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Quiz#1 - Cash and Cash Equivalent
Quiz#1 - Cash and Cash Equivalent
2. International Financial Reporting Standards were developed and approved by which of the following?
a. SEC c. IASB
b. FRSC d. BOA
3. It is the national government agency charged with supervision over the corporate sector, capital market participants,
and the securities and investments market, and the protection of the investing public.
a. SEC c. IASB
b. FRSC d. BOA
i. IASB's definition of SMEs include the size criteria for determining what is a small and medium sized entity.
ii. Under the Philippine jurisdiction, the definition of small and medium sized entity does not include size criteria.
iii. SEC defines SME as an entity with total assets between P3M and P350M or total liabilities between P3M and P250M.
i. Regardless of size, entities whose securities are traded in public market should follow full PFRS.
ii. Entities whose securities are traded in public market must provide the outside debt and equity inestors with a broader
range of financial information.
iii. Financial institutions are not publicly accountable because the entities act in a fiduciary capacity.
7. Which of the following are exempted from the mandatory adaption of PFRS for SME?
i. An entity which is a subsidiary of a parent company reporting under the full PFRS
ii. An entity either as a significant joint venture or associate, is part of a group, that is reporting under the full PFRS
iii. An entity which is a branch office or regional operating headquarter of a foreign company reporting under the full PFRS
8. It is an entity that present its first annual financial statements that conform with the PFRS for SME regardless of whether
its previous accounting framework was full PFRS or another set of GAAP.
9. Which of the following are true regarding the transition to PFRS for SME?
i. The PFRS for SMEs shall be effective for annual periods beginning on or after January 1, 2000
ii. Entities whose recognizing revenue from agreements for the construction of real estate which shall apply to annual
periods beginning on or after January 1, 2012
iii. First-time adoption requires full retrospective application of the PFRS for SMEs effective at the reporting date of an entity’s
first PFRS for SMEs financial statements
10. Which of the following are true regarding the opening statement of financial position?
i. The opening statement of financial position is the statement of financial position on the date of transition to PFRS for SMEs
ii. In the opening statement of financial position, a first-time adopter shall apply PFRS for SMEs in measuring all recognized assets and liabi
iii. In the opening statement of financial position, a first-time adopter shall reclassify items that it recognized under the previous
accounting framework as one type of asset, liability, or component of equity, but a different type of asset, liability, or equity under PFRS fo
11. To be reported as cash and cash equivalent, the cash and cash equivalent must be
a. Short-term and highly liquid investments that are readily convertible into cash.
b. Short-term and highly liquid investments that are readily convertible into cash with remaining maturity of three months.
c. Short-term and highly liquid investments that are readily convertible into cash and acquired three months before maturity.
d. Short-term and highly liquid marketable equity securities
13. Which is false concerning measurement of cash and cash equivalents?
16. Unreleased checks (checks drawn before the end of the reporting period but held for later delivery)
a. Certificate of deposits
b. Checking accounts
c. Money market savings certificates
d. Postdated checks
a. Is a system in handling cash wherein petty cash expenses are recorded upon replenishment.
b. Is a system in handling cash wherein petty cash expenses are immediately recorded.
c. Is an internal control device for cash which requires that all cash receipts should be deposited intact and
all cash payments should be made by means of check
d. None of the above
19. Petty cash fund account under the imprest fund system is debited
23. Which will not require an adjusting entry on the depositor's books?
24. Bank statements provide information about all of the following except
a. The accounting function should be separated from the custodianship of entity assets.
b. Certain clerical personnel in an entity should be rotated among various jobs.
c. The responsibility for receiving merchandise and paying for it should usually be given to one person.
d. An entity's personnel should be given well-defined responsibilities.
e of an entity’s
ore maturity.
1. B. R.A. 6977 is known as known as the Magna Carta for Small Enterprises approved on January 22, 1991.
It was amended by RA 9501 known as the Magna Carta for Micro, Small, and Medium Enterprises approved
on May 23, 2008.
