ASSIGNMENT: AUDIT OF CASH AND CASH EQUIVALENTS

1. The following information has been extracted from the accounting records of the Limerick Company at
December 31, 2018:

a. Cash on hand (see note below) P230,000

b. Belfast Bank savings account (the required minimum 9,500
Monthly Average Daily Balance is P10,000)
c. 364-day Treasury bills purchased March 1, 2018 400,000
d. Petty cash fund (see note below) 20,000
e. Cork Bank current account (see note below) 160,000
f. Time deposit placements
Date Term
Dec. 15, 2018 30 days 30,000
Oct. 31, 2018 90 days 40,000
Nov. 31, 2018 180 days 25,000
g. Employee travel advances 7,000
h. Cash in bond sinking fund 500,000
i. Customer’s note receivable 45,000
j. Postage stamps 2,400

The following are included in cash on hand:

• A customer check for P43,000 returned by the bank on December 28, 2018. It was redeposited and cleared
by the bank on January 2, 2019.
• A customer check for P75,000 dated January 3, 2019, received December 27, 2018.
• PHLPost money orders received from customers, P30,000.

The petty cash fund consists of the following:

Currency and coins P13,500

IOUs from officers and employees 3,000
Unreplenished petty cash disbursements 1,500
Currency in envelope with the notation:
”We were Adriana’s coworkers. Words may not be
adequate to express how sorry we feel. Please accept
our heartfelt sympathies on the loss of your loved
one.” 1,500
P20,000

The following information pertains to Cork Bank current account:

• A check for P13,000 was dated and recorded on December 29, 2018, but was delivered to payee on January
5, 2019.
• A check for P5,000 was dated January 10, 2019, payable to a supplier was recorded and released to payee
on December 19, 2018. Cork Bank requires current account depositors to maintain a monthly average daily
balance of P50,000

I. What total amount should be recorded as cash and cash equivalents on December 31, 2018?

2. In connection with your audit of the financial statements of Waterford Company for the year ended December
31, 2018, you gathered the following information.

a. The company maintains its current account with Westport Bank. The bank statement on December 31, 2018,
showed a balance of P638,340.

Your audit of the company’s account with Westport Bank disclosed the following:

• A check for P22,500 received from a customer whose account is current had been deposited and then
returned by the bank on December 28, 2018. No entry was made for the return of this check. The
customer replaced the check on January 15, 2019.
• A check for P5,720 was cleared by the bank as P7,520. The bank made the correction on January 2,
2019.
• A check for P3,500 representing payment of an employee advance was received and deposited on
December 27, 2018, but was not recorded until January 3, 2019.
• Postdated checks totaling P67,300 were included in the deposits in transit. These represent
collections of current accounts receivable from customers. The checks were actually deposited on
January 5, 2019.
• Various debit memos for drafts purchased for payment of importation of equipment totaling P230,000
were not yet recorded. These purchases were previously set up as accounts payable. Said equipment
arrived in December 2018.
• Interest earned in the bank balance for the 4th quarter of 2018, amounting to P1,950 was not
recorded.
• Bank service charges totaling P1,260 were not recorded.
• Deposits in transit and outstanding checks at December 31, 2018, totaled P136,250 and P276,380,
respectively.
 b. Various expenses from the company’s imprest petty cash fund dated December 2018, totaled P16,250, while
those dated January 2019, amounted to P5,903. Another disbursement from the fund dated December 2018
was a cash advance to an employee amounting to P3,500. A replenishment of the petty cash fund was made
on January 8, 2019.

c. The company’s trial balance on December 31, 2018, includes the following accounts:

Cash in bank – Westport Bank P748,320

Cash in bank – Tulle Bank (restricted account
for plant expansion, expected to be disbursed in
2019) 700,000
Petty cash fund 30,000
Time deposit, placed December 20, 2018, and due
March 20, 2019 1,000,000
Money market placement – Naas Bank 4,000,000

I. What is the adjusted Cash in bank – Westport Bank balance on December 31, 2018?
II. The statement of financial position as of December 31, 2018 should show ”Cash and Cash Equivalents”
at?

3. Michael Rodriguez is reviewing the cash accounting for Greystone, Inc. Michael’s review will focus on the
petty cash fund account and the bank reconciliation for the month ended May 31, 2018. She has collected
the following information from Greystone’s bookkeeper for this task.

Petty Cash Fund

a. The petty cash fund was established on May 2, 2018, in the amount of P10,000.
b. Expenditures from the fund by the custodian as of May 31, 2018, were evidenced by approved petty cash
vouchers for the following

Various office supplies P3,920

IOU from employees 1,200
Shipping charges 2,298
Miscellaneous expenses 1,526

c. On May 31, 2018, the petty cash fund was replenished and increased to P12,000; currency and coins in
the fund at that time totaled P756.

Bank Reconciliation

Disbursements Receipts Balance

Balance, May 1, 2018 P350,760
Deposits P1,120,000
Note payment direct from customer
(interest of P1,200) 37,200
Checks cleared during May P1,246,000
Bank service charges 1,080
Balance, May 31, 2018 260,880

Greystone, Inc.’s Cash Account

Balance, May 1, 2018 P354,000

Deposits during May 2018 1,240,000
Checks written during May 2018 1,273,400

Deposits in transit are determined to be P120,000, and checks outstanding at May 31 total P34,000. Cash on
hand (besides petty cash) at May 31, 2018, is P9,840.

I. What is the amount of petty cash shortage?

II. What amount of cash should be reported in the May 31, 2018, statement of financial position?