Chapter 4

Cash & Cash Equivalents

PROBLEM 4-1: THEORY

1. C 6. C
2. B 7. C
3. D 8. D
4. C 9. D
5. D 10. C

PROBLEM 4-2: THEORY

1. A 6. D
2. D 7. C
3. D 8. C
4. B 9. C
5. C 10. B

PROBLEM 4-3: THEORY

1. D 6. D
2. D 7. A
3. E 8. B
4. D 9. D
5. A 10. A

PROBLEM 4-4: COMPUTATIONAL: MULTIPLE CHOICE

1. C 350,000 + 250,000 + 800,000 = 1,400,000
2. D 1,800,000 + 50,000 = 1,850,000
3. C
Solution:
Cash in banks 2,250,000
Cash on hand 125,000
Adjusted balance 2,375,000

4. C
Solution:
Checking account #101 175,000
Checking account #201 (10,000)
Money market account 25,000
90-day certificate of deposit, due 2/28/04 50,000
Cash and cash equivalents 240,000
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5. A
Solution:
Checkbook balance - 12/31/x3 5,000
NSF check (500)
Undelivered check 300
Adjusted balance 4,800

6. C
Solution:
Balance per bank statement, 12/31/x1 38,075
Deposit in transit, 12/31/x1 5,200
Outstanding checks, 12/31/x1 (6,750)
Amount erroneously credited by bank to ABC's account,
12/28/x1 (400)
Adjusted balance 36,125

7. A
Solution:
18,050 + 3,250 – 2,750 = 18,550

8. A
Solution:
Cash in bank
(per books)
3/31/x1 44,200
Book disbursements
Book receipts (58,400 (49,700 bank
44,10
bank receipts - 10,300 disbursements -
0
DIT last mo.) 12,600 OC last mo. +
48,100 7,000 OC this mo.)
48,20
4/30/x1
0

Alternative solution:
Balance per bank statement, 3/31/x1 46,500
Deposits 58,400
Disbursements (49,700)
Balance per bank statement, 4/30/x1 55,200
DIT - 4/30/x1 -
OC - 4/30/x1 (7,000)
Adjusted balance 48,200

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The cash balance per books is equal to the adjusted balance
because there are no book reconciling items.

9. A
Solution:
Outstanding checks
25,200 31-Mar
Checks encashed
(Disbursements by bank) 99,400 89,200 Checks drawn (squeeze)
1-Apr 15,000

10. B
Solution:
Balance per bank statement .................. ₱32,400
Add deposits in transit ..................... 51,000
₱83,400
Deduct outstanding checks ................... 79,100
Corrected balance ........................... ₱ 4,300

Balance per depositor's records ............. ₱ 8,350

Add note receivable collected by bank ....... 1,250
₱ 9,600
Deduct:
Overdrafts ................................ ₱ 800
Book error--unrecorded check .............. 4,500 5,300
Corrected balance ........................... ₱ 4,300

PROBLEM 4-5: COMPUTATIONAL: MULTIPLE CHOICE

1. C (375,000 + 5,000 – 125,000) = 255,000

2. D
Solution:
Per count (400 + 90) = 490 less Accountability 500 = 10 shortage

Various expense accounts 90

Cash shortage 10
Cash in bank 100

3. D

4. B (28,000 – 12,000 + 4,000 + 500) = 20,500

5. B (30,140 + 4,000 – 5,200) = 28,940

6. C (27,200 + 450 – 700 + 1,450) = 28,400

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7. B (38,000 + 940 – 220 - 90 + 18) = 38,648

8. C (27,000 + 5,400 – 4,900) = 27,500

9. A (25,650 + 5,900 – 750 – 2,000) = 28,800

10. A
Solution:
OC
12,600 31-Mar
Checks drawn
Disbursements 49,700 42,100 (squeeze)
30-Apr 5,000

CIB - per books

31-Mar 34,900
Collections* 32,400 42,100 Checks drawn
25,200 30-Apr (squeeze)

* (Deposits per bank in April of ₱42,700 less ₱10,300 DIT from last month
that cleared in April) = 32,400

11. D (40,000 – 2,000 + 8,000 + 400) = 46,400

12. C (54,075 + 9,375 – 8,625 – 375) = 54,450

13. A (113,000 + 17,200 – 10,800) = 119,400 adjusted balance + 2,400 NSF

= 121,800 unadjusted balance of cash per book (squeezed upwards)

14. C (8,000 – 400 + 1,000) = 8,600

15. D (18,025 + 3,125 – 2,875 + 125) = 18,400

PROBLEM 4-6: COMPUTATIONAL: EXERCISES

1. Solution:
Checks drawn but not yet issued to payees 120,000
Customers’ checks dated Dec. 31, 20x1 40,000
SML’s check dated Jan. 15, 20x2 already mailed to payee 16,000
Cash on hand 130,000
Employees’ checks representing unclaimed salaries,
14,000
held by the treasurer
Petty cash fund (fully replenished) 20,000
Total 340,000

