Prelim Period (August 9, 2021- September 17, 2021)

Burauen Community College Modular Home Instruction

Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

AUDITING AND ASSURANCE CONCEPTS AND APPLICATIONS 1

Prepared by:
Germa D. Cosep, CPA

ILLUSTRATIVE PROBLEMS:
PROBLEM 1
The “CASH” account of Don Corporation’s ledger on December 31, 2021 showed the following:
a. Petty cash fund (including P7,500 unreplenished
voucher of which P2,400 is dated January 3, 2022) P 15,000
b. Redemption Fund Account – PNB 500,000
c. Traveler’s check 100,000
d. Money order 10,000
e. Treasury bill, purchased December 1, 2021 (due on Feb. 1, 2022) 50,000
f. Time deposit due on March 31, 2022 50,000
g. 180-day Treasury bill, due March 15, 2022 120,000
h. Note receivable in the possession of a collecting agency 20,000
i. PNB – Checking Account #211-009-091 325,900
j. Cash on hand, including customer postdated check of P15,000 23,000
k. Savings deposit, earmarked for acquisition of equipment 210,000
l. A check payable to San Ignacio Incorporated, dated January 5, 2022,
that was included in the December 31 PNB Checking Account #211-009-091 50,000
m. Bond Sinking Fund (used to finance the maturing long-term obligation
on March 31, 2022) 150,000
n. Overdraft in PNB Checking Account #211-099-085 ( 50,000)
o. Check #801 in payment to Accounts Payable, dated Dec. 31, 2021
not mailed until January 5, 2022 20,000
p. Advances to Officers/Employees for Seminars (no liquidation is
required) 80,000
q. Money market placement (due June 30, 2022) 600,000
r. Listed stock held as temporary investment 100,000
s. Check #789 in payment to Suppliers, dated January 5, 2022 and
recorded December 31, 2021. 35,000
t. Customers’ certified checks 10,000
u. Pension Fund 150,000
TOTAL 2,568,900

QUESTIONS
1. The entry to correct/adjust item F is:
a. Investment 50,000
Cash 50,000
b. Other assets 50,000
Cash 50,000
c. Short-term investment 50,000
Cash 50,000
d. No adjustment

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

2. The entry to correct/adjust item L is:

a. Accounts payable 50,000
Cash 50,000
b. Cash 50,000
Other liabilities 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustment

3. The entry to correct/adjust item M is:

a. Investment 150,000
Cash 150,000
b. Other assets 150,000
Cash 150,000
c. Short-term investment 150,000
Cash 150,000
d. No adjustment

4. DON CORPORATION’S cash and cash equivalents balance at December 31, 2021 is:
a. Overstated by P1,950,100 c. Overstated by P 1,845,100
b. Overstated by P 1,895,100 d. Overstated by P 1,795,100

5. DON CORPORATION’S adjusted cash and cash equivalents balance at December 31, 2021 is:
a. P 618,800 b. P 623,800 c. P 673,800 d. P 723,800

PROBLEM 2
The following items are found in the cash account of Corrs Company at December 31, 2021. The company’s
controller asks your opinion whether the items listed below should be considered as part of cash account and come
up with adjusting entry to adjust the cash account.

1. Customers’ check dated December 25, 2021, P25,000.

2. Company’s check (P30,000) dated December 26, 2021 which was drawn in payment for merchandise purchased
on that date but not delivered until January 3, 2022. This check was deducted in the cash balance.
3. A check worth P196,000 from customer who paid the account net of the 2% discount. The company records the
transaction as credit to Accounts Receivable for the proceeds.
4. Cash in closed bank (Urban Bank), P95,000.
5. Redemption fund, P100,000
6. Sinking fund, P100,000. This will be used on March 1, 2022 to redeem the bonds payable.
7. Metro Bank Checking Account No. 0004568, P210,000.
8. RCBC Checking Account No. 0002347, P115,000.
9. Overdraft in PNB Checking Account No. 00011256, P50,000.
10. Company’s check dated January 3, 2022 in payment of account, P50,000. This was recorded in the company’s
disbursement ledger at December 31, 2021.
11. Overdraft in RCBC Checking Account No. 0056791, P15,000.
12. Postage stamps, P2,000.
13. 90-day Treasury Bills (purchase on November 1, 2021), P100,000
14. Treasury Bills that matures on February 1, 2022, P50,000.
15. Change fund, P10,000.
16. Customers’ certified check, P20,000.
17. Company’s certified check, P50,000. (This was included in the cash disbursement for December).

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

QUESTIONS
1. The entry to correct/adjust item number 3 is:
a. Accounts receivable 4,000
Sales discounts 4,000
b. Sales discounts 4,000
Accounts receivable 4,000
c. Accounts receivable 4,000
Sales 4,000
d. No adjustments
2. The entry to correct/adjust item number 10 is:
a. Accounts payable 50,000
Cash 50,000
b. Other liabilities 50,000
Cash 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustment

3. The entry to correct/adjust item number 17 is:

a. Accounts payable 50,000
Cash 50,000
b. Cash 50,000
Accounts receivable 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustments

4. The entry to correct/adjust item number 16 is:

a. Accounts receivable 20,000
Cash 20,000
b. Cash 20,000
Accounts payable 20,000
c. Cash 20,000
Accounts receivable 20,000
d. No adjustments

5. CORRS COMPANY’S adjusted cash and cash equivalents balance at December 31, 2021 is:
a. P 771,000 b. P 741,000 c. P 721,000 d. P 691,000

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

PROBLEM 3
Your audit of the December 31, 2021, financial statements of Akari Corporation reveals the following:
1. Current account at PBCom P (35,000)
2. Current account at PNB 65,000
3. Treasury bills (acquired 3 months before maturity) 200,000
4. Treasury bills (maturity date is 12/31/22) 500,000
5. Payroll account 175,000
6. Foreign bank account - restricted (translated using the
12/31/21 exchange rate) 900,000
7. Postage stamps 600
8. Employees’ checks marked “DAIF” 10,000
9. IOU from the vice-president 50,000
10. Credit memo from a supplier for a purchase returns 25,000
11. Traveler’s check 60,000
12. Money order 10,000
13. Company’s check dated 12/30/21 but not mailed at year-end 30,000
14. Petty cash fund (P4,000 in currency and expense receipts for
(P6,000) 10,000

