Ysa Elaine Antonio

3A8
Homework # 1 in Auditing Problems

PROBLEM 1: Charm Company showed the following cash items as of December 31, 2019:

Cash Items Amount Adjustment Correct

Amount

Petty cash fund (P 3,500 is expense receipts; P 10,000 -3500 5,000

P 1,500 is IOU notes; & P 500 is check dated -1500
12/30/19 from employee)
Cash in Security Bank per bank statement 45,000 +10,000 30,000
(unadjusted) (outstanding Checks, P 25,000; deposit -25,000
in transit, P10,000)

Postdated customers check of P 1,500; Travelers’ 7,000 -1,500 5,500

check of P 2,500; Postal money order of P 3,000
Cash in BPI per book (unadjusted) (credit memo for 32,000 +15,000 46,000
note collected of P 15,000; debit memo for bank -1,000
service charge of P 1000)

Sinking fund cash 120,000 NOT

INCLUDED
Cash surrender value of life insurance 20,000 NOT
INCLUDED
Cash in PNB (including unrestricted compensating 500,000 500,000
balances of P 100,000)
Treasury bills, with 90 days original maturity 50,000 50,000

CORRECT CASH AND CASH EQUIVALENTS 636,500

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 ANSWERS:

1. Correct petty cash fund balance on December 31, 2019.

Petty Cash Fund Balance, Unadjusted ₱ 10,000

Expense Receipts -₱ 3,500
IOU Notes -₱ 1,500
Adjusted Petty Cash Fund Balance ₱ 5,000

2. Total correct cash in bank

Cash in Security Bank, Unadjusted ₱ 45,000

Outstanding Checks -₱ 25,000
Deposit in Transit ₱ 10,000
Adjusted Cash in Security Bank ₱ 30,000

Cash in BPI, Unadjusted ₱ 32,000

Credit Memo ₱ 15,000
Bank Service Charge -₱ 1,000
Adjusted Cash in BPI ₱ 46,000

Cash in PNB ₱ 500,000

Total Cash In Bank, Adjusted ₱ 576,000

3. Correct Cash and Cash Equivalents on December 31, 2019

Answer: P 636, 500

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PROBLEM 2: Data for AMV Co. are as follows:

CASH ITEMS AMOUN ADJUSTMEN CORRECT

T T AMOUNT
Cash on Hand from undeposited sales receipts 10,000 NONE 10,000

Sinking Fund Cash 45,000 NON- -

CURRENT
Cash in Bank 85,000 NONE 85,000
NSF check 10,000 RECEIVABLE -
Bank draft in a checking account with Allied 70,000 NONE 70,000
Bank
Funds appropriated for building expansion 900,000 NON- -
CURRENT
CORRECT AMOUNT OF CASH ITEMS 165,000

CASH EQUIVALENT ITEMS CORRECT

Securities: Date Acquired Maturity Date Amount AMOUNT
BSP T. Bills 12/1/18 03/01/19 30,000 NONE 30,000

MM Funds 1/01/18 1/31/19 80,000 NCA -

CORRECT AMOUNT OF CASH EQUIVALENT ITEMS 30,000

4. How much is the amount of Cash and Cash Equivalents to be presented in the balance sheet
on December 31, 2018?

Cash on Hand from undeposited sales receipts ₱ 10,000

Cash in Bank ₱ 85,000
Bank draft in a checking account with Allied Bank ₱ 70,000
BSP Treasury Bills ₱ 30,000
Cash and Cash Equivalents, 12/31/18 ₱ 195,000

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PROBLEM 3: Magneto Company reported a Cash and Cash Equivalent balance of P2,375,000
on December 31, 2019 which consisted of the following:

Cash and Cash Equivalents Amount Adjustments Adjusted

Petty cash fund (of which P 780 is -780(expense) 3,800

unreplenished vouchers for expenses; P150 is
5,000 -150 (IOU)
IOU notes and remaining currencies and coins
amounting to P3,800) -270 (short)

