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2.1D Diy-Exercises (Questionnaires)
2.1D Diy-Exercises (Questionnaires)
INTERMEDIATE ACCOUNTING 1
DO-IT-YOURSELF EXERCISES
TABLE OF CONTENTS
• Exercise 2.1-1 Composition of Cash
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-1
Composition of Cash
Case 1:
Reported as
Items Amount “Cash”
Case 2:
Reported as
Reported as “Non-Current
Items Amount “Cash” Assets”
Case 3:
Reported as
Reported as “Accounts
Items Amount “Cash” Receivable”
Case 4:
Reported as
Reported as “Accounts
Items Amount “Cash” Receivable”
Case 5:
Reported as Reported as
“Cash and Cash “Non-current
Items Amount Equivalents” assets”
2|Page
Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
Cash advance to
company executive
payable on demand 7,000
Refundable deposit paid to Philippine
government to guarantee performance on
construction project 2,500,000
Balance in closed foreign bank (in Pesos) 89,000
Total P P
Case 6:
Reported as
Items Amount “Cash and Cash Reported as
Equivalents” “Prepayments”
Case 7:
Reported as Reported as
Items Amount “Cash and Cash “Accounts
Equivalents” Receivable”
3|Page
Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-2
Cash Related Adjusting Journal Entries at Reporting Date
2 Undelivered Check
3 Customer’s post-
dated check
4 Post-dated check
payable to supplier
5 Customer’s Stale
Check
6 Stale check
payable to supplier
7 Post-dated check
payable to supplier
1. Which of the following is not classified as accounts receivable at the end of the accounting
period?
A. Customer’s post-dated check
B. No sufficient fund checks
C. Undelivered check
D. Customer’s stale check
2. Which of the following is not classified as accounts payable at the end of the accounting period?
A. Undelivered check
B. Post-dated check to suppliers
C. Customer’s post-dated check
D. Stale check payable to supplier
4. Which means that the check has been merely drawn and recorded but not given to the payee on
the statement of financial position date?
A. Undelivered check
B. Post-dated check delivered
C. Stale check
D. All of the above
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
Which means that the checks are drawn, recorded and already given to the payees but they
5. bear a date subsequent to the date of the statement of financial position?
A. Customer’s post-dated check
B. Post-dated check delivered
C. Undelivered check
D. Stale check delivered
8. A check that was not honored by the bank of the entity issuing the check, on the grounds that
the entity's bank account does not contain sufficient funds.
A. Stale check
B. Ante-dated check
C. NSF check
D. Cancelled check
11. If NSF check is not adjusted to appropriate accounts at the end of the accounting period, what is
the effect to Cash and Accounts Receivable, respectively?
A. Understated and overstated, respectively
B. Overstated and understated, respectively
C. Both accounts are overstated
D. Both accounts are understated
12. If undelivered check is not adjusted to appropriate accounts at the end of the accounting period,
what is the effect to Cash and Accounts Payable, respectively?
A. Understated and overstated, respectively
B. Overstated and understated, respectively
C. Both accounts are overstated
D. Both accounts are understated
13. If customer’s post-dated check is not adjusted to appropriate accounts at the end of the
accounting period, what is the effect to Cash and Accounts Receivable, respectively?
A. Understated and overstated, respectively
B. Overstated and understated, respectively
C. Both accounts are overstated
D. Both accounts are understated
14. If post-dated check delivered is not adjusted to appropriate accounts at the end of the
accounting period, what is the effect to Cash and Accounts Payable, respectively?
A. Understated and overstated, respectively
B. Overstated and understated, respectively
C. Both accounts are overstated
D. Both accounts are understated
15. If stale check issued to creditor is not adjusted to appropriate accounts at the end of the
accounting period, what is the effect to Cash and Accounts Payable, respectively?
A. Understated and overstated, respectively
B. Overstated and understated, respectively
C. Both accounts are overstated
D. Both accounts are understated
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-3
Cash Composition and Adjusting Journal Entries
The following information pertains to “Cash” GL account of AIR Corporation as at December 31, 2020:
Required: Compute the correct balance of the following at December 31, 2020:
1. Cash on Hand
2. Cash in Bank
3. Petty Cash Fund shortage (overage), if any
4. Total Cash to reported in the Statement of Financial Position
5. Adjusting journal entries at December 31, 2020
1.
