AC20 – AUDITING AND ASSURANCE: CONCEPTS AND APPLICATIONS 1

EXERCISE 1-SOLUTION
AUDIT OF CASH

PROBLEM 1 (Composition of Cash and Cash Equivalents)

Included Not Included

Current account at Metrobank ₱2,000,000 ₱2,000,000
Current account at BPI (100,000) Current liability
Payroll account 500,000 500,000
Foreign bank account-restricted 1,000,000 Cash restricted
Postage stamps 1,000 Supplies
Employee’s post-dated check 4,000 Revert-back to A/R
IOU from controller’s sister 10,000 Receivable from
controller’s sister
Credit memo from a vendor for a purchase return 20,000 Offset A/P
Traveler’s check 50,000 50,000
NSF check 15,000 Not sufficient fund
Money order 30,000 30,000
PCF (P4,000 in currency and expense receipts for P6,000) 10,000 4,000
Treasury bills, due 3/31/2021 (purchased 12/21/20) 200,000 Short-term investment
Treasury bills, due 1/31/2021 (purchased 1/1/20) 300,000 Short-term investment
₱2,584,000

PROBLEM 2 (Petty Cash and Undeposited Collections)

Requirement 1
Angel Glass Company
Cash Count Sheet
January 06, 2021

Bills Denomination Quantity Amount Total

₱ 50 2 ₱100.00
20 9 180.00
10 13 130.00 ₱410.00
Fractional denominations and coins
5.00 5 ₱25.00
1.00 74 74.00
0.25 282 70.50
0.10 515 51.50
0.05 649 32.45 253.45
Total bills and coins ₱663.45
 Cash Items:
Checks for Deposit

Date Maker Payee

12/23/21 K. Tut Angel Glass Co. ₱60.00
12/26/21 K. Cerro Angel Glass Co. 40.00 100.00

Unreplenished Vouchers

Date Payee Particulars

12/19/21 Rosalinda & Co. Supplies ₱14.50
12/18/21 Anaconda Club Freight-in 18.25
12/18/21 Postal Office Supplies 30.00
12/20/21 S. Micabalo Repairs 45.00
12/21/21 C. Sumalinog Miscellaneous Exp. 15.40 123.15

Advances or IOU’s

Date Payee
12/16/21 L. Escolano ₱10.00
12/20/21 D. Caballero 35.00
12/22/21 E. Tirao 25.00
12/24/21 Simon Munar 15.00 85.00
Total amount of fund per count ₱971.60
Total amount of fund per books or receipts:
Petty Cash Fund per ledger ₱900.00
Unclaimed wages per opened envelopes 58.00
Undeposited collections
Cash Sales 1/2/21 ₱865.00
Less: Amount deposited 765.00 100.00
₱1,058 .00
Shortage ₱ (86.40)

I certify that the above fund of ₱971.60 was counted in my presence by (name of auditor) Calaor
and Associates, CPAs on January 6, 2021, at 9:00 A.M and was returned to me intact.

KYLA CERRO

Cashier
Requirement 2

Adjusting Journal Entries

1. Supplies expense (₱14.50 + ₱30) ₱44.50

Freight-in 18.25
Repairs and maintenance 45.00
Miscellaneous expense 15.40
Petty cash fund 123.15

2. Advances to employees 85.00

Petty cash fund 85.00

3. Cash in bank 58.00

Salaries payable 58.00

4. Accounts receivable-Cashier 86.40

Petty cash fund 86.40

PROBLEM 3 (Bank Reconciliation)

Requirement 1
BOOK
Cash balance per company records, June 30, 2020 ₱248,758.80
Credit Memo (customer note and interest) 24,240.00
Debit Memo (NSF) (2,762.80)
Debit Memo (service charge) (300.00)
Error (₱1,824 – ₱384) (1,440.00)
Total ₱268,496.00

BANK
Cash balance per Bank Statement, June 30, 2020 ₱249,223.00
Deposit in transit #1 22,857.40
Deposit in transit #2 6,548.00
Outstanding checks (#862, #864, #865) (10,132.40)
Total ₱268,496.00
Requirement 2

