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CHAPTER 3 - Audit of Cash &

Cash Equivalents
Problem 1
The following items are found in the cash account of Ivie Company at December 31, 200!
The company"s controller as#s your opinion whether the items listed below should be
considered as part of cash account and come up with ad$usting entry to ad$ust the cash
account!
1! Customers" chec# dated December 2%, 200, &2%,000!
2! Company"s chec# '&30,000( dated December 2, 200 which was drawn in payment
for merchandise purchased on that date but not delivered until )anuary 3, 200*! This
chec# was deducted in the cash balance!
3! + chec# worth &1,,000 from customer who paid the account net of the 2-
discount! The company records the transaction as credit to +ccounts .eceivable for the
proceeds!
/! Cash in closed ban# '0rban 1an#(, &,%,000!
%! .edemption fund, &100,000
! 2in#ing fund, &100,000! This will be used on 3arch 1, 200* to redeem the bonds
payable!
*! 3etro 1an# Chec#ing +ccount 4o! 000/%5, &210,000!
5! .C1C Chec#ing +ccount 4o! 00023/*, &11%,000!
,! 6verdraft in &41 Chec#ing +ccount 4o! 000112%, &%0,000!
10! Company"s chec# dated )anuary 3, 200* in payment of account, &%0,000! This was
recorded in the company"s disbursement ledger at December 31, 200!
11! 6verdraft in .C1C Chec#ing +ccount 4o! 00%*,1, &1%,000!
12! &ostage stamps, &2,000!
13! ,07day Treasury 1ills 'purchase on 4ovember 1, 200(, &100,000
1/! Treasury 1ills that matures on 8ebruary 1, 200*, &%0,000!
1%! Change fund, &10,000!
1! Customers" certified chec#, &20,000!
1*! Company"s certified chec#, &%0,000! 'This was included in the cash disbursement for
December(!
Problem 2
9our audit of the December 31, 200, financial statements of 3ato Corporation reveals the
following:
1! Current account at &1Com & '3%,000(
2! Current account at &41 %,000
3! Treasury bills 'ac;uired 3 months before maturity( 200,000
/! Treasury bills 'maturity date is 12<31<0*( %00,000
%! &ayroll account 1*%,000
! 8oreign ban# account 7 restricted 'translated using the
12<31<0 e=change rate( ,00,000
*! &ostage stamps 00
5! >mployees" chec#s mar#ed ?D+I8@ 10,000
,! I60 from the vice7president %0,000
10! Credit memo from a supplier for a purchase returns 2%,000
11! Traveler"s chec# 0,000
12! 3oney order 10,000
13! Company"s chec# dated 12<30<0 but not mailed at year7end 30,000
1

1/! &etty cash fund '&/,000 in currency and e=pense receipts for
'&,000( 10,000
Questions
1! The entry to ad$ust the employees" chec#s mar#ed ?D+I8@ is:
a! +ccounts receivable 10,000
Cash 10,000
b! Cash 10,000
+ccounts receivable 10,000
c! >mployees" advances 10,000
Cash 10,000
d! Cash 10,000
>mployees" advances 10,000
2! 3+T6 C6.&6.+TI64"2 ad$usted cash and cash e;uivalents balance at December 31,
200 is:
a! & %0,000 b! & %//,000 c! & %1/,000 d! & %0,,000
Problem 3
The controller of &acatang Company is attempting to determine the amount of cash to be
reported on its December 31, 200 balance sheet! The following information is provided:
a! Commercial savings account of &1,000,000 and a commercial chec#ing account
balance of &,00,000 are held at &hil! 1an#ing Corporation!
b! 3oney mar#et fund account held at +llied 1an#, &00,000
c! Travel advance of &150,000 for e=ecutive travel for the first ;uarter of ne=t year
'employee to reimburse through salary reduction(
d! + separate fund in the amount of &1,%00,000 is restricted for the retirement of long7
term debt!
e! &etty cash fund, &%,000
f! +n I60 from David 2antos, a company officer, in the amount of &10,000!
g! + ban# overdraft of &110,000 has occurred at one of the ban#s the company uses to
deposit its cash receipts! +t the present time, the company has no other deposits at this
ban#!
h! The company has two certificates of deposit, each totaling &%00,000! These
certificates of deposit have a maturity of 120 days!
i! &acatang Company has received a chec# that is dated )anuary 12, 200* in the
amount of &12%,000!
$! Currency and coins on hand amounted to &%,300!
Questions
1! &+C+T+4A C63&+49"2 ad$usted cash and cash e;uivalents balance at December 31,
200 is:
a! & 1,,10,300 b! & 2,/00,300 c! & 2,%10,300 d! & 3,%10,300
2! The travel advance of &150,000 for e=ecutive travel should be classified as:
a! +ccounts receivable c! &repaid e=penses
b! Travel e=penses d! +dvances to employees
Problem 4
2

