School of Business and Economics

Department of Accountancy

AC 1201 Cash and cash equivalents

Intermediate Accounting mfdiii

Instructions: Answer the following problems using a yellow paper. On the top half portion of your
yellow paper, write down all your answers to the fifty-four questions below. The lower portion
of your paper would then be used to present your solutions to all the problems. Present your
solutions in good form. An answer without a supporting computation will not be given any credit.

1. Which of the following statements is incorrect concerning measurement of cash and cash
equivalents?
a. Cash is measured at face value
b. Cash in foreign currency is measured at the current exchange rate
c. If a bank or financial institution holding the funds of the entity is in bankruptcy or financial
difficulty, cash shall be written down to estimated realizable value
d. Cash equivalents shall be measured at maturity value, meaning face value plus interest

2. Which is not considered as a cash equivalent?
a. A three-year treasury note maturing on May 30 of the current year purchased by the entity on
April 15 of the current year
b. A three-year treasury note maturing on May 30 of the current year purchased by the entity on
January 15 of the current year.
c. A 90-day Treasury bill
d. A 60-day money market placement

3. 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 when the fund is decreased.

4. Which of the following is usually considered Cash?
a. Certificate of deposit
b. Checking account
c. Money market saving certificate
d. Treasury bill

5. Which of the following should not be included in “cash”?
a. Travel cash advance
b. Certified check
c. Personal check
d. Manager check

6. Under which classification is “cash restricted for plant expansion” reported?
a. Current assets
b. Noncurrent assets
c. Current liabilities
d. Equity

7. A cash equivalent is a short term, highly liquid investment that is readily convertible into known
amount of cash and
a. Is acceptable as a means to pay current liabilities.
b. Has a current market value that is greater than the original cost.
c. Bears an interest rate that is at least equal to the prime rate of interest at the date of
liquidation.
d. Is so near maturity that it presents insignificant risk of change in interest rate.

8. What is the treatment of customers’ postdated checks?
a. Accounts receivable
b. Prepaid expenses
c. Cash
d. Accounts payable

9. Bank overdraft generally should be
a. Reported as a deduction from current assets
b. Reported as a deduction from cash
c. Netted against cash and a net cash amount reported
d. Reported as a current liability

10. The internal control feature specific to petty cash is
a. Separation of duties
b. Assignment of responsibility
c. Property authorization
d. Imprest system

11. 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 when the fund is decreased

12. Which of the following statements in relation to an imprest petty cash fund is incorrect?
a. The imprest petty cash system in effect adheres to the rule of disbursement by check
b. Entries are made to the Petty Cash account only to increase or decrease the size of the fund or
to adjust the balance if not replenished at year end
c. The petty cash account is debited when the fund is replenished
d. The petty cash fund is reported as part of current assets

13. A bank reconciliation is
a. A formal financial statement that lists all of the bank account balances of an entity.
b. A merger of two banks that previously were competitors.
c. A statement sent by the bank to depositor on a monthly basis.
d. A schedule that accounts for the differences between an entity’s cash balance as shown on its
bank statement and the cash balance shown in its general ledger.

14. In preparing a 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 charge
c. Deposits in transit
d. A customer’s note collected by the bank on behalf of the depositor

15. Bank statements provide information about all of the following, except:
 a. Checks cleared during the period
b. NSF check
c. Bank charges for the period
d. Errors made by the depositor

16. When preparing a 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 charge
c. Deposit in transit
d. A customer’s note collected by the bank on behalf of the depositor

17. When preparing a bank reconciliation, bank credits are
a. Added to the bank statement balance
b. Deduct from the bank statement balance
c. Added to the balance per book
d. Deducted from the balance per book

18. If the cash balance shown on an entity’s accounting records is less than the correct cash balance and
neither the entity nor the bank has made any errors, there must be
a. Deposits credited by the bank not yet recorded by the entity
b. Deposits in transit
c. Outstanding checks
d. Bank charges not yet recorded by the entity

19. Bank statement provide information about all of the following, except
a. Checks cleared during the period
b. NSF checks
c. Bank charges for the period
d. Errors made by the depositor

20. Which of the following items must be added to the cash balance per ledger in preparing a bank
reconciliation which ends with 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

21. A cash over and short account
a. Is not generally accepted.
b. Is debited when the petty cash fund proves out over.
c. Is debited when the petty cash fund proves out short.
d. Is a contra account to cash.

