6/10/24, 9:42 AM CASH AND CASH Equivalents

CASH AND CASH EQUIVALENTS

True or False: Indicate your answer on the space before the number.
FALSE 1. Money, whether restricted or not, is presented as cash.
TRUE 2. Postdated checks received from customers are reverted from cash back to receivable.
TRUE 3. An investment in debt securities that is acquired 3 months or less before maturity date Is
presented as cash equivalent.
TRUE 4. Checks drawn that are postdated should be reverted back to cash even if the checks Are
already delivered to the payees.
FALSE 5. Entity A acquired debt securities 2 years ago. At the reporting date, the debt securities
Have a remaining term of two months. Entity A can present the dent securities as cash equivalents.

Part I. Modified True or False. Write TRUE if the statement is correct; Otherwise, write FALSE and change
the underlined word to make the statement correct.
unrestricted
1. Money that is readily available for restricted use can be presented as part of cash. FALSE
2. Cash includes cash on hand and cash in the bank. TRUE
not always
3. Checks are always presented as part of cash. FALSE
4. Post-dated checks and IOUs are not part of cash for financial reporting purposes. TRUE
cash equivalents
5. Money market instruments are considered as ash for financial reporting purposes. FALSE
face value
6. Cash is measured at fair value. FALSE
7. Manager’s check and Certified check are considered as cash. TRUE
8. Money orders are considered as cash for financial reporting purposes. TRUE
cannot
9. Shares of stocks or equity instruments can qualify as cash equivalents. FALSE
10. Redeemable preference shares acquired 3 months or less before redemption date can qualify as
cash equivalents. TRUE

PART II. MULTIPLE CHOICE.

1. The following information is provided for Iloilo Corp.:
 The commercial savings account of P 1,200,000 and a commercial checking account balance
of P1,800,000 are held at PS bank.
 A separate cash fund in the amount of P 3,000,000 is restricted for the retirement of a long-
term debt.
 Petty cash fund of P10,000.
 An IOU from a company officer of 45,000.
 Currency and coin on hand amounted to P 15,000.
 Iloilo Corp. Has agreed to maintain a cash balance of P200,000 at all times at PS bank to
ensure future credit availability.
Compute for the cash and cash equivalents to be reported in the Dec. 31, 2019 statement of financial
position
a. 3,025,000 b. 3,000,000 c. 2,755,000 d. None of the above

2. Guim Co. Provides the following information as of Dec. 31, 2019:

Demand deposit account P2,000,000

about:blank 1/8
6/10/24, 9:42 AM CASH AND CASH Equivalents

Time deposit-30 days 1,000,000

NSF check of customer 40,000
Money market placement due June 30, 2020 1,500,000
Pension fund 3,000,000
Petty cash fund 10,000
Customer’s check outstanding for 18 mos. 40,000
Compute for the cash and cash equivalents to be reported in the Dec. 31, 2019 statement of financial
position
a. 3,010,000 b. 3,000,000 c. 4,500,000 d. None of the above

3. Which of the following statements is incorrect?

a. Cash that is restricted within one year from the end of the reporting period should be included in
noncurrent assets.
b. Cash funds that are specifically for the retirement of long-term debts not maturing currently should
be excluded from current assets and shown as a noncurrent investment.
c. Investments that can be liquidated at once and with little risk of loss of principal may be classified as
cash equivalent and included in the caption “Cash and cash equivalents”.
d. Cash and cash equivalents is always presented as the first line item in the statement of financial
position

4. Which of the following may qualify as cash equivalent?

a. Investment in ordinary shares acquired on Dec. 31, 2019, expected to be sold within the next three
months.
b. Treasury notes acquired on Nov. 1, 2019 maturing on March 31, 2020.
c. One -year money market placements.
d. Investment in redeemable preference shares acquired on DEc. 1, 2019, maturing on Feb. 28, 2020.

5. The amount reported as "Cash" on a company's statement of financial position normally should
exclude
a. Post-dated checks that are payable to the company.
b. cash in a payroll account
c. undelivered checks written and signed by the company
d. petty cash

6. The “cash” account in Gina company’s ledger on December 31, 2015 showed a balance of 525,000
which included the following;
Petty cash fund 5, 000
Undeposited receipts, including a post-dated check of 10.000 130,000
Cash in bank 250,000
Cash in sinking fund 100,000
Vouchers paid out of collections, not yet recorded 25,000
IOUs signed by employees 15,000
Total 525,000
At what amount should Gina company report as “cash” on the December 31, 2015 statement of

about:blank 2/8
6/10/24, 9:42 AM CASH AND CASH Equivalents

about:blank 3/8
6/10/24, 9:42 AM CASH AND CASH Equivalents

Credit memo from a vendor for a purchase return 20,000

Money market placement (due June 30, 2020) 100,000
What are the cash and cash equivalents to be reported on the statement of financial position?
a.350,000 b. 550,000 c.250,000 d. None of the above

12. XYZ Co. Holds the following short-term investments as of Dec. 31, 20x1:
1- year Treasury bill maturing on March 30, 20x2, acquired on July 1, 20x1, 500,000.
1- year Treasury bill maturing on March 30, 20x2, acquired on Dec. 1, 20x1, 600,000.
1- year Treasury bill maturing on April 1, 20x2, acquired on Dec. 31, 20x1, 700,000
How much will be the total cash equivalents as of Dec. 31, 20x1?
a.500,000 b. 1.200,000 c.700,000 d. None of the above