&resent $ournal entries to record the following transactions in the boo#s of 3arites
Corporation, which uses a calendar year as accounting period! +ssume that the company is
using the imprest method in accounting for petty cash fund:
a! + petty cash fund was set up on 4ovember 1, 200 in the amount of &2,/00!
b! 6n 4ovember 2,, 200, a chec# was issued to replenish the fund, the composition of
which was as follows:
Currency B bills and coins 1
Couchers showing e=penditures for:
6ffice supplies 2*0
Charges from purchased of supplies 12/
.epairs and maintenance 3%0
Dages paid to casual employees ,%0
Charges from purchased of goods to be sold /00
c! 6n December 15, 200, the fund was replenished and correspondingly increased to
&3,000E its composition included the following:
Currency B bills and coins 1%5
Couchers showing e=penditures for:
2tore supplies 30/
+ccounts payable ,1/
Charges from purchased of goods to be sold 2/2
3iscellaneous e=penses *52
d! +n e=amination on December 31, 200, disclosed the following composition of the fund,
although it was not replenished on this date:
Currency B bills and coins ,%5
Chec# of office manager, dated )anuary %, 200* 1,000
Couchers showing e=penditures for:
6ffice supplies 12
3iscellaneous e=penses ,0
+ccounts payable 500
e! 6n )anuary %, 200*, the chec# of office manager was cashed and the proceeds were
added to the petty cash fund!
f! 6n )anuary , 200*, replenished disbursement from December 15, 200 to )anuary %,
200*!
Questions
1! The entry to record the 4ovember 2, replenishment of petty cash fund is:
a! 6perating e=penses 1,,/
8reight7in /00
Cash short<over 1/0
Cash 2,23/
b! 6perating e=penses 2,23/
&etty cash fund 2,23/
c! 6perating e=penses 1,,/
8reight7in /00
Cash short<'over( 1/0
&etty cash fund 2,23/
d! 4o entry since the company is using an impress fund system!
3

2! The ad$usted &etty Cash 8und balance of 3+.IT>2 C6.&6.+TI64 at December 31,
200 is:
a! & 3,000 b! & 1,,%5 c! & ,5/ d! & ,%5
3! The entry to record the December 31, 200 ad$ustment of petty cash fund is:
a! 6perating e=penses 21
+ccounts payable 500
Cash short<over 2
&etty cash fund 1,0/2
b! 6perating e=penses 21
+ccounts payable 500
Cash short<over 2
Cash 1,0/2
c! 6perating e=penses 21
+ccounts payable 500
+dvances B employees 1,000
Cash short<'over( 2
&etty cash fund 2,0/2
d! 4o entry since there is no replenishment yet!
/! The entry to record the )anuary , 200/ replenishment of petty cash fund is:
a! 6perating e=penses 21
+ccounts payable 500
Cash short<over 2
&etty cash fund 1,0/2
b! 6perating e=penses 21
+ccounts payable 500
Cash short<over 2
Cash 1,0/2
c! 6perating e=penses 21
+ccounts payable 500
+dvances B employees 1,000
Cash short<'over( 2
Cash 2,0/2
d! 4o entry since the account has been ad$usted on December 31!
Problem 5
9our audit of the petty cash '&10,000( of )uliet Company as of December 31, 200 revealed
the following: 'cash count date is )anuary 3, 200* at %:00 pm(
1ills: 10 7 &%00 bill 1% 7 &100 bill 15 7 &%0 1% 7 &20 % 7 &10
Coins: &150 in &% piecesE &/2 in &1!00 piecesE &23 in &0!2% pieces!
I60"s submitted were:
Dec! 15 4ap .! 7 & *%0
Dec! 25 .uel .! 12%
Dec! 30 2onny 2! %00
Cashed chec#s:
Dec! 25, 200 chec# drawn by the manager & 1,12%
Dec! 25, 200 chec# drawn by an employee %00
Dec! 30, 200 chec# drawn by a customer 3%0
4