QUESTIONS
1. The entry to adjust the employees’ checks marked “DAIF” is: (DAIF = Drawn Against Insufficient Fund)
a. Accounts receivable 10,000
Cash 10,000
b. Cash 10,000
Accounts receivable 10,000
c. Employees’ advances 10,000
Cash 10,000
d. Cash 10,000
Employees’ advances 10,000

2. AKARI CORPORATION’S adjusted cash and cash equivalents balance at December 31, 2021 is:
a. P 560,000 b. P 544,000 c. P 514,000 d. P 509,000

PROBLEM 4
The controller of Kryzzie Company is attempting to determine the amount of cash to be reported on its December
31, 2021 balance sheet. The following information is provided:
a. Commercial savings account of P1,000,000 and a commercial checking account balance of P900,000 are held at
Phil. Banking Corporation.
b. Money market fund account held at Allied Bank, P600,000
c. Travel advance of P180,000 for executive travel for the first quarter of next year (employee to reimburse
through salary reduction)
d. A separate fund in the amount of P1,500,000 is restricted for the retirement of long-term debt.
e. Petty cash fund, P5,000
f. An IOU from David Santos, a company officer, in the amount of P10,000.
g. A bank overdraft of P110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At
the present time, the company has no other deposits at this bank.
h. The company has two certificates of deposit, each totaling P500,000. These certificates of deposit have a
maturity of 120 days.
i. Kryzzie Company has received a check that is dated January 12, 2022 in the amount of P125,000.
j. Currency and coins on hand amounted to P5,300.

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

QUESTIONS
1. KRYZZIE COMPANY’S adjusted cash and cash equivalents balance at December 31, 2021 is:
a. P 1,910,300 b. P 2,400,300 c. P 2,510,300 d. P 3,510,300

2. The travel advance of P180,000 for executive travel should be classified as:
a. Accounts receivable c. Prepaid expenses
b. Travel expenses d. Advances to employees

PROBLEM 5
Present journal entries to record the following transactions in the books of Yanyan Corporation, which uses a
calendar year as accounting period. Assume that the company is using the imprest method in accounting for petty
cash fund:

a. A petty cash fund was set up on November 1, 2021 in the amount of P2,400.

b. On November 29, 2021, a check was issued to replenish the fund, the composition of which was as follows:
Currency – bills and coins 166
Vouchers showing expenditures for:
Office supplies 270
Charges from purchase of supplies 124
Repairs and maintenance 350
Wages paid to casual employees 950
Charges from purchase of goods to be sold 400

c. On December 18, 2021, the fund was replenished and correspondingly increased to P3,000; its composition
included the following:
Currency – bills and coins 158
Vouchers showing expenditures for:
Store supplies 304
Accounts payable 914
Charges from purchased of goods to be sold 242
Miscellaneous expenses 782

d. An examination on December 31, 2021, disclosed the following composition of the fund, although it was not
replenished on this date:
Currency – bills and coins 958
Check of office manager, dated January 5, 2022 1,000
Vouchers showing expenditures for:
Office supplies 126
Miscellaneous expenses 90
Accounts payable 800

e. On January 5, 2022, the check of office manager was cashed and the proceeds were added to the petty cash
fund.

f. On January 6, 2022, replenished disbursement from December 18, 2021 to January 5, 2022.

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

QUESTIONS
1. The entry to record the November 29 replenishment of petty cash fund is:
a. Operating expenses 1,694
Freight-in 400
Cash short/over 140
Cash 2,234
b. Operating expenses 2,234
Petty cash fund 2,234
c. Operating expenses 1,694
Freight-in 400
Cash short/(over) 140
Petty cash fund 2,234
d. No entry since the company is using an impress fund system.

2. The adjusted Petty Cash Fund balance of YANYAN CORPORATION at December 31, 2021 is:
a. P 3,000 b. P 1,958 c. P 984 d. P 958

3. The entry to record the December 31, 2021 adjustment of petty cash fund is:
a. Operating expenses 216
Accounts payable 800
Cash short/over 26
Petty cash fund 1,042

b. Operating expenses 216

Accounts payable 800
Cash short/over 26
Cash 1,042
c. Operating expenses 216
Accounts payable 800
Advances – employees 1,000
Cash short/(over) 26
Petty cash fund 2,042
d. No entry since there is no replenishment yet.

4. The entry to record the January 6, 2022 replenishment of petty cash fund is:
a. Operating expenses 216
Accounts payable 800
Cash short/over 26
Petty cash fund 1,042
b. Operating expenses 216
Accounts payable 800
Cash short/over 26
Cash 1,042
c. Operating expenses 216
Accounts payable 800
Advances – employees 1,000
Cash short/(over) 26
Cash 2,042
d. No entry since the account has been adjusted on December 31.

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

PROBLEM 6
Your audit of the petty cash (P10,000) of Juleto Company as of December 31, 2021 revealed the following: (cash
count date is January 3, 2022 at 5:00 pm)

Bills: 10 - P500 bill 15 - P100 bill 18 - P50 15 - P20 5 - P10

Coins: P180 in P5 pieces; P42 in P1.00 pieces; P23 in P0.25 pieces.
IOU’s submitted were:
Dec. 18 Nap R. - P 750
Dec. 28 Ruel R. 125
Dec. 30 Sonny S. 500
Cashed checks:
Dec. 28, 2021 check drawn by the manager P 1,125
Dec. 28, 2021 check drawn by an employee 500
Dec. 30, 2021 check drawn by a customer 350
Jan 1, 2022 check drawn by an employee 1,250

The cashier informed you that owing to the lack of cash it was necessary for him to open certain payroll
envelopes unclaimed by employees and use the cash found herein. They were as follows:
Dec. 15, 2021 - Ed A. P 1,250
Dec. 30, 2021 - Andoy 1,750
Dec. 30, 2021 - Macky 650
Dec. 30, 2021 - Paz 1,000

The cashier also informed you that all cash sales receipts were passed through his fund and that cash sales
tickets Nos. 2059 to 2061 under dates of Dec. 30, Jan. 3 and Jan. 4 for P350, 500 and P545, respectively, had not
yet been turned over to the general cashier.

