Problem 1-1 (IAA)

On December 31, 2021, Albania Company provided the following data:

Cash in bank 3,000,000

Time deposit – 30 days 1,000,000
Money market placement due on June 30, 2022 2,000,000
Saving deposit in closed bank 100,000
Sinking fund for bond payable due June 30, 2023 1,500,000
Petty cash fund 20,000

 The cash in bank included customer check of P200,000 outstanding for 18 months.

 Check of P250,000 in payment of accounts payable was dated and recorded on December 31, 2021
but mailed to creditors on January 15, 2022.
 Check of P100,000 dated January 31, 2022 in payment of accounts payable was recorded and
mailed December 31,2021.
 The reporting period is the calendar year.
The cash receipts journal was held open until January 15, 2022 during which time an amount of
P450,000 was collected and recorded on December 31, 2021.

Required:

1. Prepare adjusting entries on December 31, 2021.

2. Compute the total amount of cash and cash equivalents that should be reported on December 31,
2021.
3. Explain the presentation of the items excluded from cash and cash equivalents.
Problem 1-2 (IAA)

Argentina Company reported the following accounts on December 31, 2021:

Cash on hand 1,000,000

Petty cash fund 50,000
Security Bank current account 2,000,000
PNB current account 1,500,000
BDO current account (overdraft) (200,000)
BSP treasury bill - 120 days 3,000,000
BPI time deposit - 90 days 2,000,000
Bond sinking fund 2,500,000

 The cash on hand included a customer postdated check of P150,000 and postal money order of
P50,000.
 The petty cash fund included unreplenished petty cash vouchers for P10,000 and an employee check
for P5,000 dated January 31, 2022.
 The BPI time deposit is set aside for acquisition of land to be made in early January 2022.

 The bond sinking fund is set aside for payment of bond payable due December 31, 2022.

Required:

1. Prepare adjusting entries on December 31, 2021.

2. Compute the total amount of cash and cash equivalents.
3. Explain the presentation of the items excluded from cash and cash equivalents.
Problem 1-3 (IAA)

Armenis Company reported the following information on December 31, 2021:

Cash on hand 1,000,000

Petty cash fund 50,000
Cash in bank 4,000,000
Saving deposit 2,000,000
7,050,000

 Cash on hand included the following:

a. Customer check of P100,000 returned by bank December 26, 2021 due to insufficient fund but
subsequently redeposited and cleared by bank January 5, 2022.
b. Customer check for P150,000 dated January 15, 2022 received December 22, 2021.
c. Postal money orders received from customers. P200,000.
 The petty cash fund consisted of the following items:

Currency and coins 2,000

Employees' IOUs 10,000
Currency in envelope marked collections for Christmas party 5,000
Check drawn by Armenia payable to petty cashier 33,000
50,000

 Check written and dated December 22, 2021 and delivered to payee on January 5, 2022, P200,000.

 Check written December 26, 2021 and dated January 31, 2022 delivered to payee on December 26,
2021, P300,000.

Required:

1. Prepare adjusting entries on December 31, 2021. 

2. Compute the total cash on December 31, 2021.
Problem 1-4 (PHILCPA Adapted)

Callous Company reported the following accounts on December 31, 2021:

Cash on hand 200,000

Petty cash fund 20,000
Philippine Bank current account 5,000,000
City Bank current account No. 1 4,000,000
City Bank current account No. 2 (overdraft) (100,000)
Asia Bank saving account 250,000
Asia Bank time deposit, 90 days 2,000,000

 Cash on hand included the following items:

Customer check for P35,000 returned by bank December 26, 2021 due to insufficient fund but
subsequently redeposited and cleared by the bank on January 10, 2022.

Customer check for P15,000 dated January 10, 2022, received December 23, 2021.