)an 1, 200* chec# drawn by an employee 1,2%0
The cashier informed you that owing to the lac# of cash it was necessary for him to open
certain payroll envelopes unclaimed by employees and use the cash found herein! They
were as follows:
Dec! 1%, 200 7 >d +! & 1,2%0
Dec! 30, 200 7 +ndoy 1,*%0
Dec! 30, 200 7 3ac#y %0
Dec! 30, 200 7 &aF 1,000
The cashier also informed you that all cash sales receipts were passed through his fund
and that cash sales tic#ets 4os! 20%, to 201 under dates of Dec! 30, )an! 3 and )an! /
for &3%0, %00 and &%/%, respectively, had not yet been turned over to the general
cashier!
The petty cash vouchers found in the petty cash bo= were as follows:
Dec! 30, 200Transportation &%1%
Dec! 30, 200To#en gifts to visitors %0
Dec! 30, 2008reight for office supplies purchase 21%
)an! 1, 200* 8reight for mdse! purchased 12%
)an! 2, 200* 8reight for mdse! sold %*%
Questions
1! )0GI>T C63&+49"2 cash shortage at December 31, 200 is:
a! & 2,0*2!*% b! & 1,3*0!00 c! & 1,02*!*% d! & 32*!*%
2! The ad$usted petty cash balance of )0GI>T C63&+49 at December 31, 200 is:
a! & 10,000 b! & ,,2% c! & %,,*% d! & /,2%
3! The entry to ad$ust the unclaimed payroll at December 31, 200 is:
a! &etty Cash 8und c! Cash
2alaries e=pense +ccrued salaries
b! 2alaries e=pense d! +ccrued salaries
&etty cash fund Cash
/! The cashed chec# dated )anuary 1, 200*
a! 2hould be ad$usted since it was dated )anuary 1, 200*, hence a postdated chec#!
b! 2hould be ad$usted since it was received December 31, 200 but the chec# is dated
)anuary 1, 200*, hence a postdated chec#!
c! 2hould not be ad$usted since the chec# is dated )anuary 1, 200*!
d! 2hould not be ad$usted since the chec# was received December 31, 200*!
%! The Cash account 'e=cluding &C8( of )0GI>T C63&+49 is understated at December 31,
200 by:
a! & /,%0 b! & /,,00 c! & ,0/% d! & ,3*0

5

Problem 6
9ou are ma#ing an audit of the Darwin Corporation for the past calendar year! The balance
of the &etty Cash account at December 31, 200 was &1,300! 9our count of the imprest
cash count made at 5:30 am on )anuary 3, 200*, in the presence of the petty cash
custodian, revealed:
Currency and coins %*1!35
Chec#s:
Date 3a#er 1an#
12<25<0 3ac#y, vice7president &41 30!00
12<2,<0 +ndy, employee D1& 0!00
12<31<0 1obot, customer .C1C 1%3!50
01<02<0* 4eil, customer &41 121!3
01<10<0* )eff, employee &41 0!00
'chec# received Dec! 2,(
'These chec#s were all considered good when deposited after dates shown on the
chec#s! The first four chec#s were actually deposited )an! 3E the last chec# was
deposited )an! 11E all five chec#s proved to be good!(
Couchers:
Dec! 11 H21 .ichard, shipping cler# B temporary advance for the use of the
receiving department! 9our count of 3r! .ichard"s fund revealed:
currency B &25!50E merchandise freight bills, &31!20! & 0!00
Dec! 25 H 301 &ostage 12!00
Dec! 2, H 302 8reight bill on merchandise purchases /*!30
Dec! 31 H 30% 8reight bill on office supplies 55!,3
)an! 2 H %00 8reight bill on merchandise purchases 2,!3
I60 Dec! 21 3abel, employee 3!00
2ales Invoices 'for cash sales, collections handled by the petty cashier(:
Invoice H 31% Dec! 30 & 120!00
325 Dec! 31 1%3!50
33/ )an! 2 121!3
'+s a general rule, the petty cashier endeavored to turn over the proceeds of
cash sales to the general cashier on the 10
th
, 20
th
and last days of each month!
&roceeds on these sales were recorded and deposited by the general cashier!(
&ostage 2tamps:
Three one7peso stamps! The petty cashier handled postage stamps! These
stamps represent the unused stamps purchased on Coucher H 301!
Questions
1! The petty cash fund shortage at December 31, 200 is:
a! & 21!3, b! & 123!53 c! & ,5!03 d! & ,%!03
6

