ACCOUNTING 102

CASH AND CASH EQUIVALENTS

PRE-DISCUSSION GROUP SEATWORK

Problem 1

Lipton Company shows the following account balances in their financial records as of December 31,
2018:

Checking account at Morgan Bank P(20,000)

Checking account at Land Bank 500,000
Payroll account – National bank 100,000
Foreign bank account – restricted 750,000
Postage stamps 22,000
Employees’ postdated checks 30,000
I.O.U from president’s brother 75,000
Traveler’s check 50,000
No-sufficient funds check 18,000
Petty cash fund (P16,000 in currency & expenses
receipts for P84,000) 100,000
Cashier’s check 36,000

1. What is the correct cash balance to be reported in the statement of financial position or Lipton
Company on December 31, 2018? Answer: P702,000
2. What is the correct cash balance to be reported in the statement of financial position of Lipton
Company on December 31, 2018 assuming the bank overdraft is repayable on demand and it’s
integral to the entity’s cash management? Answer: P682,000

Problem 2

The cash account in the current asset section of the balance sheet for Heater Company showed a
balance of P555,000. It was found to include the following items:

Petty cash fund P 5,000

Checking account balance, per bank statement
(A 25,000 check is still outstanding) 255,000
Undeposited receipts, including a post-dated check
for P5,000 120,000
Currencies and coins awaiting deposit 55,000
Bond sinking fund – cash 100,000
Check drawn by manager, returned by bank marked NSF 20,000

3. What is the correct cash balance for Heater Company’s statement of financial position? P405,000
Problem 3

On December 31, 2018, Agenda Company has the following information concerning its cash and cash
equivalents and some other items:

Coins and currency P 50,000

Checks received from customers 600,000
Certificate of deposit, term; 12 months 800,000
Petty cash fund 4,000
Postage stamps 600
Bank A, checking account balance 2,100,000
Post-dated check, customer 10,000
Money order from customer 15,000
Cash in savings account 100,000
Bank draft from customer 40,000
Utility deposit to gas company, refundable 5,000
Cash advance received from customer 8,000
NSF check, C. Company 20,000
Cash advance to company executive, collectible upon
Demand 200,000
Bank B, checking account, overdraft 20,000
IOUs from employees 12,000

4. What amount of cash and cash equivalents should Agenda Company report in its December 31,
2018 statement of financial position? Answer: P2,909,000

Problem 4

Delta Corporation has supplied you with the following list of its bank accounts and cash at December 31,
2018:

Checking account (compensating balance of P15,000

with no restriction) P48,000
Savings account, 2% 30,000
Certificate of deposit, 6 months, 10% due April 20, 2019) 60,000
Money market (30-day certificate), current rate, 9.75% 40,000
Payroll account 20,000
Certificate of deposit, 3 months, 10%, due
February 15, 2019 75,000
Petty cash 1,500
P274,500
5. What should be the balance to be reported as “Cash and Cash Equivalents” in the December 31.
2018 statement of financial position of Delta Corporation? Answer: P214,500
Problem 5

Angelic Corporation had the following account balances at December 31, 2018:

Cash on hand and in banks P975,000

Cash restricted for additions to plant (expected
to be disbursed in 2020) 600,000
Bank certificates of deposit (due January 16, 2019) 250,000

6. In the current assets section of Angelic’s December 31, 2018 statement of financial position, what is
the total amount that should be reported under the caption “cash and cash equivalents”?
P1,225,000

Problem 6

The cash account in the current asset section of the December 31, 2018 balance sheet of King Company
consists of:

Cash in banks P2,250,000

Cash restricted for additions to plant (expected to
be disbursed in 2020) 3,000,000
Petty cash funds (all funds were replenished on
December 31, 2018) 30,000

Included in the cash in banks is a compensating balance of P750,000 against short-term borrowing
arrangements at December 31, 2018, The compensating balance is not legally limited as to withdrawal
by King Company.

7. What is the correct balance of King Company at December 31, 2018? P2,280,000

Problem 7

Following were the account balances of Born Company at December 31, 2018:

Cash on hand P 187,500

Cash in current and savings account 3,375,000
Cash set aside for plant expansion (expected for 2,400,000
payment in 2019)

Cash in current and savings accounts includes P900,000 as holdout against short-term loan
arrangements. There are no legal restrictions as to withdrawal by Born on these holdouts.

8. What is the total cash that should be reported in the current assets section of Born’s December 31,
2018 statement of financial position? Answer: P3,562,500
Problem 8

On December 31, 2018, First Company had the following cash balances:

Cash in banks P1,800,000

Petty cash funds (all funds were reimbursed on 12/31/18 50,000

Cash in banks included P600,000 in a separate bank wherein the company is required to maintain a
minimum average of P800,000 of 10 working days on a rolling basis.

9. In the current assets section of First’s December 31, 2018 statement of financial position, what total
amount should be shown as cash? Answer: P1,850,000

Problem 9

PCU Corporation’s checkbook balance on December 31, 2018 was P160,000. On the same date, PCU
held the following items in its safe:

 A P5,000 check payable to PCU, dated January 2, 2019, was not included in the December 31
checkbook balance.
 A P3,500 check payable to PCU which was deposited December 19 and included in the
December 31 checkbook balance, was returned by the bank on December 30 marked NSF. The
check was re-deposited on January 2, 2019 and cleared on January 9.
 A P25,000 check payable to a supplier and drawn on PCU’s account, was dated and recorded on
December 31, but was not mailed until January 19, 2019.

10. In its December 31, 2018 statement of financial position, how much should PCU report as cash?
181,500

Problem 10

Volume Company had the following cash balance at December 31, 2018:

Undeposited coins and currency P 35,000

Unrestricted demand and deposits 1,450,000
Company checks written (and deducted from the demand
deposits amount) but not scheduled to be mailed until
January 2 270,000
Time deposits restricted for use (expected use in 2019) 3,000,000

In exchange for a guarantee line of credit, Volume has agreed to maintain a minimum balance of
P150,000 in its unrestricted demand deposits account.

11. How much should Volume report as “Cash” in its December 31, 2018 statement of financial
position? Answer: P1,755,000
PROBLEM 11

Western Company reported a total cash and cash equivalent of P6,325,000 on December 31, 2018,
which includes the following information:

a. Two certificates of deposits, each totaling P500,000. These certificates of deposit have a
maturity of 120 days.
b. A check that is dated January 12, 2019 in the amount of P125,000.
c. A commercial paper of P2,100,000 which is due in 120 days.
d. Currency and coins on hand amounted to P7,700.

Western Company has agreed to maintain a cash balance of P500,000 in one of its banks at all times and
it is not available for withdrawal and to ensure future credit availability (this amount was included in the
above balance).

12. How much is the correct amount of cash and cash equivalents that Western Company should report
in its December 31, 2018 statement of financial position? Answer: P2,600,000