ADAMSON UNIVERSITY

INTERMEDIATE ACCOUNTING 1
CASH & CASH EQUIVALENT - QUIZ
1. To be reported as “Cash and Cash Equivalent”, the cash item must be:
a. unrestricted in use for current operations
b. available for the purchase of property, plant, and equipment
c. set aside for the liquidation of long-term debt
d. deposited in bank

2. The amount reported as “Cash” in a company’s statement of financial position normally should
exclude:
a. petty cash fund
b. postdated checks issued by the company
c. postdated checks payable to the company
d. checks undelivered to payee

3. In most situations, the petty cash fund is reimbursed just prior to the year end and an adjusting entry
is made to avoid
a. overstatement of cash and understatement of expenses.
b. understatement of cash and overstatement of expenses.
c. understatement of cash and appropriate statement of expenses.
d. misstatement of revenues.

4. 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 every time 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 size of the fund is decreased.

5. The journal entries for bank reconciliation

a. are taken from the balance per bank section only.
b. may include a debit to Office Expense for bank service charges.
c. may include a credit to Accounts Receivable for an NSF check.
d. may include a debit to Accounts Payable for an NSF check.

6. Parasite Company had the following account balances on December 31, 2021
Cash in Bank Current Account – 5,000,000
Cash in Bank Payroll Account – 1,000,000
Cash in Bank restricted for building construction – 3,000,000
Time Deposit placed on December 15, 2021 due on January 14, 2022 – 2,000,000
Cash on Hand – 500,000
What amount should be reported as “Cash and Cash Equivalent” on December 31, 2021?
a. P6,300,000
b. P8,300,000
c. P6,500,000
d. P8,500,000
Cash in Bank Current Account (CASH) 5,000,000
Cash in Bank Payroll Account (CASH) 1,000,000
Cash on Hand (CASH) 500,000
Time Deposit (CASH EQUIVALENT) 2,000,000
TOTAL 8,500,000

Due to its restriction, Cash in Bank restricted for building construction of 3,000,000 is not
considered either as “Cash” or “Cash Equivalent”

7. Parasite Company had the following account balances on December 31, 2021
Cash in Bank Current Account – 5,000,000
Cash in Bank Payroll Account – 1,000,000
Cash in Bank restricted for building construction – 3,000,000
Time Deposit placed on December 15, 2021 due on January 14, 2022 – 2,000,000
Cash on Hand – 500,000
The Cash in Bank Current Account has a legally restricted compensating balance of P1,000,000, while
the Cash on Hand includes a post-dated check in the amount of P200,000.
What amount should be reported as “Cash” on December 31, 2021?
a. P5,300,000
b. P9,500,000
c. P6,500,000
d. P7,300,000
Cash in Bank Current Account (CASH) MINUS compensating balance 4,000,000
Cash in Bank Payroll Account (CASH) 1,000,000
Cash on Hand (CASH) MINUS post-dated check 300,000
TOTAL 5,300,000

Due to its restriction, Cash in Bank restricted for building construction of 3,000,000 is not
considered either as “Cash”

8. Valor Corporation’s December 31, 2021 checkbook balance was P5,000,000. On that date, Valor
held the following items in its safe:
Check dated January 02, 2022 payable to Valor in payment of a sale made in December 2021, not
included in the December 2021 checkbook balance – P2,000,000
Check payable to Valor that was deposited on December 15 and included in the December 2021
checkbook balance, but was returned by the bank on December 29 marked “NSF”. The check was
redeposited on January 02, 2022, and was cleared on January 09, 2022 – P500,000
Check drawn against Valor’s account payable to a vendor, dated and recorded in Valor’s books on
December 31, 2021 but not mailed until January 10, 2022 – P300,000
What amount of “Cash” should be reported on December 31, 2021?
a. P6,800,000
b. P6,500,000
c. P5,300,000
d. P4,800,000
Checkbook balance 5,000,000
Less: Check payable to Valor returned by bank marked “NSF” (500,000)
Add: Check payable to a vendor not mailed until Jan. 10, 2022 300,000
--------------
Cash to be reported on Dec. 31, 2021 4,800,000

The P2,000,000 check dated January 02, 2022 payable to Valor is a POSTDATED CHECK

9. The petty cash fund was established in the amount of P5,000, and contains P4,000 in cash and P950
in vouchers for disbursements when it was replenished.
The journal entry to record replenishment should include credit(s) to the following account(s):
a. Cash in Bank, P1,000
b. Petty Cash, P1,000
c. Cash in bank, P950; Cash Short or Over, P50
d. Petty Cash, P750
The established amount of PCF, P5,000, MINUS the remaining cash of P4,000 is equal to the
amount of replenishment, P1,000
The journal entry for the replenishment will be as follows:
Various disbursements (NOT AN ACCOUNT TITLE) 950
Cash Short or Over 50
Cash in Bank 1,000