The petty cash vouchers found in the petty cash box were as follows:
Dec. 30, 2021 Transportation P515
Dec. 30, 2021 Token gifts to visitors 650
Dec. 30, 2021 Freight for office supplies purchase 215
Jan. 1, 2022 Freight for mdse. purchased 125
Jan. 2, 2022 Freight for mdse. sold 575

QUESTIONS
1. JULETO COMPANY’S cash shortage at December 31, 2021 is:
a. P 2,072.75 b. P 1,370.00 c. P 1,027.75 d. P 327.75

2. The adjusted petty cash balance of JULETO COMPANY at December 31, 2021 is:
a. P 10,000 b. P 9,625 c. P 5,975 d. P 4,625

3. The entry to adjust the unclaimed payroll at December 31, 2021 is:
a. Petty Cash Fund c. Cash
Salaries expense Accrued salaries
b. Salaries expense d. Accrued salaries
Petty cash fund Cash

4. The cashed check dated January 1, 2022

a. Should be adjusted since it was dated January 1, 2022, hence a postdated check.

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

b. Should be adjusted since it was received December 31, 2021 but the check is dated January 1, 2022, hence a
postdated check.
c. Should not be adjusted since the check is dated January 1, 2022.
d. Should not be adjusted since the check was received December 31, 2022.

5. The Cash account (excluding PCF) of JULETO COMPANY is understated at December 31, 2021 by:
a. P 4,650 b. P 4,900 c. P 6,045 d. P 6,370

Problem 7

You are making an audit of the Darwin Corporation for the past calendar year. The balance of the Petty Cash
account at December 31, 2006 was P1,300. Your count of the imprest cash count made at 8:30 am on January 3,
2007, in the presence of the petty cash custodian, revealed:

Currency and coins 571.38

Checks:
Date Maker Bank
12/28/06 Macky, vice-president PNB 360.00
12/29/06 Andy, employee DBP 60.00
12/31/06 Bobot, customer RCBC 153.80
01/02/07 Neil, customer PNB 121.36
01/10/07 Jeff, employee PNB 60.00
(check received Dec. 29)
(These checks were all considered good when deposited after dates shown on the checks. The first four
checks were actually deposited Jan. 3; the last check was deposited Jan. 11; all five checks proved to be
good.)

Vouchers:
Dec. 11 #261 Richard, shipping clerk – temporary advance for the use of the receiving
department. Your count of Mr. Richard’s fund revealed: currency – P28.80; merchandise
freight bills, P31.20. P 60.00
Dec. 28 # 301 Postage 12.00
Dec. 29 # 302 Freight bill on merchandise purchases 47.30
Dec. 31 # 305 Freight bill on office supplies 88.93
Jan. 2 # 500 Freight bill on merchandise purchases 29.36

IOU Dec. 21 Mabel, employee 36.00

Sales Invoices (for cash sales, collections handled by the petty cashier):
Invoice # 315 Dec. 30 P 120.00
328 Dec. 31 153.80
334 Jan. 2 121.36
(As a general rule, the petty cashier endeavored to turn over the proceeds of cash sales to the general
cashier on the 10th, 20th and last days of each month. Proceeds on these sales were recorded and
deposited by the general cashier.)

Postage Stamps:
Three one-peso stamps. The petty cashier handled postage stamps. These stamps represent the unused
stamps purchased on Voucher # 301.
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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

Questions
1. The petty cash fund shortage at December 31, 2006 is:
a. P 216.39 b. P 123.83 c. P 98.03 d. P 95.03

2. The adjusted petty cash fund balance of DARWIN CORPORATION at December 31, 2006 is:
a. P 900.74 b. P 960.74 c. P 1,174.54 d. P 1,234.54

3. DARWIN CORPORATION’S operating expenses found in the petty cash fund at December 31, 2006 is:
a. P 208.23 b. P 205.75 c. P 174.03 d. P 97.93

4. The Cash account (excluding PCF) of DARWIN CORPORATION is understated at December 31, 2006 by:
a. P 395.16 b. P 273.80 c. P 153.80 d. P 120.00

Problem 8
In connection with your audit of the financial statements of Reyes Corporation for the year ended December 31,
2006, you conducted a surprise count of the company’s petty cash and undeposited collections at 9:10 am on
January 3, 2007. You count disclosed the following:

Bills and counts

Bills Coins
P100.00 5 pieces P1.00 205 pieces
50.00 40 pieces 0.50 162 pieces
20.00 35 pieces 0.25 32 pieces
10.00 27 pieces

Postage stamps (unused) - P365

Checks
Date Payee Maker Amount
Dec. 30 Cash Custodian P 1,200
Dec. 30 Reyes Corp. Karren, Inc. 14,000
Dec. 31 Reyes Corp. Sheryl, sales manager 1,680
Dec. 31 Reyes Corp. Victor Corp. 17,800
Dec. 31 Reyes Corp. Ma. Karen, Inc. 8,300
Dec. 31 Merry Corp. Reyes Corp. 27,000
(not endorsed)

Unreimbursed vouchers
Date Payee Description Amount
Dec. 23 Sheryl, sales mgr. Advance for trip P 7,000
Dec. 28 Post Office Postage stamps 1,620
Dec. 29 Messengers Transportation 150
Dec. 29 Ace, Inc. Computer repair 800

Other items found inside the cash box:

1. Unclaimed pay envelope of Jeanette. Indicated on the pay slip is his net salary of P7,500. Your inquiry revealed
that Jeanette’s salary is mingled with the petty cash fund.

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

2. The sales manager’s liquidation report for this Baguio Trip.

Cash Advance received on Dec. 23 P 7,000
Less: Hotel accomodation, meals, etc. P 4,500
Bus fare for two 400
Cash given to Carlo, salesman 300 5,200
Balance P 1,800
Accounted for as follows:
Cash returned by Carlo to the sales manager P 120
Personal check of the sales manager 1,680
Total P 1,800

Additional information:

1. The custodian is not authorized to cash checks.

2. The last official receipt included in the deposit on December 30 is No. 4351 and the last official receipt issued for
the current year is No. 4355. The following official receipts are all dated December 31, 2006.

OR No. Amount Form of Payment

4352 P 13,600 Cash
4353 17,800 Check
4354 3,600 Cash
4355 8,300 Check

3. The petty cash balance per general ledger is P10,000. The last replenishment of the fund was made on
December 22, 2006.