2! The ad$usted petty cash fund balance of D+.DI4 C6.&6.+TI64 at December 31, 200
is:
a! & ,00!*/ b! & ,0!*/ c! & 1,1*/!%/d! & 1,23/!%/
3! D+.DI4 C6.&6.+TI64"2 operating e=penses found in the petty cash fund at December
31, 200 is:
a! & 205!23 b! & 20%!*% c! & 1*/!03 d! & ,*!,3
/! The Cash account 'e=cluding &C8( of D+.DI4 C6.&6.+TI64 is understated at
December 31, 200 by:
a! & 3,%!1 b! & 2*3!50 c! & 1%3!50 d! & 120!00
Problem 7
3ary )ane is the cashier of +dlawan Corporation! +2 representative of the Iarate and
+ssociates, C&+s, you were assigned to verify her cash on hand in the morning of )anuary
3, 200*! 9ou began to count at ,:00 +3 in the presence of 3ary )ane! In the course of
your counting, you found currencies in paper bills and coins together with chec#s, vouchers,
and other items, which are mentioned below:
1ills: '2( &%00E '5( &100E '12( &%0E '%( &20
Coins: & %!00 11 loose
1!00 2/ loose
0!2% % rolls and 32 loose '%0 pieces to a roll(
0!10 10 rolls and 1% loose '%0 pieces to a roll(
0!0% 1/ rolls and 20 loose '/0 pieces to a roll(
Chec#s:
Date 3a#er &ayee +mount
12<22<0 Civian, +sst! 3gr +dlawan Corp! & ,000
12<2<0 3ary )ane, cashier +dlawan Corp! /,000
I60s:
Date 3a#er +mount
12<20<0 9ap, )anitor & %00
12<22<0 8eli=, cler# *%0
12<2/<0 +blay, boo##eeper %00
&>TT9 C+2J C60CJ>.2 86. .>&G>4I2J3>4T
Date &ayee +ccounts Charged +mount
12<1<0 Dagan, messenger +dvances to employees &1,000!00
12<1*<0 3aren and Co! 2upplies %/%!00
12<15<0 >eman Giner 8reight in ,52!%0
12<15<0 &osts 6ffice 2upplies 300!00
12<20<0 +le$andre, carpenter .epairs 2,,%0!00
12<21<0 Ciolan 3iscellaneous e=pense %%/!00
9our investigation also disclosed the following:
1! The balance of petty cash fund per boo#s is &20,000!00!
7