2. C. INTERNATIONAL ACCTG STANDARDS BOARD (IASB) is an independent, private-sector body that develops
and approves International Financial Reporting Standards (IFRSs).
3. A. SECURITIES AND EXCHANGE COMMISSION (SEC) is the national government agency charged with supervision
over the corporate sector, capital market participants, and the securities and investments market, and the
protection of the investing public.
4. C. First statement is false as IASB's definition of SME does not include size criteria, it was SEC that includes
a size criteria in determining small and medium sized entities.
Second statement is false (please refer to explanation for the first statement, second part.
Third statement is true as SEC defines small-sized entities with aseets of 3M to 100M or liabilities of 3M to 100M
while medium-sized entities are those with assets between 100M to 350M and liabilities of 3M to 250M.
6. A. First statement is true, entities who are publicly accountable should follow the full PFRS since more users
their financial statements.
Second statement is true as entities whose securities are traded in public market are publicly accountable.
Third statement is false, financial institutions are publicly accountable because the act in a fiduciary capacity.
7. D. The following are exempted from the mandatory adaption of PFRS for SME:
- An SME which is a subsidiary of a parent company reporting under the full PFRS
- An SME which is a subsidiary of a foreign parent company which will be moving towards PFRS pursuant to the
foreign country’s published convergence plan
- An SME either as a significant joint venture or associate, is part of a group, that is reporting under the full PFRS
- An SME which is a branch office or regional operating headquarter of a foreign company reporting under the full PFRS
- An SME which has a subsidiary that is mandated to report under the full PFRS
- An SME which has a short term projection that show that it will breach the quantitative thresholds set in the criteria
for a small entity. The breach is expected to be significant and continuing due to its long term effect on the company’s
asset size
- An SME which hash a concrete plan to conduct an initial public offering within the next two years
- An SME which has been preparing financial statements using full PFRS and has decided to liquidate
- Such other cases that the Commission may consider as valid exceptions from the mandatory adoption of PFRS
for Small Entities
8. A. First-time adopter of the PFRS for SMEs is an entity that presents its first annual financial statements that conform
with the IFRS for SMEs regardless of whether its previous accounting framework was full PFRS or another set of generally
accepted accounting principle
9. B. First statement is false, The PFRS for SMEs shall be effective for annual periods beginning on or after January 1, 2010.
Second and Third statements are true.
11. A. Cash and cash equivalents must be unrestricted for use. If it is restricted but will be use for current operations,
then it will be included in the cash and cash equivalents. On the other hand, if the cash fund is set aside for noncurrent
purposes, it is shown as long-term investment.
12. C.Cash equivalents are short-term and highly liquid investments that are readily convertible into cash and acquired
three months before maturity
13. C. Cash is measured at face value. Cash in foreign currency is valued at the current exchange rate during the reporting
period. Cash is valued at net realizable value if a bank or financial institution holding the funds of the company is in
bankruptcy or financial difficulty and if recoverable amount is estimated to be lower than the face value.
14. C. Bank overdraft is a credit balance in a cash in bank account.It is classified as a current liability and should not be
offset against bank accounts with debit balances except:
- When the entity maintains two or more accounts in one bank and one account results in an overdraft
- An overdraft may also be offset against the other bank account if the amount is not material
15. C. A compensating balance is the minimum checking or demand account balance that must be maintained in
connection with a borrowing arrangement with a bank. If the deposit is not legally restricted as to withdrawal by the
borrower because of an informal compensating balance agreement, the compensating balance is part of cash.
If the deposit is legally restricted because of a formal compensating balance agreement, the compensating balance is
classified separately as “cash held as compensating balance” under current assets if the related loan is short-term. If the
related loan is long-term, the compensating balance is classified as noncurrent investment.
16. B. Unrelease checks issued by a company shoue be restored to the cash balance.
18. C. Imprest system is an internal control device for cash which requires that all cash receipts should be deposited intact
and all cash payments should be made by means of check.
19. C. Petty cash fund account under the imprest fund system is debited when the fund is created and when the size of the
fund is increased.