Questions
1. REYES CORPORATION’S cash shortage/overage at December 31, 2006 is:
a. P 61,166 short c. P 34,166 over
b. P 20,166 short d. P 22,514 over

2. The adjusted petty cash balance of REYES CORPORATION at December 31, 2006 is:
a. P 4,964 b. P 2,110 c. P 1,200 d. P 430

3. The undeposited sales/collection of REYES CORPORATION at December 31, 2006 is:

a. P 66,480 b. P 64,800 c. P 57,300 d. P 43,300

Problem 9
Mary Jane is the cashier of Adlawan Corporation. AS representative of the Zarate and Associates, CPAs, you were
assigned to verify her cash on hand in the morning of January 3, 2007. You began to count at 9:00 AM in the
presence of Mary Jane. In the course of your counting, you found currencies in paper bills and coins together with
checks, vouchers, and other items, which are mentioned below:

Bills: (2) P500; (8) P100; (12) P50; (5) P20

Coins: P 5.00 11 loose

1.00 24 loose
0.25 5 rolls and 32 loose (50 pieces to a roll)
0.10 10 rolls and 15 loose (50 pieces to a roll)
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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

0.05 14 rolls and 20 loose (40 pieces to a roll)

Checks:
Date Maker Payee Amount
12/22/06 Vivian, Asst. Mgr Adlawan Corp. P 6,000
12/26/06 Mary Jane, cashier Adlawan Corp. 4,000

IOUs:
Date Maker Amount
12/20/06 Yap, Janitor P 500
12/22/06 Felix, clerk 750
12/24/06 Ablay, bookkeeper 500

PETTY CASH VOUCHERS FOR REPLENISHMENT

Date Payee Accounts Charged Amount
12/16/06 Wagan, messenger Advances to employees P1,000.00
12/17/06 Maren and Co. Supplies 545.00
12/18/06 Eeman Liner Freight in 982.50
12/18/06 Posts Office Supplies 300.00
12/20/06 Alejandre, carpenter Repairs 2,950.00
12/21/06 Violan Miscellaneous expense 554.00

Your investigation also disclosed the following:

1. The balance of petty cash fund per books is P20,000.00.

2. Cash sale of January 2, 2007 amounted to P8,650 per sales records, while cash receipts book and bank
deposit slip showed that only P7,650 was deposited in the bank on January 3, 2007

3. The following employees’ pay envelopes had been opened and the money removed. Each envelope was
marked “Unclaimed” - Ernesto, P332.50; Secinando, P447.50.

Questions

1. The petty cash shortage of ADLAWAN CORPORATION at December 31, 2006 is:
a. P 2,748.50 b. P 1,748.50 c. P 968.50 d. P 188.50

2. The adjusted petty cash balance of ADLAWAN CORPORATION at December 31, 2006 is:
a. P 10,950 b. P 11,950 c. P 11,730 d. P 12,730

3. The undeposited sales/collection of ADLAWAN CORPORATION at December 31, 2006 is:

a. P 8,650 b. P 7,650 c. P 1,000 d. P 0

Problem 10
In your year-end audit of Angela Corp., the cashier showed a cash accountability of P1,100,000 as at December 31,
2006. The following transactions were extracted in the books of the company, in summary form:

Accounts receivable, beginning P 275,000

Accounts receivable, end 385,000
Sales (80% on credit) 1,850,000
Accounts written-off 25,000
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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

Recovery of accounts written-off, included in the collection

of account receivable 15,000
Depreciation of fixed assets 150,000
Inventory, end 185,000
Inventory, beg 203,000
Cost of sales 960,000
Income tax accrued 18,500
Payment of bank loan 200,000
Subscription receivable 250,000
Subscribed capital stock 950,000
Purchases of fixed assets 320,000
Proceeds from short-term bank loan 300,000
Accounts payable, end 425,000
Accounts payable, beg. 200,000

Questions
1. The correct cashier’s accountability at December 31, 2006 is:
a. P 1,493,000 b. P 1,123,000 c. P 793,000 d. P 423,000

2. ANGELA CORPORATION’S cash account at December31, 2006 is:

a. Understated by P 307,000 c. Overstated by P 693,000
b. Understated by P 393,000 d. Overstated by P 677,000

Problem 11
The following data are gathered from the cash books and bank statement received from Davao Bank by Grace
Company:

The cash in bank ledger account shows a debit balance of P290,438.50 as of May 31.

The bank statement shows a credit balance of P318,560 as of May 31.

An examination of the checks encashed by the bank shows that the following checks are not presented for payment:
No. 187, P3,608; No. 189, P15,499; No. 191, P4,400;
No. 192, P1,545.50, No. 193, P23,001

A certified check for P24,750 payable to creditor, was encashed by the bank during May.

The bank statement shows a deduction of P10,802 for check No. 184. The check was actually made out at P10,208.

A check deposited on May 27 for P34,100 was returned by the bank on May 28 marked Refer to Maker.

A non-interest bearing note for P44,000 was collected by the bank for the account Grace Company. Collection fee
deducted by the bank is P330.

A deposit for P20,900 was recorded in the books twice.

Check No. 179 for P26,400 was erroneously recorded in the books as P46,200.

Interest on an outstanding loan payable, deducted by the bank on May 31, P1,320.
Collections on May 31 to be deposited on June 1, P26,488.

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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

Questions

1. GRACE COMPANY’S adjusted cash balance at May 31, 2006 is:

a. P 341,939.50 b. P 283,288.50c. P 297,588.50 d. P 273,168.50

2. The recorded cash of GRACE COMPANY at May 31 is:

a. Understated by P 17,270 c. Overstated by P 7,150
b. Understated by P 7,150 d. Overstated by P 17,270

Problem 12
The following data pertaining to the cash transactions and bank account of Abiso Company for May 2006 are
available to you:

Cash balance, per accounting records, May 31, 2006 P 51,582

Cash balance, per bank statement, May 31, 2006 95,874
Bank service charge for May 327
Debit memo for the cost of printed checks delivered by the bank;
the charge has not been recorded in the accounting records 375
Outstanding checks, May 31, 2006 20,184
Deposit of May 30 not recorded by bank until June 1 14,610
Proceeds of bank loan on May 30, not recorded in the accounting
records, net of interest of P900 17,100
Proceeds from a customer’s promissory note; principal amount P24,000,
collected by the bank, taken up in the books with interest 24,300
Check No. 1086 issued to a supplier entered in the accounting records
as P6,300 but deducted in the bank statement at an erroneous amount
of 3,600
Stolen check lacking an authorized signature, deducted from Abiso’s
account by the bank in error 2,400

Customer’s checks returned by the bank marked NSF, indicating that the
customer’s balance was not adequate to cover the checks; no entry has
been made in the accounting records to record the returned check 2,280

Questions
1. The adjusted cash in bank balance of ABISO COMPANY at May 31, 2006 is:
a. P 87,570 b. P 90,000 c. P 90,570 d. P 90,900
2. The cash in bank balance of ABISO COMPANY at May 31, 2006 is:
a. Understated by P39,318 c. Understated by P38,418
b. Understated by P38,988 d. Understated by P35,988

Problem 13
In connection with an audit, you are given the following bank reconciliation.