2! Cash sale of )anuary 2, 200* amounted to &5,%0 per sales records, while cash
receipts boo# and ban# deposit slip showed that only &*,%0 was deposited in the
ban# on )anuary 3, 200*
3! The following employees" pay envelopes had been opened and the money removed!
>ach envelope was mar#ed ?0nclaimed@ 7 >rnesto, &332!%0E 2ecinando, &//*!%0!
Questions
1! The petty cash shortage of +DG+D+4 C6.&6.+TI64 at December 31, 200 is:
a! & 2,*/5!%0 b! & 1,*/5!%0 c! & ,5!%0 d! & 155!%0
2! The ad$usted petty cash balance of +DG+D+4 C6.&6.+TI64 at December 31, 200 is:
a! & 10,,%0 b! & 11,,%0 c! & 11,*30 d! & 12,*30
3! The undeposited sales<collection of +DG+D+4 C6.&6.+TI64 at December 31, 200 is:
a! & 5,%0 b! & *,%0 c! & 1,000 d! & 0
Problem 8
The following data are gathered from the cash boo#s and ban# statement received from
Davao 1an# by Arace Company:
The cash in ban# ledger account shows a debit balance of &2,0,/35!%0 as of 3ay 31!
The ban# statement shows a credit balance of &315,%0 as of 3ay 31!
+n e=amination of the chec#s encashed by the ban# shows that the following chec#s are not
presented for payment:
4o! 15*, &3,05E 4o! 15,, &1%,/,,E 4o! 1,1, &/,/00E
4o! 1,2, &1,%/%!%0, 4o! 1,3, &23,001
+ certified chec# for &2/,*%0 payable to creditor, was encashed by the ban# during 3ay!
The ban# statement shows a deduction of &10,502 for chec# 4o! 15/! The chec# was
actually made out at &10,205!
+ chec# deposited on 3ay 2* for &3/,100 was returned by the ban# on 3ay 25 mar#ed
Refer to Maker!
+ non7interest bearing note for &//,000 was collected by the ban# for the account Arace
Company! Collection fee deducted by the ban# is &330!
+ deposit for &20,,00 was recorded in the boo#s twice!
Chec# 4o! 1*, for &2,/00 was erroneously recorded in the boo#s as &/,200!
Interest on an outstanding loan payable, deducted by the ban# on 3ay 31, &1,320!
Collections on 3ay 31 to be deposited on )une 1, &2,/55!
Questions
1! A.+C> C63&+49"2 ad$usted cash balance at 3ay 31, 200 is:
a! & 3/1,,3,!%0 b! & 253,255!%0 c! & 2,*,%55!%0 d! & 2*3,15!%0
8

2! The recorded cash of A.+C> C63&+49 at 3ay 31 is:
a! 0nderstated by & 1*,2*0 c! 6verstated by & *,1%0
b! 0nderstated by & *,1%0 d! 6verstated by & 1*,2*0
Problem 9
The following data pertaining to the cash transactions and ban# account of +biso Company
for 3ay 200 are available to you:
Cash balance, per accounting records, 3ay 31, 200 & %1,%52
Cash balance, per ban# statement, 3ay 31, 200 ,%,5*/
1an# service charge for 3ay 32*
Debit memo for the cost of printed chec#s delivered by the ban#E
the charge has not been recorded in the accounting records 3*%
6utstanding chec#s, 3ay 31, 200 20,15/
Deposit of 3ay 30 not recorded by ban# until )une 1 1/,10
&roceeds of ban# loan on 3ay 30, not recorded in the accounting
records, net of interest of &,00 1*,100
&roceeds from a customer"s promissory noteE principal amount &2/,000,
collected by the ban#, ta#en up in the boo#s with interest 2/,300
Chec# 4o! 105 issued to a supplier entered in the accounting records
as &,300 but deducted in the ban# statement at an erroneous amount
of 3,00
2tolen chec# lac#ing an authoriFed signature, deducted from +biso"s
account by the ban# in error 2,/00
Customer"s chec#s returned by the ban# mar#ed 428, indicating that the
customer"s balance was not ade;uate to cover the chec#sE no entry has
been made in the accounting records to record the returned chec# 2,250
Questions
1! The ad$usted cash in ban# balance of +1I26 C63&+49 at 3ay 31, 200 is:
a! & 5*,%*0 b! & ,0,000 c! & ,0,%*0 d! & ,0,,00
2! The cash in ban# balance of +1I26 C63&+49 at 3ay 31, 200 is:
a! 0nderstated by &3,,315 c! 0nderstated by &35,/15
b! 0nderstated by &35,,55 d! 0nderstated by &3%,,55
Problem 10
In connection with an audit, you are given the following ban# reconciliation!
1+4K .>C64CIGI+TI64
December 31, 200
1alance per ledger, 12<31<03 & 3/,3/,!*2
+dd: Collections received on the last day of
December and charged to ?Cash in 1an#@
on boo#s but not deposited %,32/!%0
Debit memo for customer"s chec#s returned
unpaid 'chec# is on hand but no entry has been
made on the boo#s( /,000!00
9