 The petty cash fund consisted of the following items:

Currency and coins 5,000
IOUs from officers 2,000
Unreplenished petty cash vouchers 12,000

 Included among the checks drawn by Callous Company. against the Philippine Bank current account
and recorded in December 2021 were the following:

Check written and dated December 23, 2021 and delivered to payee on January 31, 2022, P25,000.

Check written December 26, 2021, dated January 30, 2022, delivered to payee on December 28,
2021, P45,000.

Required:

1. Compute the total cash and cash equivalents. 

2. Prepare adjusting entries on December 31, 2021.
Problem 1-5 (ACP)

Zealous Company established a petty cash fund. 

1. Established a petty cash fund of P10,000 on January 2.

2. Petty cash expenses - January 2-31 are:

Postage 1,500
Supplies 5,500
Transportation 1,200
Miscellaneous expense 800

3. The fund is replenished on February 1 and increased by P5,000.

Required:

Prepare journal entries to record the transactions under the fluctuating fund system and imprest fund
system.
Problem 1-6 (ACP)

Zenith Company provided the following chronological transactions in relation to petty cash:

1. The entity established a petty cash fund of P10,000.

2. Petty cash disbursements were:

Postage 1,500
Supplies 3,000

3. Petty cash disbursements were:

Transportation 1,000
Accounts payable 3,500

4. Issued check for an amount to replenish the fund and bring the balance of the petty cash to P20,000.

Required:

Prepare journal entries to record the transactions under fluctuating fund system and imprest fund system.
Problem 1-7 (IAA)

Laborious Company closed the accounts on June 30. The entity provided the following transactions:

May 2 The entity established an imprest fund of P10,000.

29 The fund is replenished. The petty cash items include:

Currency and coin 2,000
Postage 1,000
Supplies 3,000
Transportation 2,500
Miscellaneous expense 1,500

June 30 The fund was not replenished. The fund is composed of the following:
Currency and coin 6,000
Supplies 2,000
Postage 1,000
Transportation 1,000

July 15 The fund is replenished and increased to P15,000.

Currency and coin 3,000
Supplies 3,500
Postage 1,500
Transportation 1,500
Miscellaneous expense 500

Required:

Prepare journal entries to record the transactions under imprest fund system and fluctuating system.
Problem 1-8 (IAA)

Tacit Company provided the following transactions:

2021
Nov. 2 The entity established an imprest petty cash fund of P10,000.

30 An examination of the cash fund disclosed:

Currency and coin 3,000

Memoranda showing expenditures for:
Postage 2,000
Supplies 5,000

A check was drawn to replenish the fund and to increase its amount to P20,000.

Dec. 31 The fund was not replenished.

Currency and coin 11,000

Memoranda showing expenditures for:
Postage 3,000
Supplies 4,000
Deposit for 20 cases of softdrinks 2,000

2022
Jan. 2 The deposit for the 20 cases of softdrinks is collected.

31 A check was drawn to replenish the fund.

Currency and coin 1,000

Postage stamps 500

Memoranda showing expenditures since November 30, 2021 for:

Postage 5,000
Supplies 6,000
Payment of account 7,000

Required:

Prepare journal entries to record the transactions.

Problem 1-9 (IAA)

On December 1, 2021, Wacky Company established an imprest petty cash fund.

2021
Dec. 1 Established an imprest petty cash fund of P10,000 by writing a check on National Bank.

20 Replenished the petty cash fund by writing a check on National Bank. The fund contained:

Currency and coins 1,000

Vouchers for selling expenses 5,000
Vouchers for miscellaneous expenses 2,000
Vouchers for equipment 2,000

Dec. 31 The petty cash fund was not replenished. The fund contained:

Currency and coins 6,000

Postdated employee's check 2,000
Vouchers for selling expenses 1,500
Vouchers for transportation 500

2022
Jan. 15 Encashed the employee's check. The proceeds were retained in the fund.

31 Replenished the petty cash fund by writing a check on National Bank.

The petty cash vouchers for January expenditures were:

