Drills on Cash and Cash Equivalents

 ADAPTED: Conrado T. Valix, Jose F. Peralta, & Christian

Aris M. Valix, Intermediate Accounting, Volume 1, 2020
Edition
 Problem 1:
 On December 31, 2020, 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, 2021 2,000,000
 Saving deposit in closed bank 100,000
 Sinking fund for bond payable due on June 30, 2022 1,500,000
 Petty cash fund 20,000
 Problem 1:
 Additional information:
 A. The cash in bank included customer check of P200,000
outstanding for 18 months.
 B. Check of P250,000 in payment of accounts payable was dated
and recorded on December 31, 2020 but mailed to creditors on
January 15, 2021.
 C. Check of P100,000 dated January 31, 2021 in payment of
accounts payable was recorded and mailed December 31, 2020.
 D. The cash receipts journal was held open until January 15,
2021 during which time an amount of P450,000 was collected
and recorded on December 31, 2020.
 E. The reporting period is the calendar year.
Required:
1. Prepare the adjusting entries on December 31, 2020.
2. Compute the total amount of cash and cash
equivalents that should be reported on December 31,
2020.
3. Explain the presentation of the items excluded from
cash and cash equivalents.
 Answers:
 Requirement 1:
 A. Accounts Receivable 200,000
 Cash in Bank 200,000

 B. Cash in Bank 250,000

 Accounts Payable 250,000

 C. Cash in Bank 100,000

 Accounts Payable 100,000

 D. Accounts Receivable 450,000

 Cash 450,000
 Answers:
 Requirement 2:
 Cash in Bank per book P3,000,000
 Customer check outstanding for 18 months (200,000)
 Undelivered check 250,000
 Postdated check delivered 100,000
 Collection on Jan. 2021 recorded Dec. 2020 (450,000)
 Adjusted Cash in Bank P2,700,000
 Time Deposit – 30 days 1,000,000
 Petty cash fund 20,000
 Total cash and cash equivalents P3,720,000
 Answers:
 Requirement 3:
 The money market placement of P2,000,000 due on June
30, 2021 should be separately shown as current asset. The
sinking fund of P1,500,000 and savings deposit in closed
bank of P100,000 should be separately shown as non-
current asset.
 Problem 2:
 Callous Company reported the following accounts on December 31, 2020:
 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 savings account 250,000
 Asia Bank time deposit, 90 days 2,000,000
 Problem 2:
 Additional information:
 1. Cash on hand included the following items:
 A. Customer check for P35,000 returned by bank December 26,
2020 due to insufficient fund but subsequently redeposited and
cleared by the bank on January 10, 2021
 B. Customer check for P15,000 dated January 10, 2021, received
December 23, 2020.
 2. The petty cash fund consisted of the following items:
 Currency and coins 5,000
 IOU’s from officers 2,000
 Unreplenished petty cash vouchers 12,000
 Problem 2:
 Additional information:
 3. Included among the checks drawn by Callous Company
against the Philippine Bank current account and recorded in
December 2020 were the following:
 A. Checks written and dated December 23, 2020 and delivered to
payee on January 31, 2021, P25,000.
 B. Checks written December 26, 2020, dated January 30, 2021,
delivered to payee on December 28,2020, P45,000.

 Required:
 1. Compute the total cash and cash equivalents.
 2. Prepare the adjusting entries on December 31, 2020
 Answers:
 Requirement 1:
 Cash on hand 200,000
 NSF customer check (35,000)
 Postdated customer check (15,000)
 Adjusted Cash on Hand 150,000

 Petty Cash Fund 5,000

 Philippine Bank current account 5,000,000

 Undelivered company check 25,000
 Postdated company check delivered 45,000
 Adjusted balance 5,070,000
 Answers:
 Requirement 1:
 Cash on Hand 150,000
 Petty Cash Fund 5,000
 Philippine Bank – current account 5,070,000
 City Bank current account No. 1 4,000,000
 City Bank current account No. 2 (100,000)
 Asia Bank saving account 250,000
 Asia Bank time deposit, 90 days 2,000,000
 Total Cash and Cash Equivalents P11,375,000
 Requirement 2:
 1. Accounts receivable 35,000
 Cash on hand 35,000

 2. Accounts receivable 15,000

 Cash on hand 15,000

 3. Receivable from officer 2,000

 Expenses 12,000
 Cash short or over 1,000
 Petty cash 15,000

 4. Philippine Bank – current account 25,000

 Accounts payable 25,000

 5. Philippine Bank – current account 45,000

 Accounts payable 45,000
 Problem 3:
 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 the

imprest fund system and fluctuating system.
 Answers:
 A. Imprest Fund System:
 1. Petty cash fund 10,000
 Cash in Bank 10,000

 2. No entry

 3. No entry

 4. Postage 1,500
 Supplies 3,000
 Transportation 1,000
 Accounts payable 3,500
 Petty cash fund 10,000
 Cash in Bank 19,000
 Answers:
 B. Fluctuating Fund System
 1. Petty cash fund 10,000
 Cash in Bank 10,000
 2. Postage 1,500
 Supplies 3,000
 Petty cash fund 4,500
 3. Transportation 1,000
 Accounts payable 3,500
 Petty cash fund 4,500
 4. Petty cash fund 19,000
 Cash in bank 19,000
Disclaimer: This power point presentation is for
classroom instruction only. Not for publication.

SOURCE AND REFERENCE:

Conrado T. Valix, Jose F. Peralta, & Christian Aris
M. Valix, Intermediate Accounting, Volume I, 2020
Edition
End of Presentation