2.
3.
4.
5. Use the solution guide below
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-4
Cash Equivalents
Required:
What amount is to be reported in the statement of financial position at December 31, 2020 as cash equivalents?
YOU MAY USE THE SPACE BELOW FOR YOUR SUPPORTING COMPUTATION
2. To be reported as “cash and cash equivalent”, the cash and cash equivalent must be
A. Unrestricted in use for current operations
B. Available for the purchase of property, plant and equipment
C. Set aside for the liquidation of long-term debt
D. Deposited in the bank
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-5
Computation of Correct Cash Balance
On December 31, 2020, the cash account of Tonette Corporation has a debit balance of P 3,440,000. Ana
analysis of the cash account shows the following details:
Required:
What is the correct cash balance to be shown as current asset in the statement of financial position as of
December 31, 2020?
YOU MAY USE THE SPACE BELOW FOR YOUR SUPPORTING COMPUTATION
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-6
Computation of Correct Cash and Cash Equivalents Balance
Additional information:
A. The Cash in Closed Bank is covered by PDIC. The excess of P 500,000 covered by insurance is estimated to be
recovered at P 0.60 for every P 1.00 deposit.
B. PNB Checking Account is Sinking Fund No. 1 which is restricted for the payment of bonds issued seven years ago
and will be paid in 2024.
C. PNB Checking Account is Sinking Fund No. 2 which is restricted for the payment of bonds issued two years ago
and will be paid on June 30, 2022.
Required:
1. Compute the correct amount of Cash and Cash Equivalents to be reported in the statement of financial position at
December 31, 2020.
2. What amount is to be reported as Cash in Closed Bank at December 31, 2020?
YOU MAY USE THE SPACE BELOW FOR YOUR SUPPORTING COMPUTATION
1.
2.
9|Page
Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
Exercise 2.1-6B (Unadjusted Cash balance is given with some information included in the balance)
The same information in Exercise 2.1-6A except that the unadjusted cash account balance of Thinker Corporation as
of December 31, 2020 is P 20,500,000 and includes the same given information.
Required:
Compute the correct amount of Cash and Cash Equivalents to be reported in the statement of financial position at
December 31, 2020.
YOU MAY USE THE SPACE BELOW FOR YOUR SUPPORTING COMPUTATION
Exercise 2.1-6C (Unadjusted cash balance is given with some information excluded in the balance)
The same information in Exercise 2.1-6A except that the unadjusted cash account balance of Thinker Corporation as
of December 31, 2020 is P 20,500,000 in which the given information is excluded in this unadjusted cash balance.
Required:
Compute the correct amount of Cash and Cash Equivalents to be reported in the statement of financial position at
December 31, 2020.
YOU MAY USE THE SPACE BELOW FOR YOUR SUPPORTING COMPUTATION
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
2. If material, deposits in foreign bank which are subject to foreign exchange restriction should be
classified
A. Separately as current asset, with appropriate disclosure
B. Separately as a non-current asset with appropriate disclosure
C. Be written off as an extraordinary loss
D. As part of cash and cash equivalents
3. Bank overdraft
A. is a debit balance in a cash in bank account.
B. is offset against demand deposit account in another bank.
C. which cannot be offset is classified as a current liability.
D. which cannot be offset is classified as non-current liability.
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-7
Computation of Correct Cash and Cash Equivalents Balance
Required:
Based on the above information and the result of your audit, compute for the cash and cash equivalent that would be
reported on the December 31, 2019 statement of financial position.
YOU MAY USE THE SPACE BELOW FOR YOUR SUPPORTING COMPUTATION
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-8
Compensating Balances
Cash in bank included P 400,000 of compensating balance against short-term borrowing arrangement. The
compensating balance is legally restricted as to withdrawal.
Required:
Compute the amount of cash and cash equivalents that should be reported in the statement of financial position as at
December 31, 2020.
YOU MAY USE THE SPACE BELOW FOR YOUR SUPPORTING COMPUTATION
Required:
Compute the amount of cash and cash equivalents that should be reported in the statement of financial position as at
December 31, 2020.