Distribution costs 500

Administrative expenses 2,000
Transportation 1,000
Payment for supplier's invoice 1,200

Required:

1. Prepare journal entries to record the transactions.

2. How much is the petty cash on January 31, 2022 before the replenishment?
Problem 1-10 (AICPA Adapted)

Tranvia Company revealed the following information on December 31, 2021:

Cash in checking account 350,000

Cash in money market account 750,000
Treasury bill, purchased November 1, 2021
maturing January 31, 2022 3,500,000
Time deposit purchased December 1, 2021
maturing March 31, 2022 4,000,000

What amount should be reported as cash and cash equivalents on December 31, 2021?

a. 1,100,000
b. 3,850,000
c. 4,600,000
d. 8,600,000
Problem 1-11 (IAA)

At year-end, Myra Company reported cash and cash equivalents which comprised the following:

Cash on hand 500,000

Demand deposit 4,000,000
Certificate of deposit 2,000,000
Postdated customer check 300,000
Petty cash fund 50,000
Traveler check 200,000
Manager check 100,000
Money order 150,000

What total amount should be reported as cash at year-end?

a. 7,000,000
b. 4,800,000
c. 6,800,000
d. 5,000,000
Problem 1-12 (PHILCPA Adapted)

Starex Company provided the following information at year-end:

Checking account at Metrobank 3,000,000

Employee's postdated check 120,000
Foreign bank account unrestricted and in equivalent pesos 2,500,000
IOU from company president 500,000
NSF customer check 100,000
Petty cash fund, expense receipts P40,000 50,000
Postage stamps 10,000
Treasury bonds 50,000
Value added tax account 1,500,000

What amount should be reported as unrestricted cash?

a. 7,050,000
b. 5,500,000
c. 7,010,000
d. 5,510,000
Problem 1-13 (PHILCPA Adapted)

At year-end, ABC Company reported cash account per ledger at P4,700,000 which consisted of the
following:

Petty cash fund 50,000

Undeposited receipts, including a
postdated customer check for P100,000 1,500,000
Cash in bank 2,500,000
Deposit in bank closed by BSP 500,000
Vouchers paid out of collections, not yet recorded 150,000
IOUS signed by employees, taken from collections 100,000
4,800,000

What amount should be reported as cash at year-end?

a. 3,750,000
b. 3,950,000
c. 4,250,000
d. 4,050,000
Problem 1-14 (AICPA Adapted)

Thor Company provided the following data on December 31, 2021:

Checkbook balance 4,000,000

Bank statement balance 5,000,000
Check drawn on Thor's account, payable to supplier,
dated and recorded on December 31, 2021 but
not mailed until January 31, 2022 500,000
Cash in sinking fund 2,000,000

On December 31, 2021, what amount should be reported as cash under current assets?

a. 4,500,000
b. 5,500,000
c. 3,500,000
d. 6,500,000
Problem 1-15 (AICPA Adapted)

Joana Company had the following account balances on December 31, 2021:

Petty cash fund 50,000

Cash on hand 500,000
Cash in bank-current account 4,000,000
Cash in bank-payroll account 1,000,000
Time deposit 2,000,000
Cash in bank-restricted account for plant addition,
expected to be disbursed in early January 2022 500,000
Cash in sinking fund set aside for bond payable due June 30, 2022 1,500,000

The petty cash fund included unreplenished December 2021 petty cash expense vouchers of P5,000 and
employee IOU of P5,000.

The cash on hand included a P100,000 check payable to Joana Company dated January 31, 2022.

What total amount should be reported as cash and cash equivalents on December 31, 2021?

a. 6,940,000
b. 8,940,000
c. 7,940,000
d. 7,440,000
Problem 1-16 (AICPA Adapted)

On December 31, 2021 Lamentable Company had the following cash balances:

Cash in bank - current account 6,000,000

Petty cash fund - all funds were reimbursed at year-end 50,000
Time deposit - three months, due January 15, 2022 2,500,000
Saving deposit 1,000,000

Cash in bank included P400,000 of compensating balance against short term borrowing arrangement.