22. A compensating balance
a. Must be included in cash and cash equivalent
b. Which is legally restricted and related to along-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
d. Which is not legally restricted as to withdrawal is classified separately as current asset

23. All of the following can be classified as cash and cash equivalents, except
a. Redeemable preference shares acquired and due in 60 days
b. Commercial papers held and due for repayment in 90 days
 c. Equity investments
d. A bank overdraft

24. Which is not considered as a cash equivalent?
a. A three-year treasury note maturing on May 30 of the current year purchased by the entity on
April 15 of the current year
b. A three-year treasury note maturing on May 30 of the current year purchased by the entity on
January 15 of the current year
c. A 90-day Treasury bill
d. A 60-day money market placement

25. In reimbursing the imprest petty cash fund, which of the following statements is true?
a. Cash is debited
b. Petty cash is debited
c. Petty cash is credited
d. Expense accounts are debited




26. Burr Company had the following account balances at December 31, year 2:
Cash in banks
 2,250,000
Cash on hand
 125,000
Cash legally restricted for additions
to plant (expected to be disbursed in year 3) 1,600,000

Cash in bank includes 600,000 of compensating balances against short-term borrowing arrangements.
The compensating balances are not legally restricted as to withdrawal by Burr. In the current assets
section of Burr’s December 31, year 2 balance sheet, total cash should be reported at
a. 1,775,000 

b. 2,250,000 

c. 2,375,000 

d. 3,975,000 


27. Ral Corp.’s checkbook balance on December 31, year 2, was 5,000. In addition, Ral held the
following items in its safe on that date:
Check payable to Ral Corp., dated January 2, year 3,
in payment of a sale made in December year 2, not
included in December 31 checkbook balance 2,000
Check payable to Ral Corp., 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, year 3,
and cleared on January 9 500
Check drawn on Ral Corp.’s account, payable to
a vendor,
dated and recorded in Ral’s books on
December 31 but
not mailed until January 10, year 3 300

The proper amount to be shown as Cash on Ral’s balance sheet at December 31, year 2, is
a. 4,800 

b. 5,300 

c. 6,500 

d. 6,800 




28. Trans Co. had the following balances at December 31, year 2:
Cash in checking account
 35,000

Cash in money market account
 75,000

Treasury bill, purchased 11/1/year 2,
maturing 1/31/year 3
 350,000
Treasury bill, purchased 12/1/year 2,
maturing 3/31/year 3 400,000

Trans’s policy is to treat as cash equivalents all highly liquid investments with a maturity of three months
or less when purchased. What amount should Trans report as cash and cash equivalents in its
December 31, year 2 balance sheet?
a. 110,000
b. 385,000
c. 460,000
d. 860,000

29. On October 31, year2,Dingo,Inc.hadcashaccountsat three different banks. One account balance is
segregated solely for a November 15, year 2 payment into a bond sinking fund. A second account,
used for branch operations, is overdrawn. The third account, used for regular corporate operations,
has
a positive balance. How should these accounts be reported in Dingo’s October 31, year 2
classified balance sheet?
a. The segregated account should be reported as a noncurrent asset, the regular account should be re-
ported as a current asset, and the overdraft should be reported as a current liability.
b. The segregated and regular accounts should be re- ported as current assets, and the overdraft should
be reported as a current liability.
c. The segregated account should be reported as a noncurrent asset, and the regular account should be
reported as a current asset net of the overdraft.
d. The segregated and regular accounts should be re- ported as current assets net of the overdraft.

30. In preparing its August 31, year 2 bank reconciliation, Apex Corp. has available the following
information:
Balance per bank statement, 8/31/Y2 18,050
Deposit in transit, 8/31/Y2
 3,250
Return of customer’s check for insufficient
funds, 8/31/Y2
 600
Outstanding checks, 8/31/Y2 2,750
Bank service charges for August 100
At August 31, year 2, Apex’s correct cash balance is
a. 18,550 

b. 17,950 

c. 17,850 

d. 17,550 


31. Poe, Inc. had the following bank reconciliation at March 31, year 2:
Balance per bank statement, 3/31/Y2 46,500
Add deposit in transit 10,300
56,800
Less outstanding checks 12,600
Balance per books, 3/31/Y2 44,200

Data per bank for the month of April year 2 follow:
Deposits 58,400
Disbursements 49,700
All reconciling items at March 31, year 2, cleared the bank in April. Outstanding checks at April 30, year
2, totaled 7,000. There were no deposits in transit at April 30, year 2. What is the cash balance per
books at April 30, year 2?
a. 48,200
b. 52,900
c. 55,200
d. 58,500

32. The December 31, 20014 trial balance of Yasmin Company includes the following accounts:

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

The petty cash fund includes unreplenished December 2014 petty cash expense vouchers for P15,000
and an employee check for P5,000 dated January 31, 2015.