BANK RECONCILIATION
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First Semester, SY 2021- 2022

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 customer’s 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. A check for an account payable entered on books as P12,625 but drawn and paid by bank as 16,225
a. Should not be included in the reconciliation since the bank already gave the money to the payee.
b. Should not be included in the reconciliation since bank’s record is always followed.
c. Should be included as deduction in the book reconciliation since this is considered as book error, thus a
reconciling item.
d. Should be included as addition in the book reconciliation since this is considered as book error, thus a
reconciling item.

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

a. P 15,025 b. P 18,625 c. P 19,025 d. P 22,625
4. 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
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Problem 14
The cash books of Grace Corporation show the following entries during the month of June 2021.
Cash Receipts Journal Check Register
Date Amount Date Check No. Amount
June 1 Balance 762,000 June 2 801 15,625
4 Deposit 113,000 3 802 7,526
4 Deposit 811,000 5 803 229,205
7 Deposit 152,200 7 804 169,555
10 Deposit 11,300 8 805 74,936
10 Deposit 12,700 10 806 274,600
11 Deposit 73,000 11 807 34,842
17 Deposit 110,075 13 808 250,000
18 Deposit 3,725 14 809 1,070,000
18 Deposit 65,000 17 810 167,300
19 Deposit 26,463 19 811 3,130
20 Deposit 133,037 21 812 82,730
27 Deposit 273,628 23 813 127,200
30 Deposit 92,400 25 814 93,080
30 815 720

The bank statement for the month of June 2021 shows:

Checks No. Deposits Date Amount

Balance May 31 798,000
924,000 June 5 1,722,000
800 36,000 6 1,686,000
804 169,555 7 1,516,445
805 74,936 217,200 8 1,658,709
801 16,525
803 229,205 9 1,412,979
807 34,842 97,000 12 1,475,137
924 75,000
200 40,400 CM 13 1,440,337
(collection charge)
809 1,070,000 14 370,337
808 250,000 15 120,337
198,000 CM 16 318,337
810 167,300 113,800 19 264,837
812 82,730 159,500 21 341,607
806 274,600 24 67,007
273,628 28 340,635
811 3,130
DM 300 30 337,205

Upon investigation, the following are discovered:

CM - Represents a 60-day, 6% note for P40,000 collected by the bank for the account of Grace Company.
CM - Represents a 60-day, 6% own note for P200,000 discounted by Grace Corporation with the bank and not yet
recorded in the books.
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First Semester, SY 2021- 2022

DM - Represents bank service charge for the month.

Check No. 924 represents a check signed by Graciele Company.
Collection charge – represents collection fee charged by the bank.

Questions
1. The unadjusted cash ledger balance of GRACE CORPORATION at June 30, 2021 is:
a. P 114,079 b. P 113,179 c. P 39,079 d. P 38,179

2. The unadjusted cash bank balance of GRACE CORPORATION at June 30, 2021 is:
a. P 261,305 b. P 336,305 c. P 337,205s d. P 412,205

3. The deposit in transit of GRACE CORPORATION at June 30, 2021 is:

a. P 92,400 b. P 104,500 c. P 182,000 d. P 0

4. The outstanding checks of GRACE CORPORATION at June 30, 2021 is:

a. P 302,806 b. P 228,526 c. P 227,806 d. P 153,526

5. The adjusted cash balance of GRACE CORPORATION at June 30, 2021 is:
a. P 277,879 b. P 276,079 c. P 261,305 d. P 201,079

6. The error made in check number 801 is known as:

a. Fundamental error c. Transplacement error
b. Balance sheet error d. Transposition error

7. In the discounting of P200,000 note, the company should credit

a. Notes receivable discounting c. Notes payable
b. Notes Receivable d. Notes discounting

Problem 15
The bank portion of the bank reconciliation for Angelo Company at October 31, 2021 was as follows:
Angelo Company
Bank Reconciliation
October 31, 2021
Cash Balance per Bank P 12,367.90
Add: Deposit in transit 1,530.20
P 13,898.10
Less: Outstanding checks

Check Number Check Amount

2451 P 1,260.40
2470 720.10
2471 844.50
2472 426.80
2474 1,050.00 4,301.80

Adjusted cash balance per bank P 9,596.30

The adjusted cash balance per bank agreed with the cash balance per books at October 31.

The November bank statement showed the following checks and deposits.

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Bank Statement
Checks Deposits
Date Number Amount Date Amount
11-1 2470 720.10 11-1 1,530.20
11-2 2471 844.50 11-4 1,211.60
11-5 2474 1,050.00 11-8 990.10
11-4 2475 1,640.70 11-13 2,575.00
11-8 2476 2,830.00 11-18 1,472.70
11-10 2477 600.00 11-21 2,945.00
11-15 2479 1,750.00 11-25 2,567.30
11-18 2480 1,330.00 11-28 1,650.00
11-27 2481 695.40 11-30 1,186.00
11-30 2483 575.50 Total 16,127.90
11-29 2486 900.00
Total 12,936.20
The cash records per books for November showed the following:

Cash Receipts
Cash Payments Journal Journal____
Date Number Amount Date Number Amount Date Amount
11-1 2475 1,640.70 11-20 2483 575.50 11-3 1,211.60
11-2 2476 2,830.00 11-22 2484 829.50 11-7 990.10
11-2 2477 600.00 11-23 2485 974.80 11-12 2,575.00
11-4 2478 538.20 11-24 2486 900.00 11-17 1,472.70
11-8 2479 1,570.00 11-29 2487 398.00 11-20 2,954.00
11-10 2480 1,330.00 11-30 2488 800.00 11-24 2,567.30
11-15 2481 695.40 Total 14,294.10 11-27 1,650.00
11-18 2482 612.00 11-29 1,186.00
11-30 1,225.00
Total 15,831.70

The bank statement contained two bank memoranda:

1. A credit of P2,105.00 for the collection of a P2,000 note for Angelo Company plus interest of P120 and less a
collection fee of P15. Angelo company has not accrued any interest on the note.

2. A debit for the printing of additional company checks, P50.

At November 30, the cash balance per books was P11,123.90, and the cash balance per the bank statement was
P17,604.60. The bank did not make any errors, but Angelo Company made two errors.