The compensating balance is legally restricted as to withdrawal.

What total amount should be reported as cash and cash equivalents?

a. 9,500,000
b. 9,150,000
c. 9,100,000
d. 6,950,000
Problem 1-17 (AICPA Adapted)

Baloney Company had the following account balances on December 31, 2021:

Cash in bank 2,250,000

Cash on hand 125,000
Cash restricted for addition to plant in January 2022 1,600,000

Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement.

The compensating balance is not legally restricted as to withdrawal.

What total amount should be reported as cash on December 31, 2021?

a. 1,775,000
b. 2,250,000
c. 2,375,000
d. 3,975,000
Problem 1-18 (IAA)

Yasmin Company provided the following on December 31, 2021:

Petty cash fund 50,000

Current account - First Bank 4,000,000
Current account - Second Bank (overdraft) (250,000)
Money market placement - Third Bank 1,000,000
Time deposit - Fourth Bank 2,000,000

 A check for P100,000 was drawn against First Bank current account dated and recorded December
29, 2021 but delivered to payee on January 15, 2022.
 The Fourth Bank time deposit is set aside for land acquisition in early January 2022.

What total amount should be reported as cash and cash equivalents on December 31, 2021?

a. 5,050,000
b. 5,150,000
c. 4,900,000
d. 4,150,000
Problem 1-19 (IAA)

On December 31, 2021, Roma Company reported cash balance of P9,950,000.

Undeposited collections 600,000

Cash in bank - BDO checking account 4,000,000
Undeposited NSF check received from customer, dated December 1, 2021 150,000
Undeposited check from a customer, dated January 15, 2022 250,000
Cash in bank - BDO fund for payroll 1,000,000
Cash in bank - BDO time deposit, 90 days 2,000,000
Cash in foreign bank restricted 1,500,000
Cash in bank - BDO value added tax account 450,000
Total 9,950,000

On December 31, 2021, what total amount should be reported as cash and cash equivalents?

a. 7,600,000
b. 8,200,000
c. 6,050,000
d. 8,050,000
Problem 1-20 (AICPA Adapted)

Ral Company reported the checkbook balance, on December 31, 2021 at P5,000,000 and held the
following items on same date:

Check payable to Ral, dated January 2, 2022 in

payment of a sale made in December 2021, not
included in December 31 checkbook balance 2,000,000
Check payable to Ral, deposited December 15
and included in December 31 checkbook balance,
but returned by bank on December 30 stamped "NSF."
The check was redeposited on January 2, 2022 and
cleared on January 9, 2022 500,000
Check drawn on Ral's account, payable to a vendor,
dated and recorded in Ral's books on December 31, 2021
but not mailed until January 10, 2022 300,000
Certificate of time deposit 1,000,000

What amount should be reported as cash on December 31, 2021?

a. 4,800,000
b. 5,300,000
c. 6,500,000
d. 5,800,000
Problem 1-21 (IAA)

Everlast Company reported the following information at year-end:

 Share investments of P1,000,000 that are very actively traded.

 Government treasury bills of P2,000,000 with a 10-year term but purchased on December 31 with
two months to go until maturity.
 Cash of P3,400,000 in the form of coin, currency, saving account and checking account.
 Commercial papers of P1,500,000 with term of nine months but purchased on December 31 with
three months to go until maturity.

What total amount should be reported as cash and cash equivalents?

a. 6,900,000
b. 7,900,000
c. 3,400,000
d. 5,400,000
Problem 1-22 (AICPA Adapted)

Isabel Company provided the following information December 31, 2021:

Cash on hand 400,000

Security Bank current account 5,000,000
Manila Bank current account No. 1 4,000,000
Manila Bank current account No. 2 (bank overdraft) (500,000)
BDO account set aside for bond payable due December 31, 2022 3,000,000
United Bank saving account for equipment acquisition 1,500,000
United Bank time deposit, 90 days 2,000,000
Treasury bills 1,000,000

Included among the checks drawn by Isabel Company against the Security Bank current account and
recorded in December 2021 are:

 Check written and dated December 23, 2021 and delivered to payee on January 3, 2022, P100,000.
 Check written December 26, 2021, dated January 30, 2022 delivered to payee on December 28,
2021, P150,000.