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2. Solution:
Treasury bill acquired on Nov. 1, 20x1 300,000
Investment in redeemable preference shares 1,600,000
Three-month time deposit with UCPB - unrestricted 950,000

Total 2,850,000

3. Solution: (2,250,000 + 125,000) = 2,375,000

4. Solution:
(40,000 + 100,000 – 10,000 overdraft – 20,000 compensating bal. ) =
110,000

5. Solution:
(a)
Petty Cash ................................ 1,400
Cash in bank................................... 1,400

(b) No entry

(c)
Shipping Expense .......................... 740
Travel Expense ............................ 240
Postage Expense ........................... 230
Miscellaneous Supplies .................... 170
Employee Receivables ...................... 8
Cash Over and Short ....................... 4
Cash in bank................................... 1,392

(d)
Cash in bank ...................................... 400
Petty Cash ............................. 400

6. Solution:
Requirement (a):
Per books Per bank
Cash on hand 500,000 Cash on hand 480,000
Accounts receivable 500,000 Deposit liability 480,000

Cash in bank 500,000

Cash on hand 500,000

Accounts payable 200,000 Deposit liability 140,000

Cash in bank 200,000 Cash on hand 140,000

No entry Cash on hand 360,000

Deposit liability 360,000

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No entry Deposit liability 40,000
Cash on hand 40,000

Requirement (b):
(1) Deposits in transit: (500,00 – 480,000) = 20,000
(2) Outstanding checks: (200,000 – 140,000) = 60,000
(3) Credit memo = 360,000
(4) Debit memo = 40,000

Requirement (c):
The unadjusted balances of the “Cash in bank” and “Deposit liability”
accounts as of July 31, 20x1 are determined as follows:
Cash in bank
June 30, 20x1 100,000
(a) Deposits 500,000 200,000 (b) Checks drawn
400,000 July 31, 20x1

Deposit liability
100,000 June 30, 20x1
(b) Checks encashed 140,000 480,000 (a) Deposits
(d) Payments for bills 40,000 360,000 (c) Customer remittances
July 31, 20x1 760,000

Per books, July 31 400,000 Per bank, July 31 760,000

Credit memo 360,000 Deposits in transit 20,000
Debit memo (40,000) Outstanding checks (60,000)
Adjusted balance 720,000 Adjusted balance 720,000

Requirement (d):

Cash in bank 320,000

Utilities expense 40,000
Accounts receivable 360,000

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7. Solution:
Per books, June 30 68,757 Per bank, June 30 54,780
(i) Credit memo (4,500 + 165 - 36) 4,629 (h) Deposits in transit 13,425
(b) Dishonored check (14,265) (d) Outstanding checks (9,885)
(e) Bank charges (210) (g) Bank error 600
(f) NSF checks (1,296)
(a) Book error (4,500 - 3,000)* 1,500
(c) Book error (2,895 - 2,700) (195)
Adjusted balance 58,920 Adjusted balance 58,920

* Overstatement in check drawn.

8. Solutions:
Requirement (a):
Deposits in transit
beg. 2,100
April deposits per books 12,889 10,784 April deposits per bank
4,205 end.

Requirement (b):
Outstanding checks
3,800 beg.
April checks per bank 11,100 13,080 April checks per books
end. 5,780

Requirement (c):
Per books, Mar. 31 24,355 Per bank, Mar. 31 27,995
April note collected 3,000 Deposits in transit 4,205
April bank service charge (35) Outstanding checks (5,780)
April NSF check (900)
Adjusted balance 26,420 Adjusted balance 26,420

9. Solution:
Per books 10,460 (squeeze) Per bank, June 30 11,164 (start)

Credit memo 1,120 Deposits in transit 1,340

Debit memo Outstanding checks (1,100)

(16 + 160) (176)

Adjusted balance 11,404 Adjusted balance 11,404

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10. Solution:
Beginning Ending
Reconciliation Reconciliation
June 30 Receipts Disbursements July 31

Per bank
₱107,082 ₱249,108 ₱218,373 ₱137,817
DIT:
June 30 8,201 (8,201)
July 31 12,880 12,880
OC:
June 30 (27,718) (27,718)
July 31 30,112 (30,112)
NSF check
redeposited _______ (8,250) (8,250) ________
Adjusted
balance ₱ 87,565 ₱245,537 ₱212,517 ₱120,585

Per books ₱ 15,822 ₱236,452 ₱212,529 ₱ 39,745

Bank service
charge:
June (72) (72)
July 60 (60)
Collection of
notes
receivable:
June 71,815 (71,815)
July ______ 80,900 ________ 80,900
Adjusted
balance ₱ 87,565 ₱245,537 ₱212,517 ₱120,585

