: Bank service charge for April (15,000)
Less: NSF check (40,000)
Less: Deposit in Transit (130,000)
------------
Unadjusted BANK balance 870,000
=======
To prove Nos. 18 and 19, prepare a bank reconciliation were both BOOKS and BANK balances
are brought to their ADJUSTED balances
Bank Books
Unadjusted Balances 870,000 920,000
Add (Deduct) Reconciling Items
Deposit in Transit 130,000
Outstanding Checks (100,000)
Unrecorded customer check 35,000
Bank service charge for April (15,000)
NSF check (40,000)
------------ ------------
Adjusted Balances 900,000 900,000

Further, the necessary journal entries in the books of Laconic are the same as the entries shown
above earlier.

20. Elevated Corporation disclosed the following information as of the end of year 2020:

 Investment securities of P1,000,000. These securities are share investments in entities that are
traded in the Philippine Stock Exchange. The shares are actively traded in the stock market
 Cash of P3,400,000 deposited in Export and Import Bank
 Investment securities of P2,000,000. These securities are government treasury bills that have a
10-year term. The treasury bills were purchased on December 29, 2020, at which time they had
two (2) months until they mature.
 Investment securities of P1,500,000. These securities are commercial papers that have a 9-
month term. The commercial papers were purchased on December 29, 2020, at which time they
had three (3) months until maturity.
What amount should Elevated report as “Cash and Cash Equivalents” at the end of the year?
a. P7,900,000
b. P5,400,000
c. P6,400,000
d. P6,900,000

Cash deposited in Export and Import Bank (CASH) 3,400,000

Treasury bills (CASH EQUIVALENT) 2,000,000
Commercial papers (CASH EQUIVALENT) 1,500,000
--------------
Cash and Cash Equivalents 6,900,000
Investment securities of P1,000,000 CANNOT be classified as “Cash Equivalent” because they do
not have a maturity.