22. C. Interest paid by the bank are added to the book balance since it is not yet recorded in the book.
23. C. Deposit of another entity is credited to the account of the depositor is a bank error, therefore, no adjusting entry
should be done to adjust the book balance.
24. D. Errors made by the depositor is a book error, therefore, it is not shown in the bank statement.
25. C. One of the internal controls for cash is the segregation of duties which states that the person recording the cash
transactions should be separated from the one handling the cash or other assets.
Mai D. Tung Company reported the following information as of the end of the current year:
- Investment securities of P1,000,000. These securities are share investments in entities that are traded
in the Philippine Stock Exchange. As a result, the shares are very actively traded in the market.
- Investment securities of P2,000,000. These securities are government treasury bills. The bills have a
10-year term and purchased on December 31 at which time they had two months to go until they mature.
- Cash of P3,400,000 in the form of coin, currency, savings and checking account.
- Investment securities of P1,500,000. These securities are commercial papers. The term of the papers
are nine months and they were purchased on December 31, at which time they had four months to go until
they mature.
26. How much should be reported as cash and cash equivalents at the end of the reporting period?
a. 6,900,000 c. 6,400,000
b. 5,400,000 d. 7,900,000
Goldie Company had the following account balances on December 31, 2020:
The petty cash fund includes unreplenished petty cash expense vouchers of P10,000 and employee
IOU of P5,000.
The cash on hand includes a P100,000 check payable to Goldie dated Jan 15, 2021.
In exchange for a guaranteed line of credit, Goldie has agreed to maintain a minimum balance of
P200,000 in its unrestricted current bank account.
The sinking fund is set aside to a bond payable that is due on June 30, 2021.
27. How much should be reported as cash and cash equivalents on December 31, 2020?
a. 6,935,000 c.5,435,000
b. 8,935,000 d. 7,435,000
The cash account in Maya Man Company's ledger showed a balance at December 31, 2020 of
P4,415,000 which consisted of the following:
28. At what amount should cash be reported in the December 31, 2020 FS?
a. 3,379,000 c. 3,489,000
b. 3,419,000 d. 3,449,000
In preparing its Aug. 31, 2020 bank reconciliation. Dina G. Tally Company has made available
the following information:
a. 1,855,000 c. 1,785,000
b. 1,795,000 d. 1,755,000
In an audit of Pinagtugma Company as of December 31, 2020, the following data are gathered:
a. 1,575,000 c. 1,075,000
b. 1,065,000 d. 1,325,000
26. B.
Government treasury bills 2,000,000.00
Coin, currency, savings, and checking account 3,400,000.00
Total Cash and Cash equivalents 5,400,000.00
The securities that are traded in PSE does not have maturity
date, therefore, it should be classified as current asset under
a separate account.
The commercial papers were purchased four months before
their maturity, therefore, it should be classified as current asset
under a separate account.
27. D.
Petty Cash Fund (net of unreplenished vouchers and IOU
from employees) 35,000.00
Cash in Bank - Current Account 4,000,000.00
Cash in Bank - Sinking Fund 2,000,000.00
Cash on Hand (net of PDC) 400,000.00
Treasury Bills 1,000,000.00
Total Cash and Cash equivalents 7,435,000.00
Cash in bank restricted for Sinking fund pertains to funds set aside to
pay a bond payable which will be due in June 30, 2021 which makes
it fund set aside for current operations, thus, it will be included in
cash balance as of Dec 31, 2020.
28. A.
Petty Cash Fund 24,000.00
Undeposited receipts (net of PDC from customer) 1,150,000.00
Cash in bank, per bank statement, net of OC 2,205,000.00
Total Cash and Cash equivalents 3,379,000.00
29. A.
Balance per bank statement 1,805,000.00
Deposit in transit 325,000.00
Outstanding checks 275,000.00
Adjusted Cash in bank balance 1,855,000.00
30. C
Balance per book 1,000,000.00
Bank charges 3,000.00
Customer note collected by bank 375,000.00
Interest on customer note 15,000.00
NSF checks 62,000.00
Depositor's note charged to account 250,000.00
Adjusted Cash in bank balance 1,075,000.00