PROBLEM 4-7: COMPUTATIONAL: EXERCISES

1. Solution:
30-Jul Receipts Disbursements 31-Aug
Per books 132,200 60,000 12,200 180,000
ADD: CM
July 10,000 (10,000)
August 35,000 35,000
LESS: DM
July (7,800) (7,800)
August 8,900 (8,900)
Book errors:
August 2,800 2,800
Adjusted bal. 134,400 87,800 13,300 208,900

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 30-Jul Receipts Disbursements 31-Aug
Per bank 100,600 89,000 20,600 169,000
ADD: DIT
July 45,000 (45,000)
August 43,800 43,800
LESS: OC
July (11,200) (11,200)
August 3,900 (3,900)

Adjusted bal. 134,400 87,800 13,300 208,900

2. Solution:
31-Mar Receipts Disbursements 30-Apr
Per books 400,000 180,000 40,000 540,000
ADD: CM
March 36,000 (36,000)
April 23,000 23,000
LESS: DM
March (10,000) (10,000)
April 16,000 (16,000)
Book errors:
April (9,000) 9,000
Adjusted bal. 426,000 167,000 37,000 556,000

31-Mar Receipts Disbursements 30-Apr

Per bank 280,000 190,000 30,000 440,000
ADD: DIT
March 169,000 (169,000)
April 136,000 136,000
LESS: OC
March (23,000) (23,000)
April 30,000 (30,000)
Bank errors:
April 10,000 10,000
Adjusted bal. 426,000 167,000 37,000 556,000

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3. Solution:
31-Jan Receipts Disbursements 28-Feb
Per books 264,400 120,000 24,400 360,000
ADD: CM
January 30,000 (30,000)
February 52,500 52,500
LESS: DM
January (15,600) (15,600)
February 10,680 (10,680)
Book errors:
January 4,000 (4,000)
February (2,800) (2,800)
Adjusted bal. 282,800 135,700 19,480 399,020

31-Jan Receipts Disbursements 28-Feb

Per bank 201,200 186,940 17,320 370,820
ADD: DIT
January 95,040 (95,040)
February 43,800 43,800
LESS: OC
January (13,440) (13,440)
February 15,600 (15,600)
Adjusted bal. 282,800 135,700 19,480 399,020

4. Solution:
30-Jun Receipts Disbursements 31-Jul
Per books 382,500 180,900 36,400 527,000
ADD: CM
June 74,200 (74,200)
July 262,800 262,800
LESS: DM
June (2,000) (2,000)
July 6,000 (6,000)
Book errors:
June 36,340 (36,340)
July 54,280 (54,280)
Adjusted bal. 491,040 333,160 94,680 729,520

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 30-Jun Receipts Disbursements 31-Jul
Per bank 365,380 396,340 108,020 653,700
ADD: DIT
June 169,000 (169,000)
July 136,000 136,000
LESS: OC
June (23,000) (23,000)
July 30,000 (30,000)
Bank errors:
June (20,340) (20,340)
July (30,180) (30,180)
Adjusted bal. 491,040 333,160 94,680 729,520

5. Solution:
31-Mar Receipts Disbursements 30-Apr
Per books 396,600 180,000 36,600 540,000
ADD: CM
March 36,000 (36,000)
April 42,000 42,000
LESS: DM
March (10,920) (10,920)
April 16,020 (16,020)
Book errors:
March (27,000) (27,000)
April 9,000 (9,000)
Adjusted bal. 394,680 186,000 23,700 556,980

31-Mar Receipts Disbursements 30-Apr

Per bank 280,900 191,380 26,900 445,380
ADD: DIT
March 46,780 (46,780)
April 131,400 131,400
LESS: OC
March (23,000) (23,000)
April 19,800 (19,800)
Bank errors:
March 90,000 (90,000)
April
Adjusted bal. 394,680 186,000 23,700 556,980

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PROBLEM 4-8: CLASSROOM ACTIVITIES
1. Solution:
Exhibit No. Amount
Cash on hand 1 5,882.00
Cash in bank - Savings 3 522,277.54
Cash in bank - Current 4 645,353.03
Total cash 1,173,512.57

Notes:
 Exhibit 2.1 is a post-dated customer check.
 Exhibit 2.2 is an unreleased company check. Although this
check will increase the “Cash in bank” account per records, it
should not be included in the solution above because the amount
of “Cash in bank” in the solution above is derived from the bank
statement and not from the Ledger.
 The unused credit in Exhibit 5 may be disclosed but it should not
be included in cash.
2. Solutions:

Requirement (a):