A check for P100,000 was drawn against First Bank current account dated and recorded December 29,
20014 but delivered to payee on January 15, 2015.

The Fourth Bank time deposit is set aside for land acquisition in early January 2015.

The December 31, 2014 statement of financial position should report “cash and cash equivalents” at

a. 5, 130, 000
b. 5, 150, 000
c. 4, 130,000
d. 4, 880,000

33. The cash account of Palawan Company included the following items:
Bank draft from customer 10,000
Bond sinking fund - cash (bond is repayable on
January 31, 2017) 10,000
Bond sinking fund - cash (bond is repayable on
June 30, 2018) 10,000
Cash in bank(with legally restricted
compensating balance of 10,000) 20,000
Cash in savings account 10,000
Cash set aside for plant expansion (to be
disbursed on March 23, 2017) 10,000
Cashier's check 10,000
Checking account at BPI 10,000
Checking account at Metrobank (10,000)
Employees' postdated check 10,000
Foreign bank account – restricted 10,000
Money order from customer 10,000
Payroll account 10,000
Petty cash fund 10,000
Postage stamps 10,000
Post-dated check from customer 10,000
Time deposit (due on February 1, 2017;
acquired on December 25, 2016) 10,000
Time deposit (due on January 15, 2017;
acquired on August 15, 2016) 10,000
Traveler's check 10,000

What is the correct amount that should be reported as cash and cash equivalent on December 31, 2016?
a. 90,000
b. 100,000
c. 110,000
d. 120,000
e. 130,000

34. The following data pertaining to the cash transactions and bank account of Mandirigma company
for the month of May are available to you:
Cash balance, per bank statement, 5/31 31,948
Bank service charge for May 109
Debit memo for the cost of printed checks delivered by
the bank 125
Outstanding checks, May 31 6,728
Deposit of May 30 not recorded by bank until June 1 4,880
Proceeds of a bank loan of May 30, net of interest of
P300 5,700
Proceeds from a customer's promissory note, including
interest of P100 8,100
Check No. 2772 issued to a supplier entered in the
accounting records at P2,100 but deducted in the
bank statement at an erroneous amount of 1,200
Stolen check lacking an authorized signature, deducted
from Mandirigma's account by the bank in error 800
Customer's check returned by the bank marked NSF; no
entry has been made in the accounting records to
record the returned check 760

What is the cash balance per books at May 31?
a. 17,194
b. 18,994
c. 30,000
d. 42,806

Lipton Company shows the following account balances in their financial records as of December 31,
2016:
Checking account at Morgan Bank …………………………….………. P (20,000)
Checking account at Land Bank ……………………………….………….. 500,000
Payroll account- National Bank ……………………………….…………... 100,000
Foreign bank account- restricted ……..……………………………….…. 750,000
Postage stamps ……………………………………………………………………… 22,000
Employee’s post-dated checks ………………………………………..…….. 30,000
I.O.U. form president’s brother ……………………………………..………. 75,000
Traveller’s check ………………………………………………………....…………. 50,000
No-sufficient funds check ……………………………………………..………… 18,000
Petty cash fund (16,000 in currency & expenses for P84,000) .. 100,000
Cashier’s Check …………………………………………………………………….. 36,000
35. What is the correct cash balance to be reported in the statement of financial position or Lipton
Company on December 31, 2016?
a. P582,000 c. P702,000
b. P686,000 d. P704,000

36. What is the correct cash balance to be reported in the statement of financial position of Lipton
Company on December 31, 2016 assuming the bank overdraft or repayable on demand and it’s
integral to the entity’s cash
 a. P682,000 c. P702,000
b. P686,000 d. P704,000

37. Delta Corporation has supplied you the following list of its bank accounts and cash at Decemebr 31,
2016:

Checking account (Compensating balance of P15,000

With no restriction) P48,000
Savings account, 2% 30,000
Certificate of deposit, 6 months, 10%, due April 20, 2017 60,000
Money market placement (30-day certificate), current rate, 9.75% 40,000
Payroll account 20,000
Certificate of deposit, 3 months, 10% due February 15, 2017 75,000
Petty cash 1,500
What should be the balance to be reported as “Cash and Cash equivalents” in the Decemeber 31, 2016
statement of financial position of Delta Corporation?
a. P139,500 c. P214,500
b. P199,500 d. P274,500