1. What total amount should be reported as cash on December 31, 2021?

a. 12,150,000
b. 12,650,000
c. 9,150,000
d. 9,400,000

2. What total amount should be reported as cash equivalents on December 31, 2021?

a. 3,000,000
b. 4,500,000
c. 2,000,000
d. 2,500,000
Problem 1-23 (ACP)

Love Company reported the following information in relation to cash on December 31, 2021:

 Checkbook balance, P4,000,000.

 Undeposited collections, P400,000.

 A customer check amounting to P200,000 dated January 2, 2022 was included in the December 31,
2021 checkbook balance.
 Another customer check for P500,000 deposited on December 22, 2021 was included in the
checkbook balance but returned by the bank for insufficiency of fund.
 This check was redeposited on December 26, 2021 and cleared two days later.

 A P400,000 check payable to supplier dated and recorded on December 30, 2021 was mailed on
January 16, 2022.
 A petty cash fund of P50,000 comprised the following on December 31, 2021:
Coins and currencies 5,000
Petty cash voucher
40,000
Refundable deposit for returnable containers
5,000
50,000
 A check of P40,000 was drawn on December 31, 2021 payable to Petty Cash.

1. What amount should be reported as adjusted cash in bank on December 31, 2021?

a. 4,600,000
b. 4,200,000
c. 4,400,000
d. 3,700,000

2. What total amount should be reported as cash on December 31, 2021?

a. 4,645,000
b. 4,845,000
c. 4,600,000
 d. 4,650,000

Problem 1-24 (PHILCPA Adapted)

Marjorie Company established a petty cash fund of P50,000 with the following information:

Coins and currency 22,000

Petty cash vouchers:
Gasoline 3,000
Medical supplies 1,000
Repairs 1,500
IOU from an employee 3,500
Check drawn payable to the order of Ann Cruz,
petty cash custodian, representing her salary 15,000
Check of an employee returned by bank marked "NSF” 3,000
A sheet of paper with the names of several employees
together with a contribution for a birthday party and
attached to the sheet of paper is a currency of 5,000

What amount of petty cash fund should be reported?

a. 42,000
b. 27,000
c. 37,000
d. 22,000
Problem 1-25 (PHILCPA Adapted)

Admirable Company had a petty cash fund which included the following details:

Coins and currency 2,000

Paid vouchers: 
Transportation 600
Gasoline 400
Office supplies 500
Postage stamps 300
Due from employees 1,200 3,000
Employee's check returned by bank marked "NSF" 1,000
Check drawn to the order of of petty cash custodian 4,000

What amount of petty cash should be reported?

a. 2,000
b. 7,000
c. 6,000
d. 9,000
Problem 1-26 (PHILCPA Adapted)

On December 1, 2021, Andi Company established a petty cash fund of P50,000. On December 31, 2021,
the petty cash fund was examined and found to comprise the following information:

Coins and currencies 6,000

Petty cash vouchers for expenses 46,000

The petty cash fund was replenished on December 31, 2021.

