CHAPTER 8 CASH CASH EQUIVALENTS Applied Auditing PDF

AUDITING & ASSURANCE – PRINCIPLES AND APPLICATIONS 1
CHAPTER 8 CASH AND CASH EQUIVALENTS
PROBLEM 8-1 Cash and Cash Equivalents

Answer: c. ₱1,717,000
Solution:
Current account at Metrobank 1,000,000
Payroll account 250,000
Petty cash fund (in currency) 2,000
Postal money order 15,000
Traveler's check 25,000
Treasury bills, due 3/31/2022 (purchased 12/31/2021) 100,000
Treasury warrants 150,000
Undelivered check 100,000
Postdated check 50,000
Stale check issued 25,000
Total Cash and Cash Equivalents (December 31, 2021) 1,717,000

Answer: a. ₱3,084,000
Solution:
Traveler’s check 50,000
Postal money order 30,000
Petty cash fund (in currency) 4,000
Treasury bills, due 3/31/2022 (purchased 12/31/2021) 200,000
Current account at Metrobank 2,000,000
Payroll account 500,000
Treasury warrants 300,000

Answer: d. ₱98,330
Solution:
Bills and coins on hand 52,780
Traveler's check 22,400
Petty cash excluding paid cash voucher (2,000 - 1,650) 350
Money order 800
Checking Account Balance in Bank of Philippine Island 22,000
Total Cash and Cash Equivalents (December 31, 2021) 98,330

Answer: a. ₱3,850,000
Solution:
Securities classified as Cash equivalents
Securities: Date Acquired Maturity Date Amount
120-day Certificate of Deposit 12/10/2021 01/31/2022 600,000
BSP-Treasury Bills (No.2) 10/31/2021 01/20/2022 1,000,000
Money Market Funds 11/21/2021 02/10/2022 2,000,000
3,600,000
Cash on hand 80,000

Checking account No. 143-BPI 200,000
Checking account No. 155-BPI (30,000)
Securities classified as Cash equivalents 3,600,000
Total Cash and Cash Equivalents (December 31, 2021)
This study source was downloaded by 100000869539388 from CourseHero.com on 05-30-2024 11:51:53 GMT -05:00
3,850,000
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Answer: b. ₱100,340
Solution:
Bank cheque account 58,400
Bank savings account (collectible immediately) 23,440
Cash 10,000
Treasury bonds issued by the government (maturing in 2 months) 8,500
Total Cash and Cash Equivalents (December 31, 2021) 100,340
Answer: c. ₱4,150,000
Solution:
Petty cash fund (70,000 -15,000-5,000) 50,000
Current account-Metro bank (4,000,000+100,000) 4,100,000
PROBLEM 8-7 Effective Interest Rate
1.) Answer: c. ₱3,500,000
Solution:
Principal amount ?
Less: Compensating balance 5%
Add: Current balance 50,000
Amount needed to finance its building expansion 3,375,000
Principal amount = 100%
100% - 5% + 50,000 = 3,375,000

95% = 3,375,000 - 50,000
95% = 3,325,000
3,325,000 ÷ 95%
Principal amount = 100% 3,500,000
2.) Answer: c. 12.30%
Solution:
Annual interest payment (3,500,000 × 12%) 420,000
Less: Interest income on the loan proceeds in the 5,000
compensating balance [(3,500,000-3,375,000)×4%]
Net interest 415,000
Divide by: Loan proceeds 3,375,000
Effective interest rate 12.30%
PROBLEM 8-8 Petty Cash Fund
Requirement 1: Working papers showing Cash account
ABC Company
Petty Cash Count Sheet
January 3, 2022; 9:00 AM
Denomination Quantity Total

Bills
200.00 10 2,000.00
100.00 20 2,000.00
20.00 40 800.00
Coins
10.00 10 100.00
5.00 9 45.00
*8×100+4 1.00 804 804.00
*7×200+10 0.25 1,410 352.50
*5×300+20 0.10 1,520 152.00
*4×200+10 0.05 810 40.50
Total Bills and Coins 6,294.00
Checks for Deposits:

Maker Date Payee Amount
W. Ally, Petty cash custodian 12/28/21 ABC Company 500
I.O.U's Date Amount

A. Braham, Janitor 12/19/2021 250.00
R. Tica, Clerk 12/20/2021 150.00
P. Du, Bookkeeper 12/22/2021 200.00
Total 600.00
Vouchers:
Payee Date Account charged Amount
J. Cruz, Messenger 12/14/2021 Advances to employees 125.00
Cid Bookstore 12/15/2021 Supplies 150.00
Dalin Liner 12/19/2021 Freight-out 192.00
Bureau o Posts (stamps) 12/20/2021 Supplies 300.00
A. Bala, Carpenter 12/21/2021 Repairs 450.00
Total 1,217.00
Amount
Bills and Coins 6,294.00
Checks for deposits 500.00
I.O.U's 600.00
Vouchers paid 1,217.00
Unused stamps 50.00
Total Petty Cash Accounted 8,661.00
Less: Petty cash accountabilities 12,600.00
Petty Cash shortage (3,939)
Petty Cash accountabilities