CASH COUNT SHEET

FUND: PETTY CASH FUND
DATE: DEC. 21, 20x1

CURRENCY QTY. AMT. TOTAL

1,000.00 1 1,000.00
500.00 0 -
200.00 0 -
100.00 1 100.00
50.00 0 -
20.00 1 20.00
1,120.00
COINS
10.00 1 10.00
5.00 1 5.00
0.25 2 0.50
35.50

TOTAL BILLS & COINS 1,155.50

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 NO. PARTICULARS AMT.
VOUCHERS
1 Office supplies 356.00
2 Transportation 97.00
3 IOU's 600.00 1,053.00

CHECKS
- - - -

TOTAL PER COUNT 2,208.50

ACCOUNTABILITY 5,000.00
CASH (SHORTAGE)/OVERAGE (2,791.50)

Requirement (b):
JOURNAL
DATE ACCOUNTS Ref. Debit Credit
12.3.20X1 Petty cash fund 5,000.00
Cash in bank 5,000.00

12.21.20X1 Office supplies 356.00

Transportation expense 97.00
Advances to employees 600.00
Cash shortage 2,791.50
Cash in bank 3,844.50

3. Solutions:
Requirement (A):
ABC Co. PIGGY Bank
(a) Cash in bank 1,000,000 (a) Cash on hand 1,000,000
Cash on hand 1,000,000 Deposit liability 1,000,000

(b) Accounts payable 254,321 (b) No entry

Cash in bank 254,321

(c) No entry (c) Deposit liability 254,321

Cash on hand 254,321

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(d) No entry (d) Cash on hand 2,460,660
Deposit liability 2,460,660

(e) Cash on hand 1,952,012 (e) Cash on hand 1,592,012

Accounts receivable 1,952,012 Deposit liability 1,592,012

Cash in bank 1,952,012

Cash on hand 1,952,012
(f) No entry (f) Deposit liability 25,000
Cash on hand 25,000

(g) No entry (g) Deposit liability 1,602

Cash on hand 1,602
(i) Cash in bank 40,000 (i) No entry
Cash on hand 40,000

Requirement (B):
Cash in bank Deposit liability
(a) 1,000,000 1,000,000 (a)
254,321 (b) (c) 220,320
(e) 1,952,012 2,460,660 (d)
(f) 25,000 1,592,012 (e)
(i) 40,000 (g) 1,602
2,737,691 4,805,750

The net difference is ₱2,068,059 (₱4,805,750 – ₱2,737,691).

Requirement (C):
Per books 2,737,691 Per bank 4,805,750
Credit memo (d) 2,460,660 DIT (i) 40,000
Debit memos: OC (b) & (c) (34,001)
NSF check (f) (25,000)
Direct debits (g) (1,602)
Book error (e) (360,000)
Adjusted balance 4,811,749 Adjusted balance 4,811,749

Requirement (D):
Cash in bank (squeeze) 2,074,058
Utilities expense (g) 1,602
Accounts receivable (d) - (e) - (f) 2,075,660*

* (2,460,660 – 25,000 – 360,000) = 2,074,058

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4. Solution:
Check
Date Debits Credits Balance
No.
Nov. 1 10,000.00
Nov. 4 0339 34,000.00 44,000.00
Nov. 9 134 17,000.00 27,000.00
Nov. 12 135 13,000.00 14,000.00
Nov. 13 Cash 16,000.00 30,000.00
Nov. 16 136 8,000.00 22,000.00
Nov. 21 Cash 52,000.00 74,000.00
Nov. 22 0784 19,000.00 93,000.00
Nov. 29 137 7,600.00 85,400.00
Nov. 30 0846 23,500.00 108,900.00
144,500.00 45,600.00

Bank statement
Period covered: Nov. 1, 20x1 to Nov. 30, 20x1
Date Check No. Debits Credits Balance
Nov. 1 10,000.00
Nov. 5 0339 34,000.00 44,000.00
Nov. 6 0389 78,000.00 122,000.00
Nov. 13 Cash 16,000.00 138,000.00
Nov. 16 135 13,000.00 125,000.00
Nov. 18 984 33,000.00 158,000.00
Nov. 19 136 8,000.00 150,000.00
Nov. 21 Cash 25,000.00 175,000.00
Nov. 22 0784 19,000.00 194,000.00
Nov. 25 0784 (NSF) 19,000.00 175,000.00
Nov. 28 (DM) 2,000.00 173,000.00
Nov. 30 137 7,600.00 165,400.00

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Per book 108,900.00 Per bank 165,400.00
CM - Nov. 6 (0389) 78,000.00 DIT - Nov. 30 (0846) 23,500.00
CM - Nov. 18 (984) 33,000.00 OC - Nov. 9 (134) (17,000.00)
NSF - Nov. 25 (0784) (19,000.00)
DM - Nov. 28 (2,000.00)

Book error -
overstated collection
(Nov. 21) (52K-25K) (27,000.00)
Adjusted balance 171,900.00 Adjusted balance 171,900.00

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