10. The Petty Cash Fund (PCF) account of Snappy Company showed its composition as follows:
Coins and currency – P3,300
Total Paid Vouchers (unreplenished to date) – P3,000
Check returned by bank stamped as “NSF” – P1,000
Check drawn by Snappy to the order of the PCF Custodian as replenishment check – P2,700
What is the balance of the PCF?
a. P10,000
b. P9,000
c. P7,000
d. P6,000

Take note that you are NOT asked of the established amount of PCF but its balance at the time
you were shown the composition. Hence,

Coins and currency 3,300

Check drawn as replenishment check 2,700
----------
PCF Balance 6,000

11. In preparing the March 31, 2021 bank reconciliation, Infinity Corporation provided the following
information:
Balance per bank statement – P1,805,000
Deposit in Transit – P325,000
Customer’s check returned by bank marked “NSF” – P60,000
Bank service charge for the month – P10,000
Outstanding checks – P275,000
What is the adjusted cash in bank on March 31, 2021?
a. P1,755,000
b. P1,785,000
c. P1,855,000
d. P1,925,000

“Cash in Bank” refers to the General Ledger balance of Infinity’s Cash account. Hence, you
may start by preparing a bank reconciliation using the BANK TO BOOK method. Thus:

Unadjusted Bank Balance 1,805,000

Add: Deposit in Transit 325,000
Add: Customer’s check returned by bank marked “NSF” 60,000
Add: Bank service charge for the month 10,000
Less: Outstanding checks (275,000)
--------------
Unadjusted Book Balance 1,925,000

Now that the Unadjusted Book Balance is known, you may proceed computing as follows:

Unadjusted Book Balance 1,925,000

Less: Customer’s check returned by bank marked “NSF” (60,000)
Less: Bank service charge for the month (10,000)
--------------
Adjusted Book Balance 1,855,000

OR, since Adjusted BANK Balance SHOULD ALWAYS BE EQUAL to Adjusted BOOK
Balance, you may simply proceed preparing a bank reconciliation showing the Adjusted BANK
Balance

Unadjusted Bank Balance 1,805,000

Add: Deposit in Transit 325,000
Less: Outstanding checks (275,000)
--------------
Adjusted Bank Balance 1,855,000

12. Use the information in No. 11.

What is the unadjusted book balance on March 31, 2021?
a. P1,755,000
b. P1,785,000
c. P1,855,000
d. P1,925,000
Hint: Prepare a bank reconciliation using the BANK TO BOOK method
Unadjusted Bank Balance 1,805,000
Add: Deposit in Transit 325,000
Add: Customer’s check returned by bank marked “NSF” 60,000
Add: Bank service charge for the month 10,000
Less: Outstanding checks (275,000)
--------------
Unadjusted Book Balance 1,925,000

13. Use the information in No. 11.

The journal entry for the reconciling items per books is
a. DR Bank Charges P10,000; DR Accounts Receivable P60,000; CR Cash in Bank P70,000
b. DR Accounts Payable P70,000; CR Cash in Bank P70,000
c. DR Interest Expense P10,000; DR Cash in Bank P60,000; CR Accounts Payable P70,000
d. DR Cash in Bank P70,000; CR Accounts Receivable P70,000
To record the customer’s check returned by the bank and bank service charge for the month

14. Use the information in No. 11.

The journal entry for the Outstanding Checks is
a. DR Accounts Payable P275,000; CR Cash in Bank P275,000
b. DR Cash in Bank P275,000; CR Accounts Receivable P275,000
c. Either a or b
d. Neither a nor b
Reconciling items per BANK are NOT recorded. Hence, Outstanding checks need no journal
entry.

15. Constance, Inc. provided the following data for the purpose of reconciling the cash balance per
book with the balance per bank statement on December 31, 2021
Balance per bank statement – P2,000,000
Outstanding check – P400,000
Deposit in transit – P200,000
December NSF checks, P50,000 of which had been redeposited and cleared by December 27, 2021 –
P150,000
Erroneous credit to Constance’s account representing loan proceeds granted to another company –
P300,000
Proceeds of note collected by the bank for Constance, net of P20,000 service charge – P750,000
What is the cash in bank to be reported in the December 31, 2021 statement of financial position?
a. P1,400,000
b. P1,450,000
c. P1,500,000
d. P1,800,000

Hint: Prepare a bank reconciliation showing adjusted BANK balance

Unadjusted Bank Balance 2,000,000
Add: Deposit in Transit 200,000
Less: Outstanding checks (400,000)
Less: Bank error (300,000)
--------------
Adjusted Bank Balance 1,500,000

16. Use the data in No. 15.

What is the unadjusted book balance of Constance on December 31, 2021?
a. P850,000
b. P970,000
c. P1,250,000
d. P2,000,000