38. Following were the account balances of Born Company at December 31, 2016:
Cash on hand ………………………………………………………………. P187,500
Cash in current and savings accounts …………………………..3,375,000
Cash set aside for plant
expansion (expected for payment in 2017) …….. 2,400,000
Cash in current and savings account includes P900,000 as holdout against short-term loan
arrangements. There are no legal restrictions as to withdrawal by Born on these holdouts. What is
the total cash that should be reported in the current assets section of Born’s December 31, 2016
statement of financial position?
a. P2,662,500 c. P3,562,500
b. P3,375,500 d. P5,962,500

39. Western Company reported a total cash and cash equivalent of P6,325,000 on Decemeber 31,
2016, which includes the following information:
a. Two certificates of deposits, each totalling P500,000. These certificates of deposit have a maturity
of 120 days.
b. A check that is dated January 12, 2017 in the amount of P125,000
c. A commercial paper of P2,100,000 which is due in 120 days.
d. Currency and coins on hand amounted to P7,700.

Western Company has agreed to maintain a cash balance of P500,000 in one of its bank at all times and
it is not available for withdrawal and to ensure future credit availability (this amount was included
in the above balance). How much is the correct amount of cash and cash equivalent that western
Company should report in its December 31, 2016 statement of financial position?
a. P2,600,000 c. P5,200,000
b. P3,100,000 d. P6,200,000

40. Eastern Co. provided the following information about the compensation of its cash on December
31, 2016:
• Commercial savings account of P600,000 and a commercial checking account balance of P900,000
are held at BPI.
• Money market fund account held by Citibank that permits Eastern to write checks in the balance,
P5,000,000
• Travel advances of P180,000 for executive travel for the first quarter of the next year (employee to
pay through salary deduction)
• A separate cash fund in the amount of P1,500,000 is restricted for the retirement of long term
assets.
• Petty cash fund, P10,000
What is the correct amount of cash and cash equivalents Eastern Company should report in its
December 31, 2016 statement of financial position?
a. P610,000 c. P6,400,000
b. P6,510,000 d. P6,510,000

41. While checking the cash accounts of Ruler Company on December 31, 2016, you find the following
information:
Balance in checking account (Outstanding checks
Per books of P9, 876) ………………………………………….. 65,323
Deposit in bank closed by BSP …………………………………………. 16,000
Deposit in transit …………………………………………………………….. 12,345
Currency and coins counted ……………………………………………. 9,500
Petty cash fund (of which P450 is in the form of paid
vouchers)……………………………………………….. 1,000
Bank charges not yet taken up in the books ……………………. 58
Bond sinking fund-cash …………………………………………………… 10,000
Receivables from employees ………………………………………….. 700
Book error in recording a check, the correct amount
as paid by the bank is P890 instead of P980
as recorded in the books, or a difference of ………. 90
What is the correct (adjusted) cash in bank balance for Ruler Company on December 31, 2016?
a. P55,415 c. P67,792
b. P70,229 d. P83,792

42. Referring to Ruler company. How much is the unadjusted cash in bank balance per books.
a. P65,415 c. P67,792
b. P67,760 d. P83,792

43. Referring to Ruler company. What is the correct cash on hand balance for Ruler Company on
December 31, 2016?
a. P9,500 c. P12,895
b. P10,050 d. P19,500

44. As of June 30, 2016, the bank statement of Marine Trading had an ending balance of P373,612. The
following data were assembled in the course of reconciling the bank balance:
• The bank erroneously credited Marine Trading for P2,150 on June 19.
• During the month, the bank charged NSF checks amounting to P2,340 of which P800 had been
redeposited on the 24th of June.
• Collection for June 30 totaling P10,330 was deposited the following month
• Checks outstanding as of June 30 were P30,205.
• Notes collected by the bank for Marine Trading were P8,150 and the corresponding bank charges
were P50.

What is the adjusted bank balance on June 30, 2016?

a. P351,587 c. P358,147
b. P353,927 d. P359,687

45. Everlasting Company is preparing its March 31 bank reconciliation. The following data are available:

From the February 28 bank reconciliation:
Deposits in Transit, P1,700
Outstanding checks, P3,900

March data: Per Bank Per Book
Balance, February 28 P74,140 P71,940
March deposits reflected 47,600 49,000
March checks reflected (61,700)* (61,000)
 Note collected (including P200 interest) 20,000
Service charge (120)
Balance, March 31 P79,920 P59,940

*Erroneously includes a check drawn by Ever Company for P1,500.
How much is the deposits in transit at March 31?
a. P300 c. P3,100
b. P1,400 d. P4,500