Debit memo for ban# service charge for December 1,000!00
& /,*/!22
Deduct:
6utstanding chec#s & 15,2%
'see details below(
Credit memo for proceeds of a note receivable
which had been left at the ban# for collection
but which has not been recorded as collected 5,000
Chec# for an account payable entered on boo#s
as &12,2% but drawn and paid by ban# as
1,22% 3,00 32,22%!00
Computed balance & 1/,//,!22
0nlocated difference 3,01!00
1alance per ban# 'chec# to confirmation( & %1,0%0!22
GI2T 68 60T2T+4DI4A CJ>CK2
December 31, 200
Chec# 4o! +mount
1/3// & %,520
1/3%5 1,2,%
1/3* 3,%/3
1/3,, 2,001
1//01 /,5,2
1//0* %,0*/
& 15,2%
Questions:
1! The ad$usted cash balance at December 31, 200 is:
a! & 33,*/,!*2 b! & 3/,,/,!*2 c! & 3*,*/,!*2 d!&/0,,/,!*2
2! + chec# for an account payable entered on boo#s as &12,2% but drawn and paid by
ban# as 1,22%
a! 2hould not be included in the reconciliation since the ban# already gave the money
to the payee!
b! 2hould not be included in the reconciliation since ban#"s record is always followed!
c! 2hould be included as deduction in the boo# reconciliation since this is considered as
boo# error, thus a reconciling item!
d! 2hould be included as addition in the boo# reconciliation since this is considered as
boo# error, thus a reconciling item!
3! The outstanding chec#s at December 31, 200 is:
a! & 1%,02% b! & 15,2% c! & 1,,02% d! & 22,2%

/! The cash balance of the company per record at December 31, 200 is:
a! 6verstated by &00 c! 0nderstated by & 3,/00
b! 6verstated by &1,200 d! 6verstated by & ,00
Problem 11
The cash boo#s of Arace Corporation show the following entries during the month of )une
200!
Cash .eceipts )ournal Chec# .egister
Date +mount Date Chec# 4o! +mount
10

)une 11alance *2,000 )une2 501 1%,2%
/Deposit 113,000 3 502 *,%2
/Deposit 511,000 % 503 22,,20%
*Deposit 1%2,200 * 50/ 1,,%%%
10 Deposit 11,300 5 50% */,,3
10 Deposit 12,*00 10 50 2*/,00
11 Deposit *3,000 11 50* 3/,5/2
1* Deposit 110,0*% 13 505 2%0,000
15 Deposit 3,*2% 1/ 50, 1,0*0,000
15 Deposit %,000 1* 510 1*,300
1, Deposit 2,/3 1, 511 3,130
20 Deposit 133,03* 21 512 52,*30
2* Deposit 2*3,25 23 513 12*,200
30 Deposit ,2,/00 2% 51/ ,3,050
30 51% *20
The ban# statement for the month of )une 200 shows:
Chec#s 4o! Deposits Date +mount
1alance 3ay 31 *,5,000
,2/,000 )une % 1,*22,000
500 3,000 1,5,000
50/ 1,,%%% * 1,%1,//%
50% */,,3 21*,200 5 1,%5,*0,
501 1,%2%
503 22,,20% , 1,/12,,*,
50* 3/,5/2 ,*,000 12 1,/*%,13*
,2/ *%,000
200 /0,/00 C3 13 1,//0,33*
'collection charge(
50, 1,0*0,000 1/ 3*0,33*
505 2%0,000 1% 120,33*
1,5,000 C3 1 315,33*
510 1*,300 113,500 1, 2/,53*
512 52,*30 1%,,%00 21 3/1,0*
50 2*/,00 2/ *,00*
2*3,25 25 3/0,3%
511 3,130
D3 300 30 33*,20%
0pon investigation, the following are discovered:
C3 7 .epresents a 07day, - note for &/0,000 collected by the ban# for the account of
Arace Company!
C3 7 .epresents a 07day, - own note for &200,000 discounted by Arace Corporation with
the ban# and not yet recorded in the boo#s!
D3 7 .epresents ban# service charge for the month!
Chec# 4o! ,2/ represents a chec# signed by Araciele Company!
Collection charge B represents collection fee charged by the ban#!
Questions
1! The unad$usted cash ledger balance of A.+C> C6.&6.+TI64 at )une 30, 200 is:
11

