PRELIMINARY EXAMS- AUD 301A YMATA

Problem 1

The following items are found in the cash account of JHS Company at December 31, 2020.
The company’s controller asks your opinion whether the items listed below should be
considered as part of cash account and come up with adjusting entry to adjust the cash
account.

1. Customers’ check dated December 25, 2020, P25,000.

2. Company’s check (P30,000) dated December 26, 2020 which was drawn in payment for
merchandise purchased on that date but not delivered until January 3, 2021. This check
was deducted in the cash balance.
3. A check worth P196,000 from customer who paid the account net of the 2% discount.
The company records the transaction as credit to Accounts Receivable for the proceeds.
4. Cash in closed bank (Urban Bank), P95,000.
5. Redemption fund, P100,000
6. Sinking fund, P100,000. This will be used on March 1, 2021 to redeem the bonds
payable.
7. Metro Bank Checking Account No. 0004568, P210,000.
8. RCBC Checking Account No. 0002347, P115,000.
9. Overdraft in PNB Checking Account No. 00011256, P50,000.
10. Company’s check dated January 3, 2021 in payment of account, P50,000. This was
recorded in the company’s disbursement ledger at December 31, 2020.
11. Overdraft in RCBC Checking Account No. 0056791, P15,000.
12. Postage stamps, P2,000.
13. 90-day Treasury Bills (purchase on November 1, 2020), P100,000
14. Treasury Bills that matures on February 1, 2021, P50,000.
15. Change fund, P10,000.
16. Customers’ certified check, P20,000.
17. Company’s certified check, P50,000. (This was included in the cash disbursement for
December).

1) The entry to correct/adjust item number 3 is:

a. Accounts receivable 4,000
Sales discounts 4,000
b. Sales discounts 4,000
Accounts receivable 4,000
c. Accounts receivable 4,000
Sales 4,000
d. No adjustments

2 ) The entry to correct/adjust item number 10 is:

a. Accounts payable 50,000
Cash 50,000
b. Other liabilities 50,000
Cash 50,000
c. Cash 50,000
Accounts payable 50,000
d. No adjustment

3. The entry to correct/adjust item number 17 is:

a. Accounts payable 50,000
 Cash 50,000

b. Cash
Accounts receivable

c. Cash
Accounts payable

d. No adjustments

4. The entry to correct/adjust item number 16 is:

a. Accounts receivable 20,000
Cash 20,000
b. Cash 20,000
Accounts payable 20,000
c. Cash 20,000
Accounts receivable 20,000
d. No adjustments

5. (3 points) JHS COMPANY’S adjusted cash and cash equivalents balance at December
31, 2020 is:

a. P 771,000 b. P 741,000 c. P 721,000s d. P 691,000

Problem 2

The following data pertaining to the cash transactions and bank account of Daydream
Company for May 2020 are available to you:

Cash balance, per accounting records, May 31, 2020 P 51,582

Cash balance, per bank statement, May 31, 2020 95,874
Bank service charge for May 327
Debit memo for the cost of printed checks delivered by the bank;
the charge has not been recorded in the accounting records 375
Outstanding checks, May 31, 2020 20,184
Deposit of May 30 not recorded by bank until June 1 14,610
Proceeds of bank loan on May 30, not recorded in the accounting
records, net of interest of P900 17,100
Proceeds from a customer’s promissory note; principal amount P24,000,
collected by the bank, taken up in the books with interest 24,300
Check No. 1086 issued to a supplier entered in the accounting records
as P6,300 but deducted in the bank statement at an erroneous amount
of 3,600
Stolen check lacking an authorized signature, deducted from Daydream’s
account by the bank in error 2,400
Customer’s checks returned by the bank marked NSF, indicating that the
customer’s balance was not adequate to cover the checks; no entry has
been made in the accounting records to record the returned check 2,280

Questions

1. The adjusted cash in bank balance of Daydream COMPANY at May 31, 2020 is: (2 points)
a. P 87,570 b. P 90,000 c. P 90,570 d. P 90,900

2. The cash in bank balance of Daydream COMPANY at May 31, 2020 is ( 3 points)
a. Understated by P39,318 c. Understated by P38,418
b. Understated by P38,988 d. Understated by P35,988
Problem 3

In connection with an audit, you are given the following bank reconciliation.

BANK RECONCILIATION
December 31, 2020
Balance per ledger, 12/31/20 P 34,349.72
Add: Collections received on the last day of
December and charged to “Cash in Bank”
on books but not deposited 5,324.50
Debit memo for customer’s checks returned
unpaid (check is on hand but no entry has been
made on the books)
4,000.00

Debit memo for bank service charge for December 1,000.00

P 46,674.22
Deduct:
Outstanding checks P 18,625
(see details below)
Credit memo for proceeds of a note receivable
which had been left at the bank for collection
but which has not been recorded as collected 8,000
Check for an account payable entered on books
as P12,625 but drawn and paid by bank as
16,225 3,600 32,225.00
Computed balance P 14,449.22
Unlocated difference 36,601.00
Balance per bank (check to confirmation) P 51,050.22

LIST OF OUTSTANDING CHECKS

December 31, 2020
Check No. Amount
14344 P 5,820
14358 1,295
14367 3,543
14399 2,001
14401 4,892
14407 5,074
P 18,625
Questions:

1. The adjusted cash balance at December 31, 2020 is: (3 points)

a. P 33,749.72 b. P 34,949.72 c. P 37,749.72 d.P40,949.72

2. A check for an account payable entered on books as P12,625 but drawn and paid by
bank as 16,225
a. Should not be included in the reconciliation since the bank already gave the money
to the payee.
b. Should not be included in the reconciliation since bank’s record is always followed.
c. Should be included as deduction in the book reconciliation since this is considered as
book error, thus a reconciling item.
d. Should be included as addition in the book reconciliation since this is considered as
book error, thus a reconciling item.

3. The outstanding checks at December 31, 2020 is: (2 points)

a. P 15,025 b. P 18,625 c. P 19,025 d. P 22,625

4. The cash balance of the company per record at December 31, 2020 is:
a. Overstated by P600 c. Understated by P 3,400
b. Overstated by P1,200 d. Overstated by P 6,600