Petty Cash imprest balance 12,000.00
Unclaimed payroll 600.00
Petty cash accountabilities 12,600.00
Acknowledgment
I hereby acknowledge that the above petty cash fund items were counted in
my presence and the same were returned to me intact. I further acknowledge a petty
cash short of three thousand nine hundred thirty-nine (₱3,939). I have no other fund
accountabilities
W. Ally
Petty Cash Custodian
Requirement 2: Adjusting journal entries as of December 31, 2021

Debit Credit
1.) Advances to emplyees 600.00
Petty cash fund 600.00
2.) Expenses 1,217.00

Office supplies 50.00
Petty cash fund 1,267.00
3.) Cash shortage 3,939.00

4.) Cash shortage 3,939.00

Requirement 3: Petty cash fund

Bills and coins 6,294.00
Checks for deposit 500.00
Petty cash fund (December 31, 2021) 6,794.00
PROBLEM 8-9 Petty Cash Fund
Solution:
Cash accounted for
Currency 2,585.00
Checks 17,600.00
Unreplenished vouchers 425.00
IOUs 150.00 20,760.00
Cash accountability
Collections from customer-check 6,500.00
Cash collections 12,150.00 23,650.00
Cash Shortage (2,890.00)
Quantity Denomination Total

50 1.00 50.00
60 0.25 15.00
3 500.00 1,500.00
5 100.00 500.00
20 20.00 400.00
12 10.00 120.00
Total Currencies and coins 2,585.00
Checks:
Date Payee Maker Amount
December 26, 2021 Cash Al, Beautician 5,000.00
December 29, 2021 Raymund Rex, Hairdresser 6,100.00
December 29, 2021 Raymund Zev, customer 6,500.00
Total Checks for deposit 17,600.00
Unreplenished vouchers:
Date Nature of Disbursement Amount
December 15 Transportation 65.00
December 16 Office supplies 70.00
December 17 Xerox fees 80.00
December 28 Postage 150.00
January 2 Newspaper 10.00
January 2 Freight charges 50.00
Total 425.00
IOUs:
Date Maker Amount
December 20 Rhad, employee 50.00
December 23 Andrix 100.00
Total 150.00
Cash collections:
Invoices Date Amount
#143 December 30 4,000.00
#144 December 31 5,100.00
#145 January 2 3,050.00
Total 12,150.00
PROBLEM 8-10 Bank Reconciliation
1.) Deposit in transit on November 30

Answer: b. ₱3,600
2.) Outstanding checks on November 30

Answer: a. ₱2,628
3.) Adjusted receipts in November

Answer: b. ₱19,019
4.) Correct cash balance on November 30

Answer: d. ₱10,566
5.) Assuming each reconciling item will be given an adjusting entry, how many adjusting
entries will be made on November 30
Answer: a. 8
Solution:
Oct-31 Receipts Disbursement Nov-30
Unadjusted Bank Balance 18,005 17,709 25,620 10,094
Deposit in transit:
October 1,790 (1,790)
November 3,600 3,600
Outstanding checks:
October (6,681) (6,681)
November 2,628 (2,628)
Less: Erroneous bank credit (500) (500)
Adjusted balances 13,114 19,019
21,567 10,566
Oct-31 Receipts Disbursement Nov-30
Unadjusted Book Balance 11,534 18,269 21,575 8,228
Credit memo:
October 1,600 1,600
November 750 750
Debit memo:
November 35 (35)
Bank service charges:
October (20) (20)
November 22 (22)
NSF checks:
November 665 (665)
Book errors:
Check No. 148 (Overstated
(1,000) 1,000
disbursement)
Check No. 150 (Understated
270 (270)
disbursement)
Adjusted Balances 13,114 19,019 21,567 10,566
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AUDITING & ASSURANCE – PRINCIPLES AND APPLICATIONS 1

CHAPTER 8 CASH AND CASH EQUIVALENTS

PROBLEM 8-1 Cash and Cash Equivalents

PROBLEM 8-2 Cash and Cash Equivalents

PROBLEM 8-3 Cash and Cash Equivalents

PROBLEM 8-4 Cash and Cash Equivalents

Cash on hand 80,000

PROBLEM 8-6 Cash and Cash Equivalents

PROBLEM 8-7 Effective Interest Rate

1.) Answer: c. ₱3,500,000

Principal amount = 100%

100% - 5% + 50,000 = 3,375,000

2.) Answer: c. 12.30%

Requirement 1: Working papers showing Cash account

Denomination Quantity Total

Checks for Deposits:

I.O.U's Date Amount

Petty Cash accountabilities

Requirement 2: Adjusting journal entries as of December 31, 2021

2.) Expenses 1,217.00

3.) Cash shortage 3,939.00

4.) Cash shortage 3,939.00

Requirement 3: Petty cash fund

PROBLEM 8-9 Petty Cash Fund

Quantity Denomination Total

PROBLEM 8-10 Bank Reconciliation

1.) Deposit in transit on November 30

2.) Outstanding checks on November 30

3.) Adjusted receipts in November

4.) Correct cash balance on November 30

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