Hint: Prepare a bank reconciliation using BANK TO BOOKS method

Unadjusted Bank Balance 2,000,000
Add: Deposit in Transit 200,000
Add: NSF Checks 100,000
Add: Bank charges on note collected by bank for Constance 20,000
Less: Outstanding checks (400,000)
Less: Bank error (300,000)
Less: Proceeds of note collected by the bank for Constance (770,000)
--------------
Unadjusted Book Balance 850,000

NSF Checks – the P50,000 which had been redeposited and cleared by December 27, 2021 is
excluded simply because it was redeposited and eventually cleared during the same month

Take note that the proceeds of noted collected by the bank for Constance was stated at its gross
amount in order to capture the two (2) transactions embodied in it – (a) Collection of the note
AND (b) the corresponding bank charges

To prove Nos. 15 and 16, prepare a bank reconciliation showing adjusted balances for Books and
Bank

Bank Books
Unadjusted balances 2,000,000 850,000
Add (Deduct) Reconciling Items
Deposit in Transit 200,000
Outstanding checks (400,000)
Bank error (300,000)
Proceeds of note collected by bank 770,000
Bank charges on note collected by bank (20,000)
NSF Checks (100,000)
--------------- ---------------
Adjusted balances 1,500,000 1,500,000
Further, the necessary journal entries to record the reconciling items per BOOKS are as follows:
Cash (in Bank) 750,000
Bank Charges 20,000
Notes Receivable 770,000
To record note collected by the bank for Constance net of bank charges

Accounts Receivable 100,000

Cash (in Bank) 100,000
To record December NSF checks

17. One Company had the following information for March 31, 2021:
Balance per bank – P4,650,000
Deposit in transit – P 1,000,000
Outstanding checks – P1,250,000
Balance per book – P4,400,000
Data per bank statement for the month of April are as follows:
Deposits – P6,000,000
Disbursements – P5,000,000
All reconciling items on March cleared to the bank in April
What is the amount of bank credits that pertains to April?
a. P5,000,000
b. P5,650,000
c. P6,000,000
d. P7,000,000

Deposits for the month of April 6,000,000

Less: March deposit in transit (1,000,000)
---------------
Bank credits in April 5,000,000

If all reconciling items on March cleared to the bank in April also means that the reconciling
items on March were recorded (by the bank) in April. Hence, they do not pertain to April.

18. Use the information in No. 17

What is the amount charged by the bank against the depositor’s account pertaining to April?
a. P1,250,000
b. P3,750,000
c. P5,000,000
d. P6,250,000

Disbursements for the month of April 5,000,000

Less: March outstanding checks (1,250,000)
---------------
Bank credits in April 3,750,000

If all reconciling items on March cleared to the bank in April also means that the reconciling
items on March were recorded (by the bank) in April. Hence, they do not pertain to April.

19. Willow Corporation keeps all its cash in a checking account. An examination of the entity’s
accounting records and bank statement for the month ended June 30, 2021 revealed the following
information:
 The cash balance per book on June 30 is P8,500,000.
 A deposit of P1,000,000 that was placed in the bank’s night depository on June 30 does not
appear in the bank statement.
 The bank statement shows that on June 30 the bank collected a note for the depositor and
credited the proceeds of P950,000.
 Checks outstanding on June 30 amount to P300,000.
 Willow discovered that a check drawn in June in payment of an account payable in the amount
of P200,000 had been recorded in the books as P20,000.
 Included with the June bank statement was NSF check for P250,000 that Willow had received
from a customer on June 26.
 The bank statement shows a P20,000 service charge for June.
What is the cash in bank to be reported in the statement of financial position on June 30, 2021?
a. P8,300,000
b. P9,000,000
c. P9,180,000
d. P9,360,000

Hint: Prepare a bank reconciliation showing the adjusted BOOK balance

Unadjusted BOOK balance 8,500,000
Add: Note collected by the bank 950,000
Less: Book error (180,000)
Less: Customer’s NSF check (250,000)
Less: Service charge (20,000)
--------------
Adjusted BOOK balance 9,000,000

20. Use the information in No. 19

What is the adjusted balance per bank on June 30, 2021?
a. P8,300,000
b. P9,000,000
c. P9,180,000
d. P9,360,000
Adjusted BANK balance is always EQUAL to adjusted BOOK balance.
OR, you may choose the LONG ROUTE : Initially compute for the UNADJUSTED bank
balance, Add and Deduct the bank reconciling items, to arrive at the ADJUSTED bank balance
Unadjusted BOOK balance 8,500,000
Add: Note collected by the bank 950,000
Add: Outstanding checks 300,000
Less: Book error (180,000)
Less: Customer’s NSF check (250,000)
Less: Service charge (20,000)
Less: Deposit in transit (1,000,000)
--------------
Unadjusted BANK balance 8,300,000

Unadjusted BANK balance 8,300,000

Add: Deposit in transit 1,000,000
Less: Outstanding checks (300,000)
--------------
Adjusted BANK balance 9,000,000