Adjusting Journal Entries

1. Cash In Bank ₱24,240

Notes Receivable 24,000
Interest income 240

2. Accounts Receivable 2,762.80

Cash in bank 2,762.80

3. Bank Service Charge 300

Cash in Bank 300

4. Accounts payable 1,440

Cash in Bank 1,440

PROBLEM 4 (Proof of Cash)

Tricia Company
Proof of Cash
For the month ended December 31, 2020

November 30 December December 31

Balance Receipts Disbursement Balance
Balance per Bank Statement ₱107,800 ₱1,102,250 ₱1,094,850 ₱115,200
1. Deposit in transit
November 45,300 (45,300) ─ ─
December ─ 50,600 ─ 50,600
2. Outstanding checks
November (13,375) ─ (13,375)
December ─ ─ 7,150 (7,150)
3. Error ─ ─ (4,750) 4,750
4. Payment to creditor ─ 6,050 6,050 ─
Adjusted Bank Balance ₱139,725 ₱1,113,600 ₱1,089,925 ₱163,400

Balance per Book Statement ₱82,725 ₱1,110,950 ₱1,080,275 ₱113,400

1. Credit Memo (Collections)
November 60,750 (60,750) ─ ─
December ─ 58,200 ─ 58,200
2. Debit Memo (Bank service charges)
November (3,750) ─ (3,750) ─
December ─ ─ 2,100 (2,100)
3. Error (₱4,200 – ₱2,400) ─ ─ 1,800 (1,800)
4. Debit Memo (NSF)
December ─ ─ 4,300 (4,300)
December ─ 5,200 5,200 ─
Adjusted Book Balance ₱139,725 ₱1,113,600 ₱1,089,925 ₱163,400

PROBLEM 5 (Proof of Cash)

Zia Company
Proof of Cash
For the month ended December 31, 2020

November 30 December December 31

Balance Receipts Disbursement Balance
Balance per Bank Statement ₱918,000 ₱1,248,000 ₱612,000 ₱115,200
5. Deposit in transit
November 240,000 (240,000) ─ ─
December ─ 658,800 ─ 658,800
6. Outstanding checks
November (510,000) ─ (510,000)
December ─ ─ 1,085,880 (1,085,880)
7. Error 120,000 (120,000) ─ ─
Adjusted Bank Balance ₱768,000 ₱1,546,800 ₱1,187,880 ₱1,126,920

Balance per Book Statement ₱471,600 ₱2,206,800 ₱1,221,600 ₱1,456,800

5. Credit Memo
November 300,000 (300,000) ─ ─
December ─ (360,000) ─ (360,000)
6. Debit Memo
November (3,600) ─ (3,600) ─
December ─ ─ 4,800 (4,800)
7. Error (₱118,800 – ₱11,880) ─ ─ (106,920) 106,920
8. Debit Memo (NSF)
December ─ ─ 72,000 (72,00)
Adjusted Book Balance ₱768,000 ₱1,546,800 ₱1,187,880 ₱1,126,920

DIT, beginning ₱240,000

Add: Total Deposits per book
Total Debits per book ₱2,206,800
Less: Non-deposit items
Note Collected, Nov 300,000
Note Collected, Dec. 360,000 1,546,800
Total Deposits made ₱1,786,800
Less: Total Deposits per bank
Total Credits per bank ₱1,248,000
Less: Non-deposit items
Error 120,000 1,128,000
DIT, ending ₱658,800
 OCs, beginning ₱510,000
Add: Total Disbursements per book
Total Credits per book ₱1,221,600
Less: Non-deposit items
Bank Service Charge, Nov 3,600
Error, Dec. 106,920 1,111,080
Total Disbursements made ₱1,621,080
Less: Total Disbursements per bank
Total Debits per bank ₱612,000
Less: Non-deposit items
Bank Service Charge, Dec. 4,800
NSF Checks 72,000 535,200
OCs, ending ₱1,085,880

THEORIES:

1. C.
2. C., Bonus
3. B.
4. A.
5. A.
6. B, Bonus
7. B