YOU MAY USE THE SPACE BELOW FOR YOUR SUPPORTING COMPUTATION
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
1. A compensating balance
A. Must be included in cash and cash equivalent.
B. Which is legally restricted and related to a long-term loan is classified as a current
asset.
C. Which is legally restricted and related to a short-term loan is classified separately as a
current asset.
D. Which is not legally restricted as to withdrawal is classified separately as current
asset.
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-9
Petty Cash Fund
Exercise 2.1-9A (Recording Petty Cash Fund Transactions – Imprest Fund System)
On December 1, 2020, Harlem Corporation established an imprest petty cash fund. The operations of the fund for the
last month of 2020 and the first month of 2021 are summarized as follows:
2020
Dec. 1 - The petty cash fund was established by cashing a company check for P 20,000 and
delivering the proceeds to the fund cashier.
2 - A request for replenishment of the petty cash fund was received by the accounts payable
1 department, supported by appropriate signed vouchers, summarized as follows:
3 - The company’s independent certified public accountant counted the fund in connection
1 with the year-end audit work and found the following:
The petty cash fund was not replenished at December 31, 2020.
2021
Jan. 1 - The employees’ check held in the petty cash fund at December 31 were cashed and the
5 proceeds retained in the fund.
3 - A request for replenishment was made and a check was drawn to restore the fund to its
1 original balance of P 20,000. The support vouchers for January expenditures are
summarized below:
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
SOLUTION GUIDE
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
2. The Petty Cash Fund account under the imprest fund system is debited
A. Only when the fund is created.
B. When the fund is created and everytime it is replenished.
C. When the fund is created and when the size of the fund is increased.
D. When the fund is created and then the fund is decreased.
9. The following statements pertain to accounting for petty cash fund. Which statement is false?
A. Each disbursement from petty cash should be supported by a petty cash voucher.
B. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund out of
the general cash account.
C. At any time, the sum of the cash in the petty cash fund and the total petty cash vouchers
should equal the amount for which the imprest petty cash fund was established.
D. With the establishment of an imprest petty cash fund, one person is given the authority and
responsibility for issuing checks to cover minor disbursements.
10. It is used to pay small expenses which cannot be paid conveniently by means of check.
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
A. Payroll fund
B. Petty Cash Fund
C. Travel Fund
D. Sinking Fund
12. Which of the followings statements is false about petty cash fund replenishment?
A. Replenishment of petty cash fund is authorized when its fund runs low.
B. During replenishment, a replenishment check is issued to the petty cashier with amount
equal to the petty cash disbursements.
C. Replenishment is the time that the petty cash disbursements are recorded.
D. Upon replenishment, the Petty Cash Fund account is credited.
13. At reporting date, petty cash fund disbursements are recorded in the accounting books with
corresponding credit entry to
A. Cash in Bank
B. Petty Cash Fund
C. Cash short or over
D. Equity account
14. The accounting records of the Petty Cash fund being kept by the Petty Cashier is called
A. General Journal
B. General Ledger
C. Petty Cash ledger
D. Petty Cash Book
15. Disbursements from petty cash fund must be supported by expense receipts attached to
A. Check Voucher
B. Petty Cash Voucher
C. Cash Voucher
D. Official Receipts
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-10
Bank Reconciliation – Three Methods
Exercise 2.1-8A (Analysis of Cash Receipts and Cash Disbursements in Cash Ending Balance)
Cash balance at the end of the month (E) is computed by adding the cash balance at the beginning of the month (B)
and the cash receipts for the month (R), then deducting the cash disbursements (D) for the month.
B + R - D = E
Analyze the effect of the following in the cash ending balances if INCREASE, DECREASE or NO EFFECT. Write
your answer on the space provided using the table below:
The following bank statement was received from the Bank of the Philippine Islands by the 24/7 Grocery Store:
Additional information:
1) The 24/7 Grocery Store reconciled its bank balance on November 30 with two check outstanding: Check No. 768
for P 1,120 and Check No. 770 for P 260.
2) Check No.1042 was drawn by 24/7 Garage; the bank charged it in error to the account of 24/7 Grocery Store.