a! & 11/,0*, b! & 113,1*, c! & 3,,0*, d! & 35,1*,
2! The unad$usted cash ban# balance of A.+C> C6.&6.+TI64 at )une 30, 200 is:
a! & 21,30% b! & 33,30% c! & 33*,20%s d! & /12,20%
3! The deposit in transit of A.+C> C6.&6.+TI64 at )une 30, 200 is:
a! & ,2,/00 b! & 10/,%00 c! & 152,000 d! & 0
/! The outstanding chec#s of A.+C> C6.&6.+TI64 at )une 30, 200 is:
a! & 302,50 b! & 225,%2 c! & 22*,50 d! & 1%3,%2
%! The ad$usted cash balance of A.+C> C6.&6.+TI64 at )une 30, 200 is:
a! & 2**,5*, b! & 2*,0*, c! & 21,30% d! & 201,0*,
! The error made in chec# number 501 is #nown as:
a! 8undamental error c! Transplacement error
b! 1alance sheet error d! Transposition error
*! In the discounting of &200,000 note, the company should credit
a! 4otes receivable discounting c! 4otes payable
b! 4otes .eceivable d! 4otes discounting
Problem 12
The following information pertains to the cash of )enny Company:
4ov 31 Dec! 31
1alance shown on ban# statement & 2*,350 & 2,,0
1alance shown in general ledger before
reconciling the ban# account 2%,*50 2%,000
6utstanding chec#s 5,30 10,1%0
Deposits in transit ,5%0 12,/%0
8or Dec!
Deposits shown in ban# statement & %%,550
Charges shown on ban# statement %,300
Cash receipts shown in company"s boo#s %3,,50
Cash payments shown in company"s boo#s %/,*0
The ban# service charge was &150 in 4ovember 'recorded by the company during
December( and &2/0 in December 'not yet recorded by the company(!
Included with the December ban# statement was a chec# for &%,000 that had been received
on December 2% from a customer on account! The returned chec# mar#ed ?428@ by the
ban#, has not yet been recorded on the company"s boo#s!
During December the ban# collected &*,%00 of bond interest for the company and credited
the proceeds to the company"s account! The company earned the interest during the
current accounting period but has not yet recorded it!
During December the company issued a chec# for &,,0 for e;uipment! The chec#, which
cleared the ban# during December, was incorrectly recorded by the company for &5,,0!
Questions
12

1! The ad$usted cash receipts of )>449 C63&+49 at December 31 is:
a! & 1,/50 b! & %3,,50 c! & %0,250 d! & /,/50
2! The ad$usted cash disbursements of )>449 C63&+49 at December 31 is:
a! & 3,,50 b! & 1,,50 c! & %*,520 d! & %/,*50
3! In a proof of cash, the 428 chec#:
a! 2hould be added in the December 31 column since this was
returned bac# by the ban#!
b! 2hould be deducted in the December 31 column since this
was returned bac# by the ban#!
a! 2hould be deducted in the December 31 column since this was returned bac# and not
paid by the ban#, thus not considered as receipts!
b! 2hould be added in the December 31 column since this was returned bac# and not
paid by the ban#, thus not considered as receipts!
/! The ad$usted December 31 cash balance of )>449 C63&+49 is:
a! & 2,,*0 b! & 2,,20 c! & 2*,20 d! & 2%,00
%! The ad$usted 4ovember 31 cash balance of )>449 C63&+49 is:
a! & 2,,10 b! & 2*,20 c! & 2,10 d! & 2%,00
! The chec# issued but was incorrectly recorded as &5,,0 should be ad$usted by:
a! +ccounts payable 2,000 c! Cash 2,000
Cash 2,000 +ccounts payable 2,000
b! >;uipment 2,000 d! Cash 2,000
Cash 2,000 >;uipment 2,000
Problem 13
>G>8+4T>"s chec# register shows the following entries for the month of December
Date Chec#s Deposits 1alance
200
Dec 1 1eginning 1alance & 53,,00
% Deposit & %,000
* Chec# H 1/3// 32,%00 120,500
11 Chec# H 1/3/% 1/,000 10,500
2 Deposit /,,000
2, Chec# H1/3/ 5,00 1/*,200
>G>8+4T>"s ban# reconciliation for 4ovember revealed one outstanding chec# '4o!1/3/3(
for &12,000 'written on 4ovember 25(, and one deposit in transit for &%,%%0 'made
4ovember 2,(!
The following is from >lefante"s ban# statement for December 200:
Date Chec#s Deposits 1alance
200
Dec! 1 1eginning balance & ,%,,*0
1 Deposit & %,%%0 101,300
/ Chec# 4o! 1/3// & 32,%00 5,500
% Deposit %,000 12/,500
1/ Chec# 4o! 1/3/% 1/,000 110,500
13