46. Referring to Everlasting Company. How much is the outstanding checks at March 31?

a. P4,700 c. P6,900
b. P6,200 d. P8,600

For #38 to 41
The trial balance of CARE Corporation for December 31, 2016 provides the following data:
Cash on hand ………………………………………………………………… P 500,000
Petty Cash fund …………………………………………………………….. 10,000
BPI current account ………………………………………………………. 1,000,000
Security Bank current account no. 1 ……………………………… 1,080,000
Security Bank current account no. 2 ……………………………… (80,000)
BDO savings account …………………………………………………….. 1,200,000
BDO time deposit ………………………………………………………….. 500,000
Cash on hand includes the following items:
a. Customer’s check for P10,000 returned by bank on December 26, 2016 due to insufficient fund but
subsequently redeposited and cleared by the bank on January 8, 2017.
b. Customer’s check for P20,000 dated January 2, 2017, received on December 29, 2016.
c. Postal money orders received from customers, P30,000.

The Petty Cash Fund consisted of the following items as of December 31, 2016.
Currency and coins ……………………………………………………… P2,000
Employees’ Vales ………………………………………………………… 1,600
Currency in an envelop marked “Collections
For charity” with names attached ………………….. 1,200
Unreplinished petty cash vouchers …………………………….. 1,300
Check drawn by Care Corporation, payable to the
petty cashier …………………………………………………… 4,000
Total P 10,100

Included among the checks drawn by CARE Corporation against the BPI Current account and recorded in
December 2016 are the following:
a. Check written and dated December 29, 2016 and delivered to payee on January 2, 2017, P80,000
b. Check written on December 27, 2016, dated January 2, 2017, delivered to payee on December 29,
2016, P40,000.

The credit balance in the Security Bank current account No. 2 represents checks drawn in excess of the
deposit balance. These checks were still outstanding at December 31, 2016.

The savings account deposit in BDO has been set aside by the Board of Directors for acquisition of new
equipment. This account is expected to be disbursed in the next 3 months after the end of the
reporting period.

47. How much is Cash on hand?
a. P 410,000 c. P 470,000
b. P 530,000 d. P 440,000

48. How much is BPI Current account?
a. P1,000,000 c. P1,080,000
 b. P1,120,000 d. P1,040,000

49. How much is Petty Cash Fund?
a. P6,000 c. P2,000
b. P7,200 d. P4,900

50. How much is the total Cash and Cash equivalents?
a. P2,917,200 c. P3,052,000
b. P3,074,900 d. P3,066,000





51. On April 1, Magnanimous Company established an imprest petty cash fund for P10,000 by writing a
check drawn against the checking account. On April 30, the entity wrote a check to replenish the
fund. On April 30, the fund contained the following:
Currency and Coins ………………………………………………… 3,000
Receipts for office supplies …………………………………….. 4,000
Receipts for postage still unused …………………………….. 2,000
Receipts for transportation ………………………………………. 600
What is the amount of replenishment under the imprest fund system?
a. P10,000 c. P3,000
b. P7,000 d. P6,600




52. Gallant Company reported a cash account balance of P4,500,000 before reconciliation.

The bank statement did not include a deposit of P230,000 made on the last day of the month.

The bank statement showed a collection by the bank of P94,000 and a customer check for P32,000
returned because it was NSF.

A customers’ check for 45,000 was recorded on the books as P54,000, and a check written for P79,000
was recorded as P97,000

What is the correct balance in the cash account?
a. P4,765,000 c. P4,571,000
b. P4,819,000 d. P4,801,000




53. On June 30, 2016, the bank statement of ARSLAN Company had an ending balance of P3,735,000.
The following data were assembled in the course of reconciling the balance:
a. The bank erroneously credited ARSLAN Company for P21,000 on June 22.
b. During the month, the bank charged back NSF checks amounting to P23,000 of which P8,000 had
been redeposited by June 25.
c. Collection of June 30 totalingP103,000 was deposited the following month.
d. Checks outstanding on June 30 amounted to P302,000.
e. Note collected by the bank for ARSLAN Company was P80,000 and the corresponding bank charge
was P5,000.
What is the unadjusted cash in bank per ledger on June 31, 2016?
a. P3,515,000 c. P3,455,000
b. P3,557,000 d. P3,497,000
54. 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’s check ……………………………………………………… 200,000
Manager’s Check ……………………………………………………. 100,000
Money Order …………………………………………………………. 150,000
What total amount should be reported as “cash” at year-end?
a. P7,000,000 c. P5,000,000
b. P6,800,000 d. P4,800,000