Note: The correction of any errors pertaining to recording checks should be made to Accounts Payable. The
correction of any errors relating to recording cash receipts should be made to Accounts Receivable

Questions
1. The unadjusted cash ledger balance of ANGELO COMPANY at November 30, 2021 is:
a. P 11,133.90 b. P 12,990.90 c. P 13,188.90 d. P 13,377.90

2. The unadjusted bank balance of ANGELO COMPANY at November 30, 2021 is:
a. P 12,828.90 b. P 13,008.90 c. P 13,188.90 d. P 17,614.60

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3. The outstanding checks of ANGELO COMPANY at November 30, 2021 is:

a. P 5,659.70 b. P 5,830.70 c. P 5,839.70 d. P 6,028.70

4. The deposit in transit of ANGELO COMPANY at November 30, 2021 is:

a. P 1,225 b. P 1,216 c. P 1,234 d. P 1,396

5. The adjusted book balance of ANGELO COMPANY at November 30, 2021 is:
a. P 11,133.90 b. P 12,990.90 c. P 13,188.90 d. P 13,377.90

Problem 16
The following information pertains to the cash of Jason Company:

Nov 31 Dec. 31
Balance shown on bank statement P 27,380 P 26,960
Balance shown in general ledger before
reconciling the bank account 25,780 25,000
Outstanding checks 8,630 10,150
Deposits in transit 6,850 12,450

For Dec.
Deposits shown in bank statement P 55,880
Charges shown on bank statement 56,300
Cash receipts shown in company’s books 53,980
Cash payments shown in company’s books 54,760

The bank service charge was P180 in November (recorded by the company during December) and P240 in December
(not yet recorded by the company).

Included with the December bank statement was a check for P5,000 that had been received on December 25 from a
customer on account. The returned check marked “NSF” by the bank, has not yet been recorded on the company’s
books.

During December the bank collected P7,500 of bond interest for the company and credited the proceeds to the
company’s account. The company earned the interest during the current accounting period but has not yet
recorded it.

During December the company issued a check for P6,960 for equipment. The check, which cleared the bank during
December, was incorrectly recorded by the company for P8,960.

Questions
1. The adjusted cash receipts of JASON COMPANY at December 31 is:
a. P 61,480 b. P 53,980 c. P 50,280 d. P 46,480

2. The adjusted cash disbursements of JASON COMPANY at December 31 is:

a. P 63,980 b. P 61,980 c. P 57,820 d. P 54,780

3. In a proof of cash, the NSF check:

a. Should be added in the December 31 column since this was returned back by the bank.
b. Should be deducted in the December 31 column since this was returned back by the bank.
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c. Should be deducted in the December 31 column since this was returned back and not paid by the bank, thus
not considered as receipts.
d. Should be added in the December 31 column since this was returned back and not paid by the bank, thus not
considered as receipts.

4. The adjusted December 31 cash balance of JASON COMPANY is:

a. P 29,760 b. P 29,260 c. P 27,260 d. P 25,600
5. The adjusted November 31 cash balance of JASON COMPANY is:
a. P 29,160 b. P 27,260 c. P 26,160 d. P 25,600

6. The check issued but was incorrectly recorded as P8,960 should be adjusted by:
a. Accounts payable 2,000 c. Cash 2,000
Cash 2,000 Accounts payable 2,000
b. Equipment 2,000 d. Cash 2,000
Cash 2,000 Equipment 2,000

Problem 17
ELEPHANT’s check register shows the following entries for the month of December

Date Checks Deposits Balance

2021
Dec 1 Beginning Balance P 83,900
5 Deposit P 65,000
7 Check # 14344 32,500 120,800
11 Check # 14345 14,000 106,800
26 Deposit 49,000
29 Check #14346 8,600 147,200

ELEPHANT’s bank reconciliation for November revealed one outstanding check (No.14343) for P12,000 (written on
November 28), and one deposit in transit for P5,550 (made November 29).

The following is from Elephant’s bank statement for December 2021:

Date Checks Deposits Balance

2021
Dec. 1 Beginning balance P 95,970
1 Deposit P 5,550 101,300
4 Check No. 14344 P 32,500 68,800
5 Deposit 56,000 124,800
14 Check No. 14345 14,000 110,800
15 Loan Proceeds 500,000 610,800
20 NSF check 7,600 603,200
29 Service charge 1,000 602,200
31 Interest 3,600 605,800

Note: All errors noted in this problem were committed by the Elephant, not the bank. It is also noted that the
company failed to record one deposit in the book.

Questions
1. The unadjusted cash receipts per ledger of ELEPHANT COMPANY for the month of December is:
a. P 119,620 b. P 114,000 c. P 110,620 d. P 105,000
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2. The unadjusted cash receipts per bank of ELEPHANT COMPANY for the month of December is:
a. P 574,150 b. P 568,600 c. P 565,150 d. P 559,600

3. The adjusted December 1 cash ledger balance of ELEPHANT COMPANY is:

a. P 95,970 b. P 89,520 c. P 83,900 d. P 78,280
4. The adjusted December31 cash bank balance of ELEPHANT COMPANY is:
a. P 634,420 b. P 628,800 c. P 623,180 d. P 577,620

5. The overstatement of deposit should be:

a. Deducted in the bank December 31 column.
b. Added in the bank December 31 column.
c. Deducted in the book December 31 column.
d. Added in the book December 31 column.

Problem 18
Dragons Company maintains a checking account at the Davao Bank. At July 31, selected data from the ledger
balance and the bank statement are as follows:

Cash in Bank
Per Books Per Bank

Balance, July 1 P 17,600 P 19,200

July Receipts 82,000
July Credits 80,070
July Disbursement 76,900
July Debits 74,740
P 22,700 P 24,530

Analysis of the bank data reveals that the credits consist of P78,000 of July deposits and a credit memorandum of
P2,070 for collection of a P2,000 note plus interest revenue of P70. The July debits per bank consist of checks
cleared, P74,700 and a debit memorandum of P40 for printing additional company checks.

You also discover the following errors involving July checks: (1) a check for P230 to a creditor on account that cleared
the bank in July was journalized and posted as P320, and (2) a salary check to an employee for P255 was recorded
by the bank for P155.

The June 30 bank reconciliation contained only two reconciling items: deposits in transit, P1,000 and outstanding
checks, P2,600.

Assume that the interest on the note has been accrued.