13. YZ Co. Holds the following short-term investments as of Dec. 31, 20x1:
Treasury shares P 500,000
Redeemable preference shares purchased 1 month. Before maturity 200,000
Certified check 100,000
Manager’s check 50,000
Change fund 5,000
Treasury bill, purchased 12/31/20x1, maturing 2/28/20x2 30,000
What is the cash to be reported on the statement of financial position?
a. 135,000 b. 255,000 c. 155,000 d. None of the above

14. Given the same information as above in # 13, What are the cash and cash equivalents to be
reported on the statement of financial position?
a.485,000 b. 285,000 c. 385,000 d. None of the above

15. Global Inc. provided the following information as of Dec. 31, 2019
Employee’s NSF check P10,000
IOU from president 50,000
Traveler’s check 20,000
Money order 60,000
Petty cash fund (expense receipts of P5,000) 15,000
Treasury bill, purchased 12/31/20x1, maturing 2/28/20x2 30,000
Cashier’s checks 20,000
Treasury bill, purchased 12/31/2019, maturing 1/31/2020 350,000
What are the cash and cash equivalents to be reported on the statement of financial position?
a. 380,000 b. 210,000 c. 490,000 d. None of the above

Part III.
1. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Post-dated checks and I.O.U.'s

about:blank 4/8
6/10/24, 9:42 AM CASH AND CASH Equivalents

2. Which of the following is considered cash?

a. Certificates of deposit (CDs)
b. Money market checking accounts
c. Money market savings certificates
d. Post-dated checks

3. Travel advances should be reported as

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. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand

5. All of the following may be included under the heading of "cash" except
a. currency
b. money market funds
c. checking account balance
d. savings account balance

6. In which account are post-dated checks received classified?

a. Receivables.
b. Prepaid expenses.
c. Cash.
d. Payables.

7. In which account are postage stamps classified?

a. Cash.
b. Office supplies.
c. Receivables.
d. Inventory.

8. What is a compensating balance?

a. Savings account balances.
b. Margin accounts held with brokers.
c. Temporary investments serving as collateral for outstanding loans.
d. Minimum deposits required to be maintained in connection with a borrowing arrangement.
9. Under which section of the balance sheet is "cash restricted for plant expansion" reported?
a. Current assets.

about:blank 5/8
6/10/24, 9:42 AM CASH AND CASH Equivalents

about:blank 6/8
6/10/24, 9:42 AM CASH AND CASH Equivalents

What amount should Trans report as cash and cash equivalents in its December 31,2021, balance sheet
(statement of financial position)? 460,000

4. The cash balance of CAPSIZE OVERTURN Co. comprises the following:

Cash on hand 300,000
Cash in bank – savings – BPI 600,000
Cash in bank – current – BPI (240,000)
Cash in bank – deposit in escrow – Metrobank 300,000
Cash in bank – current – Metrobank ( 60,000)
Cash in bank – current – BDO ( 90,000)
Total 810,000
Additional information:
Cash on hand includes undeposited collections of P60,000.
The cash in bank – savings maintained at BPI includes a P150,000 compensating balance which is not
restricted.
What amount of cash is reported in the financial statements? 660,000

5. On December 31, 2021, West Company had the following cash balances:
Cash in banks P1,800,000
Petty cash funds (all funds were reimbursed on 12/31/21) 50,000
Cash in banks includes P600,000 of compensating balances against short-term borrowing arrangements
at December 31, 2021. The compensating balances are not legally restricted as to withdrawal by the
West. In the current assets section of West's December 31, 2021, balance sheet (statement of financial
position), what total amount should be reported as cash? 1,850,000

6. Caloocan Corp. Had the following records for the year ended Dec. 31, 2021
Current account at Metrobank P 2,000,000
Payroll account 500,000
Foreign bank account (restricted) P 1,000,000
Postage stamps 1,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money market instrument-90 days 60,000
How much is the cash to be reported on Dec. 31, 2021? 2,550,000

7. Laguna Corp. contains the following records for the year ended Dec. 31, 2021
Money order P 30,000
Treasury bills, due 3/30/ 2022, (purchased 12/29/21) 200,000
Treasury bills, due 1/31/2022 (purchased 2/15/21) 300,000
Money market instrument- 90 days 100,000
Savings account 500,000
Compute for the cash to be reported on Dec. 31, 2021 statement of financial position: 530,000
8. Given the same information in No. 7 (Laguna Corp.), how much is classified as cash equivalents only
for the year ended Dec. 31, 2021? 400,000

about:blank 7/8
6/10/24, 9:42 AM CASH AND CASH Equivalents

9. Given the same information in No. 7 (Laguna Corp.), how much is classified as cash and cash
equivalents for the year ended Dec. 31, 2021? 830,000

10. The books of ABC Co. Show the following balances at Dec. 31, 2021:
Cash on hand P 100,000
Cash in Bank - current account 350,000
Cash in bank peso savings deposit 2,000,000
Cash in bank-dollar deposit (unrestricted) $100,000
Cash in bank-dollar deposit (restricted) 20,000
Cash in money-market account 250,000
6-month time deposit $60,000
Treasury bond, purchased 3/1/21, maturing 2/28/22 P 800,000
Treasury note 200,000
Unused credit line 2,000,000
Sinking fund 400,000
Traveler’s check 50,000
*Exchange rate at year-end is $1 to P40.
Compute for the cash and cash equivalents to be reported in the Dec. 31, 2021 statement of financial
position: 6,750,000
Solution:
Cash on hand P 100,000
Cash in Bank - current account 350,000
Cash in bank peso savings deposit 2,000,000
Cash in bank-dollar deposit (unrestricted) ($100,000*40) 4,000,000
Cash in money-market account 250,000
Traveler’s check 50,000
Total Cash and Cash equivalents 6,750,000

about:blank 8/8