3) Check No. 776 was correctly drawn for P 2,140; the amount P 2,410 was entered in the books of original entry.
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
4) The credit on December 28 represents the proceeds of a P 2,500 note, less collection fee
of P 20, collected by the bank and credited to the account.
5) The NSF check was received from a customer, in payment of account.
REQUIRED:
1. Compare book receipts column and bank receipts (deposits) column.
a) What deposit amount is recorded in the book receipt column that is not recorded in the bank deposit
column? What do your call this amount? Which accounting book will make an adjustment for this account?
b) What amount is recorded in the bank deposit column that is not recorded in the book receipt column? What
do you call this amount? Which accounting book will make an adjustment for this account?
3. Prepare a bank reconciliation statement as of December 31, 2020 using the adjusted balance method.
4. Prepare entries in general journal form to adjust the books of 24/7 Grocery Store.
SOLUTION:
1. Comparing book receipts column and bank receipts (deposits) column.
a) What deposit amount is recorded under the book receipt column that is not recorded under the bank deposit
column?
Your answer here
b) What amount other than deposit is recorded under the bank deposit column that is not recorded under the
book receipt column?
Your answer here
What do you call this amount?
Your answer here
Which accounting book will make an adjustment for this account?
Your answer here
a) What check numbers, including amounts, are recorded under the book disbursement column that are not
recorded under the bank disbursement column?
Your answers here
b) What check numbers, including amounts, are recorded in the bank disbursements column that are not
recorded in the book disbursements column?
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
Your
answer here
Which accounting book will make an adjustment for this account?
Your answer here
c) What other items other than those mentioned in number (2b), including amounts, are recorded in the bank
disbursements column that are not recorded in the book disbursements column? What do your call these
items? Which accounting book will make an adjustment for this account?
3. Prepare a bank reconciliation statement as of December 31, 2020 using the adjusted balance method.
Book Bank
Unadjusted balances, December 31, 2020
4. Prepare entries in general journal form to adjust the books of 24/7 Grocery Store.
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
1. A bank reconciliation is
A. A formal financial statement that lists all of the bank account balances of an enterprise
B. A merger of two banks that previously where competitors
C. A statement sent by the bank to depositor on a monthly basis
D. A schedule that accounts for the differences between an enterprise’s cash balance as
shown on its bank statement and the cash balance shown in its general ledger
2. Which of the following items must be added to the cash balance per ledger in
preparing a bank reconciliation which ends with the adjusted cash balance?
A. Note receivable collected by bank in favor of the depositor and credited to the
account of the depositor
B. NSF customer check
C. Service charge
D. Erroneous bank debit
3. Which of the following must be deducted from the bank statement balance in
preparing a bank reconciliation which ends with adjusted cash balance?
A. Deposit in transit
B. Outstanding check
C. Reduction of loan charged to the account of the depositor
D. Certified check
4. In preparing monthly bank reconciliation, which of the following items would be added to the
balance per bank statement to arrive at the correct cash balance?
A. Outstanding checks
B. Bank service charges
C. Deposits in transit
D. A customer’s note collected by the bank on behalf of the depositor
5. If the balance shown on a company’s bank statement is less than the correct cash balance and
neither the company nor the bank has made any errors, there must be
A. Deposits credited by the bank but not yet recorded by the company
B. Outstanding checks
C. Deposits in transit
D. Bank charges not yet recorded by the company
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
11. Which of the following is an example of bank transaction supported by a credit memorandum?
A. Cost of checks charged to depositor’s account
B. Interest expense on loan payable directly deducted by bank from depositor’s account
C. Direct debit to depositor’s account in payment of bank loan
D. Collection of customer’s notes receivable by bank
12. Which of the following is an example of bank transaction supported by a debit memorandum?
A. Proceeds of bank borrowings
B. Interest on bank deposits
C. Bank service charges
D. Collection of notes receivable by bank
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-11
Proof of Cash – Three Methods
August September
Bank statement balance – at month end 241,200 248,200
Cash account balance – at month end 197,500 229,600
Debit Memorandum for NSF check returned 3,800 8,000
Outstanding checks – at month end 60,000 86,500
Deposit in transit – at month end 30,000 47,000
Debit Memorandum - Bank Service Charges 2,500 2,900
Credit Memorandum – Drafts collected by bank 20,000 15,000
Total credits to cash account 148,530 179,790
Total deposits on bank statement ? 180,080
Check No. 411 was erroneously recorded in the company checkbook and journal as P 28,600. The correct amount
is P 23,600. This check is not outstanding on September 30.