Cash in bank, general account A, net of P 625,000 + 25,000 650,000

25,000 bank overdraft in the general payroll
account in a different bank

Cash on hand including customers’ postdated 25,000 -6,500 (AR) 18,500

checks of P 6,500

Cash in Bank, Administrators payroll account, 750,000 +125,000 875,000

after checks amounting to P125,000 dated
Dec. 31, 2019 but unreleased as of Dec. 31,
2019

Savings deposit, earmarked for the acquisition 600,000 NCA; do not -

of building which are expected to be disbursed include
within 6 months from reporting date

Money market instrument purchased on 100,000 none 300,000

December 25, 2018 maturing on March 25,
2019

Cash in bank, General account B, including 270,000 -200,000 70,000

restricted compensating balances of P 200,000 (restricted)

ADJUSTED Cash and Cash Equivalents, Dec. 31, 2019 1,717,300

5. How much is the correct amount of Cash and Cash Equivalents to be shown in the
Statement of Financial Position at December 31, 2019?
Answer: 1,717,300

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 6. How much is the net adjustment to Cash and Cash Equivalents?

Adjusted Cash and Cash Equivalents ₱ 1,717,300

Unadjusted Cash and Cash Equivalents -₱ 2,375,000
Net Adjustment -₱ 657,700

PROBLEM 4: You were able to gather the following from the December 31, 2019 trial balance
of SCI INC. in connection with your audit of the company:
Petty cash fund 50,000
Cash on hand 1,500,000
Cash in bank – Metrobank current 4,000,000
Cash in bank – BDO savings 3,160,000
Cash in bank – Coco bank savings 4,500,000
BSP Treasury bills 2,000,000

Ø The petty cash fund consisted of the following items as of December 31, 2019:
Currency and coins P9,000
Unreplenished PCV representing expenses for December 40,000

Ø Cash on hand represents undeposited collections as of December 31, 2019 and

includes the following items:

a. Customer’s check for P160,000 returned by bank on December 26, 2019 due to insufficient
fund but subsequently redeposited and cleared by the bank on January 3, 2020.

b. Customer’s check for P80,000 dated January 2, 2020, received on December 29, 2019.

c. A customer check for P90,000 dated June 1, 2019 received on the same date and yet
undeposited as of December 31, 2019.

d. Postal money orders received, P100,000.

Ø Included among the checks drawn by SCI against the Metrobank current account
and recorded in December 2019 are the following:

a. Check written on December 29, 2016 dated January 2, 2020, delivered to payee on
December 29, 2019, P160,000.

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 b. Check written and dated December 29, 2019 and delivered to payee on January 2, 2020,
P200,000.

Ø The savings account deposit in Coco Bank has been set by the board of directors for
acquisition of new computers. This account is expected to be disbursed in the next 3
months from the balance sheet date.

Ø The BSP treasury bills were purchased on November 1, 2019 and shall mature on
November 1, 2020.

ANSWERS:

7. Petty cash fund

Currency and Coins ₱ 9,000

Adjusted Petty Cash Fund ₱ 9,000

8. Cash on hand

Unadjusted Cash on Hand ₱ 1,500,000

Customer's NSF Check -₱ 160,000
Customer's Postdated Check -₱ 80,000
Stale Check -₱ 90,000
Adjusted Cash on Hand ₱ 1,170,000

9. Cash in bank – Metrobank current

Unadjusted Cash in Metro Bank ₱ 4,000,000

Postdated Check ₱ 160,000
Undelivered Check ₱ 200,000
Adjusted Cash in Bank – Metrobank ₱ 4,360,000

10. Cash and Cash equivalents to be reported in the 2019 statement of financial position

Adjusted Petty Cash Fund ₱ 9,000

Adjusted Cash on Hand ₱ 1,170,000
Adjusted Cash in Bank – Metrobank Current ₱ 4,360,000
Cash in Bank – BDO Savings ₱ 3,160,000
Adjusted Cash and Cash Equivalents ₱ 8,699,000

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