Questions
1. The deposit in transit of DRAGONS COMPANY at July 31 is
a. P 5,000 c. P 1,000
b. P 2,930 d. Cannot be determined

2. The outstanding check of DRAGONS COMPANY at July 31 is:

a. P 4,700 b. P 4,660 c. P 4,610 d. P 4,520

3. The adjusted cash ledger balance of DRAGONS COMPANY at July 31 is:

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a. P 25,020 b. P 24,820 c. P 24,730 d. P 24,640

4. The adjusted cash bank balance of DRAGONS COMPANY at July 31 is:

a. P 25,020 b. P 24,820 c. P 24,730 d. P 24,640

Problem 19
You are asked to audit the cash of IMAGINE Corporation. IMAGINE Corporation carries its checking account with
Mindanao Bank. The following data are available:

a. IMAGINE Company Cash account for December:

Balance, November 30 P 20,900

Deposits during December 93,400
Checks written during December ( 83,000)
Balance, December 31 P 32,300

b. Bank statement for December:

Balance, November 30 P 20,000

Deposits during December 92,300
Checks cleared during December ( 82,150)
Funds transferred from foreign operations revenue
(in peso amount not yet recorded by IMAGINE Corp.) 25,000
NSF check, Customer Nelly ( 180)
Bank Service charge ( 70)
Balance, December 31 P 54,900

c. Additional data:
1. Balance in Petty Cash account, P200 (not included in IMAGINE Cash account).
2. The deposits of P93,400 by IMAGINE Company are overstated by P100; the bank recorded the correct
amount.
3. The checks cleared by the bank of P82,150 erroneously included a P300 check drawn by Laity Corporation;
the bank has not yet corrected this error.
4. November 30: deposits outstanding, P2,000; and checks outstanding, P1,500.

Questions
1. The deposit in transit of IMAGINE COMPANY at December 31 is:
a. P 3,100 b. P 3,000 c. P 2,900 d. P 2,000

2. The outstanding checks of IMAGINE COMPANY at December 31 is:

a. P 1,650 b. P 1,500 c. P 2,050 d. P 2,350

3. The adjusted cash balance of IMAGINE COMPANY at December 31 is:

a. P 56,050 b. P 55,950 c. P 55,650 d. P 55,550

4. The cash shortage of IMAGINE COMPANY at December 31 is:

a. P 0 b. P 400 c. P 500 d. P 600

Problem 20
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First Semester, SY 2021- 2022

In Your audit of the accounts of Believer Company, you find the following facts on December 31, 2021.

Balance of cash in bank account P1,350,000

Balance of bank statement 1,200,000
Outstanding checks, December 31:
No. 000567 10,000
581 55,000
582 40,000
602 25,000
615 65,000
616 70,000 265,000
Receipts of December 31, deposited the following month 275,000
The bank statement shows the following charges:
Service charge for December 5,000
NSF check received from a customer 85,000

Additional information:

The stub for check number 000581 and the invoice relating thereto show that it was for P35,000 but was incorrectly
recorded as P55,000. This was in payment of the accounts payable.

Payment has been stopped on check number 000567 which was drawn in payment of accounts payable. The payee
cannot be located.

Included in the bank statement was a canceled check the company had failed to record. The check was in payment
of accounts payable.

Questions
1. The unrecorded disbursement of BELIEVER COMPANY at December 31, 2021 is:
a. P 80,000 b. P 50,000 c. P 40,000 d. P 10,000

2. Cancellation of check number 567 should be recorded as:

a. Debit to Accounts Payable c. Credit to Accounts Payable
b. Credit to Cash d. No adjustment/entry

3. Cash shortage of BELIEVER COMPANY at December 31, 2021 is:

a. P 0 b. P 50,000 c. P 40,000 d. P 10,000

4. The adjusted cash balance of BELIEVER COMPANY at December 31, 2021 is:
a. P 1,290,000 b. P 1,240,000 c. P 1,210,000 d. P 1,180,000

Problem 21
Julius Company is very profitable small business. It has not, however, given much consideration to internal control.
For example, in an attempt to keep clerical and office expenses to a minimum, the company has combined the jobs
of cashier and bookkeeper. As a result, Maria handles all cash receipts, keeps the accounting records, and prepares
the monthly bank reconciliation.

The balance per bank statement on October 31, 2021, was P73,520. Outstanding checks were: No. 62 for P507, No.
183 for P600, No. 284 for P1,103, No. 862 for P762.84, No. 863 for P907.20, No. 864 for P661.12. Included with the
statement was a credit memorandum of P800 indicating the collection of a note receivable for Julius Company by
the bank on October 25. Julius Company has not recorded this memorandum.
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The company’s ledger showed one cash account with a balance of P87,570.88. The balance included undeposited
cash on hand. Because of the lack of internal control, Maria took for personal use all the undeposited receipts in
excess of P15,182.04. She then prepared the following bank reconciliation in an effort to conceal her theft of cash.

Cash balance per books, October 31 P 87,570.88

Add: Outstanding checks
No. 862 P 762.84
No. 863 907.20
No. 864 661.12 1,931.16
P 89,502.04
Less: Undeposited receipts 15,182.04
Unadjusted balance per bank, October 31 P 74,320.00
Less: Bank credit memorandum 800.00
Cash balance per bank statement, October 31 P 73,520.00

Questions
1. JULIUS COMPANY’S cash shortage at October 31 is:
a. P 4,210 b. P 3,410 c. P 1,600 d. P 800

2. JULIUS COMPANY’S adjusted cash balance at October 31 is:

a. P 88,370.88 b. P 87,570.88 c. P 86,770.88 d. P 84,160.88

Problem 22
On December 15 of the current year, Mavic, who owns Mark Corporation, asks you to investigate the cash-handling
activities in his firm. He thinks that an employee might be stealing funds. “I have no proof” he say, “but I’m fairly
certain that the November 30 undeposited receipts amounted to more than P6,000 although the November 30 bank
reconciliation prepared by the cashier shows only P3,619.20. Also, the November bank reconciliation doesn’t show
several checks that have been outstanding for a long time. The cashier told me that these checks needn’t appear on
the reconciliation because he has notified the bank to stop payment on them and he had made the necessary
payment on the books.

At your request, Mavic showed you the following November 30 bank reconciliation prepared by the cashier.