Instructions:
1. Prepare a four-column bank reconciliation for the month of September 2020 using the adjusted balance
method.
2. Prepare the necessary adjusting journal entries at September 30, 2020.
YOU MAY DESIGN YOUR OWN FORMAT FOR YOUR ANSWER FOR INSTRUCTION NO. 1
USE THE SOLUTION GUIDE PROVIDED ON NEXT PAGE FOR INSTRUCTION NO. 2
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
YOU MAY DESIGN YOUR OWN FORMAT FOR YOUR ANSWER FOR INSTRUCTION NO. 1
YOU MAY DESIGN YOUR OWN FORMAT FOR YOUR ANSWER FOR INSTRUCTION NO. 1
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
1. A proof of cash
A. is a physical count of currencies on hand on statement of financial position date.
B. is a formal statement showing the total cash receipts during the year.
C. is a four-column bank reconciliation showing reconciliation of cash balance per book and
per bank at the beginning and end of the current month and reconciliation of cash receipts
and cash disbursements.
D. is a summary of cash receipts and cash payments.
7. If total bank credits are not given in the proof of cash, which of the following equation will
determine this amount?
A. Bank ending balance + bank debits – bank beginning balance
B. Bank ending balance – bank debits + beginning balance
C. Bank ending balance + bank debits + beginning balance
D. Bank ending balance – bank debits – beginning balance
8. If total bank debits are not given in the proof of cash, which of the following equation will
determine this amount?
A. Bank beginning balance – bank credits – bank ending balance
B. Bank beginning balance + bank credits – bank ending balance
C. Bank beginning balance + bank credits + bank ending balance
D. Bank beginning balance – bank credits + bank ending balance
9. If total book credits are not given in the proof of cash, which of the following equation will
determine this amount?
A. Book beginning balance – book debits – book ending balance
B. Book beginning balance + book debits – book ending balance
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
10. If total book debits are not given in the proof of cash, which of the following equation will
determine this amount?
A. Book ending balance - book credits + book beginning balance
B. Book ending balance - book credits – book beginning balance
C. Book ending balance + book credits + book beginning balance
D. Book ending balance + book credits – book beginning balance
11. Which of the following reconciling items in the proof of cash is not deducted from the cash
balance beginning and the disbursement balance of the current month?
A. Outstanding checks at the end of last month
B. NSF Check of last month
C. Bank service charges of last month
D. Deposit in transit of last month
12. Which of the following reconciling items in the proof of cash is not added to the cash beginning
balance and deducted from the receipts balance?
A. Deposit in transit last month
B. Proceeds of bank loan last month
C. Collection of customer’s note receivable by bank last month
D. Bank service charges of the current month.
13. Which of the following reconciling items have the same treatment in the proof of cash?
I. Deposit in transit during the current month
II. Proceeds of bank loan of last month
III. Collection of notes receivable by bank during the current month
A. I, II and III
B. I and II
C. I and III
D. I only
14. Which of the following reconciling items have the same treatment in the proof of cash?
I. Outstanding checks during the current month
II. NSF check of customers during the current month
III. Payment of bank loan directly charged from bank account last month
A. I, II and III
B. II and III
C. I only
D. I and II
15. Which of the following entries in the proof of cash is not correct?
A. Cash balance beginning (+), Receipts during the month (-)
B. Disbursements during the month (-), Cash ending balance (+)
C. Cash balance beginning (-), Disbursements during the month (+)
D. Receipts during the month (+), Cash ending balance (+)
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Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing
EXERCISE 2.1-12
Computation of Deposit in Transit and Outstanding Checks at Month-end
Exercise 2.1-11A
Benson Plastics Company deposits all receipts and makes all payments by check. The following information is
available from the cash records:
Instructions
1. Calculate the amount of the April 30:
a. Deposits in transit
Your answers here
b. Outstanding checks
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