1. What amount should be reported as cash shortage or cash overage?

a. 2,000 over
b. 2,000 short 
c. 4,000 short
d. 0

2. What entry should Andi Company make on December 31, 2021 to record the replenishment of petty
cash fund?

a. Petty cash 46,000

Cash in bank 44,000
Cash short and over 2,000

b. Miscellaneous expenses 46,000

Cash in bank 44,000
Cash short and over 2,000

c. Miscellaneous expenses  44,000

Cash short and over 2,000
Cash in bank 46,000

d. Miscellaneous expenses 46,000

Petty cash 44,000
Cash short and over 2,000
Problem 1-27 Multiple choice (IAA) d. All of these statements are true about bank
overdraft.
1. Which of the following should not be
considered cash?
a. Petty cash fund
b. Money order
c. Coin and currency
d. IOU
6. Technically, cash may not include
2. Which of the following is usually considered
cash? a. Foreign currency
b. Money order
a. Certificate of deposit c. Restricted cash
b. Checking account d. Undeposited customer check
c. Money market certificate
d. Postdated check 7. Restricted deposits in foreign bank are
classified as
3. Which of the following should not be included
in cash? a. Current asset with appropriate disclosure:
b. Noncurrent asset with appropriate
a. Travel cash advance disclosure.
b. Certified check c. Be written off as loss.
c. Personal check d. As part of cash and cash equivalents.
d. Manager check
8. What is a compensating balance?
4. All of the following may be included in cash,
except a. Saving account balance
b. Demand deposit account balance
a. Currency
c. Temporary investment as collateral for
b. Money market instrument
loan
c. Checking account balance
d. Minimum deposit required to be
d. Saving account balance
maintained in connection with a borrowing
arrangement
5. Under IFRS, which of the following statements
is true about reporting bank overdraft?
9. Compensating balance represents
a. Overdraft typically cannot be offset against
a. Fund in a bank account that cannot be
positive balance in other cash account but
spent
reported as current liability,
b. Balance in a payroll checking account
b. Generally, cash overdraft is not allowed.
c. Account that is subject to bank service
c. Overdraft can be offset against other bank
charge
account when payable on demand and
d. Account on which a bank pays interest
often fluctuates from positive to overdrawn
as an integral part of cash management.
10. A compensating balance.
 a. Must be included in cash and cash d. Which is not legally restricted as to
equivalent. withdrawal is classified separately as
b. Which is legally restricted and related to a current asset.
long-term loan is classified as current
asset.
c. Which is legally restricted and related to a
short-term loan is classified separately as
current asset.
Problem 1-28 Multiple choice (IAA)

1. A cash equivalent is a short-term, highly liquid investment readily convertible into known amount of
cash and

a. Is acceptable as a means to pay current liability

b. Has a greater current fair value
c. Bears a prime interest rate
d. Is so near maturity that it presents insignificant risk of change in interest rate

2. Highly liquid investments are cash equivalents if the maturity is 90 days or less

a. From the date the investments are acquired

b. From the end of reporting period
c. From the date of issue of financial statements
d. From the beginning of reporting period

3. All of the following can be classified as cash and cash equivalents, except

a. Redeemable preference shares due in 60 days

b. Commercial papers due for repayment in 90 days
c. Equity investments
d. A bank overdraft

4. Cash equivalents do not include

a. Money market funds

b. High grade marketable equity investments
c. BSP treasury bills
d. Commercial papers

5. Cash equivalents are

a. Treasury bills and money market instruments.

b. Investments with original maturity of three months or less.
c. Readily convertible into known amount of cash.
d. All of these are features of cash equivalents
Problem 1-29 Multiple choice (IAA)

1. The internal control feature specific to petty cash is

a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system

2. What is the major purpose of an imprest petty cash fund?

a. To effectively plan cash inflows and outflows

b. To ease the payment of cash to vendors
c. To determine the honesty of the petty cashier
d. To effectively control cash disbursements

3. The imprest petty cash fund account 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 when the size of the fund is decreased.

4. A cash over and short account

a. Is not generally accepted.

b. Is debited when the petty cash fund out over.
c. Is debited when the petty cash fund proves out short.
d. Is a contra account to cash.

5. Petty cash fund is

a. Separately as current asset

b. Money kept on hand for making minor disbursements of coin
and currency rather than by writing checks
c. Set aside for the payment of payroll
d. Restricted cash