Bal. Per bank statement P 2,360.12 Bal. Per Books P 5,385.22

Deposit in transit 3,619.20 Bank Service charge ( 30.00)
Outstanding checks Unrecorded bank CM ( 600.00)
# 2351 550.10
2353 289.16
2354 484.84 ( 1,224.10) ________

Adjusted Balance P 4,755.22 Adjusted Balance P 4,755.22

You discover that the P600 unrecorded bank credit represents a note collected by the bank on Mavic’s behalf. It
appears in the deposits column of the November bank statement. Your investigation also reveals that the October
31 bank reconciliation showed three checks that had been outstanding longer than 10 months: No. 1432 for P300,
No. 1458 for P233.45, and No. 1512 for P126.55.

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You also discover that these items were never added back into the cash account in the books. In confirming that the
checks shown on the cashier’s November 30 bank reconciliation were outstanding on that date, you discover that
check No. 2353 was actually a payment of P829.16 and had been recorded on the books for the amount.

To confirm the amount of undeposited receipts at November 30, you request a bank statement for December 1-12
(called a cut-off bank statement). This indeed shows a December 1 deposit of P3,619.20.

Questions
1. The amount of fund stolen by the cashier is:
a. P 3,160 b. P 2,500 c. P 1,840 d. P 580

2. The total outstanding checks of MARK CORPORATION at November 30 is:

a. P 2,524.10 b. P 1,884.10 c. P 1,864.10 d. P1,224.10

3. The adjusted cash balance of MARK CORPORATION at November 30 is:

a. P 5,955.22 b. P 5,355.22 c. P 4,115.22 d. P 3,455.22

Problem 23
The bank statement for the account of APRIL COMPANY at December 31, 2021 showed a credit balance of P20,000,
while the company’s ledger balance of the cash account as of November 30, 2021 was a debit of P40,000. During
December, 2021, the ledger showed two postings, a debit of P60,000 and a credit of P39,000 from the Cash Receipts
and Check Disbursements Journal, respectively.

Your examination revealed that the cash column of the receipts book was underfooted 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 overfooted by P500, records only the checks issued
by the company. In the month of December, 2021, the bank charged APRIL 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 Prils Company. The bank made
the correction in January, 2022. The outstanding checks as of December 31, 2021 amounted to P5,600.

On the morning of January 2, 2022, a cash count conducted produced the following:

Bills and coins P 5,200

Three (3) duplicate copies of APRIL CO.
official receipts, all dated Jan. 2, 2022 1,800
Checks 2,900
NSF check charged by the bank on Jan. 2, 2022 1,400

Questions
1. The deposit in transit of APRIL COMPANY at December 31, 2021 is:
a. P 6,300 b. P 7,700 c. P 8,100 d. P 11,300

2. The cash shortage of APRIL COMPANY at December 31, 2021 is:

a. P 54,200 b. P 50,200 c. P 46,200 d. P 36,400

3. The maximum probable cash shortage of APRIL COMPANY at December 31, 2021 based on the records is:
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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

a. P 54,200 b. P 50,200 c. P 46,200 d. P 36,400

4. The adjusted cash balance of APRIL COMPANY at December 31, 2021 is:
a. P 19,500 b. P 21,300 c. P 20,900 d. P 24,500

Problem 24
The BETH CORPORATION engaged your services to audit its account. In your examination of cash, you find that the
Cash account represents both cash on hand and cash in bank. You further noted that there is very poor internal
control of cash.

Your audit covers period ended June 30, 2021. You started the audit on June 15. Upon cash count on this date, cash
on hand amounted to P4,800. Examination of the cash book and other evidence of transaction disclosed the
following:

1. July collections per duplicate receipts, P18,800

2. Total of duplicate deposit slips, all dated, July, P11,000, includes a deposit representing collections of June
30.
3. Cash book balance at June 30, 2021 is P46,500, representing both cash on hand and cash in bank.
4. Bank statement for June shows a balance of P42, 400.
5. Outstanding checks at June 30: May checks, No. 183 for P450, and No. 198 for P1,650; June checks, No. 205
for P600, No. 254 for P400, No. 280 for P5,000, No. 302 for P900, and No.317 for P2,500.
6. Undeposited collections at June 30, P5,000.
7. An amount of P900 representing proceeds of clean draft on a customer was credited by bank, but is not yet
taken up in the company’s books.
8. Bank service charges for June, P100.

The company cashier presented to you the following reconciliation statement for June, 2021 which he has prepared:

Balance per books, June 30, 2021 P46,500

Add: outstanding checks:
No. 205 P 600
254 400
280 500
302 700
317 1,500 3,600
Total P49,200
Bank charges (100)
Undeposited collections ( 5,100)
Balance per bank, June 30, 2021 P44,000

Questions
1. The outstanding checks of BETH CORPORATION at June 30, 2021 is:
a. P 3,600 b. P 3,700 c. P 5,700 d. P 11,500

2. The cash shortage of BETH CORPORATION at June 30, 2021 is:

a. P 7,800 b. P 11,400 c. P 12,800 d. P 19,400

3. The cash shortage of BETH CORPORATION from July 1 to July 15, 2021 is:
a. P 8,000 b. P 7,800 c. P 3,000 d. P 2,800

4. The total cash shortage of BETH CORPORATION up to July 15, 2021 is:
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 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

a. P 14,400 b. P 15,600 c. P 15,800 d. P 19,400

5. The adjusted cash balance of BETH CORPORATION at June 30, 2021 is:
a. P 35,900 b. P 39,600 c. P 43,800 d. P 44,900

Problem 25
In connection with the general examination of the accounts of Rosette Trading Company at December 31, 2021, 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, 2021 December 31, 2021

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, 2021:

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, 2021 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 Rose 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, 2021. 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, 2021 for
P1,500.

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26
 Prelim Period (August 9, 2021- September 17, 2021)
Burauen Community College Modular Home Instruction
Poblacion District 9, Burauen, Leyte Third Year Accountancy
First Semester, SY 2021- 2022

Questions
1. The adjusted cash receipts per ledger of ROSETTE TRADING COMPANY at December 31, 2021 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 ROSETTE TRADING COMPANY at December 31, 2021 is:
a. P 401,325 b. P 402,000 c. P 405,735 d. P 406,125

3. The adjusted cash ledger balance of ROSETTE TRADING COMPANY at December 31, 2021 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 ROSETTE TRADING COMPANY at December 31, 2021 is:
a. P 91,350 b. P 95,400 c. P 97,200 d. P 97,500

5. The cash overage of ROSETTE TRADING COMPANY at December 31, 2021 is:
a. P 765 b. P 675 c. P 575 d. P 390

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