1% Goan &roceeds %00,000 10,500
20 428 chec# *,00 03,200
2, 2ervice charge 1,000 02,200
31 Interest 3,00 0%,500
4ote: +ll errors noted in this problem were committed by the >lefante, not the ban#! It is
also noted that the company failed to record one deposit in the boo#!

Questions
1! The unad$usted cash receipts per ledger of >G>8+4T> C63&+49 for the month of
December is:
a! & 11,,20 b! & 11/,000 c! & 110,20 d! & 10%,000
2! The unad$usted cash receipts per ban# of >G>8+4T> C63&+49 for the month of
December is:
a! & %*/,1%0 b! & %5,00 c! & %%,1%0 d! & %%,,00
3! The ad$usted December 1 cash ledger balance of
>G>8+4T> C63&+49 is:
a! & ,%,,*0 b! & 5,,%20 c! & 53,,00 d! & *5,250
/! The ad$usted December31 cash ban# balance of >G>8+4T> C63&+49 is:
a! & 3/,/20 b! & 25,500 c! & 23,150 d! & %**,20
%! The overstatement of deposit should be:
a! Deducted in the ban# December 31 column!
b! +dded in the ban# December 31 column!
c! Deducted in the boo# December 31 column!
d! +dded in the boo# December 31 column!
Problem 14
9ou are as#ed to audit the cash of Getty Corporation! Getty Corporation carries its chec#ing
account with 3indanao 1an#! The following data are available:
a! Getty Company Cash account for December:
1alance, 4ovember 30 & 20,,00
Deposits during December ,3,/00
Chec#s written during December ' 53,000(
1alance, December 31 & 32,300
b! 1an# statement for December:
1alance, 4ovember 30 & 20,000
Deposits during December ,2,300
Chec#s cleared during December ' 52,1%0(
8unds transferred from foreign operations revenue
'in peso amount not yet recorded by Getty Corp!( 2%,000
428 chec#, Customer 4elly ' 150(
1an# 2ervice charge ' *0(
1alance, December 31 & %/,,00
14

c! +dditional data:
1! 1alance in &etty Cash account, &200 'not included in Getty Cash account(!
2! The deposits of &,3,/00 by Getty Company are overstated by &100E the ban#
recorded the correct amount!
3! The chec#s cleared by the ban# of &52,1%0 erroneously included a &300 chec#
drawn by Gaity CorporationE the ban# has not yet corrected this error!
/! 4ovember 30: deposits outstanding, &2,000E and chec#s outstanding, &1,%00!
Questions
1! The deposit in transit of G>TT9 C63&+49 at December 31 is:
a! & 3,100 b! & 3,000 c! & 2,,00 d! & 2,000
2! The outstanding chec#s of G>TT9 C63&+49 at December 31 is:
a! & 1,%0 b! & 1,%00 c! & 2,0%0 d! & 2,3%0
3! The ad$usted cash balance of G>TT9 C63&+49 at December 31 is:
a! & %,0%0 b! & %%,,%0 c! & %%,%0 d! & %%,%%0
/! The cash shortage of G>TT9 C63&+49 at December 31 is:
a! & 0 b! & /00 c! & %00 d! & 00
Problem 15
In 9our audit of the accounts of Cleenenth Company, you find the following facts on
December 31, 200!
1alance of cash in ban# account &1,3%0,000
1alance of ban# statement 1,200,000
6utstanding chec#s, December 31:
4o! 000%* 10,000
%51 %%,000
%52 /0,000
02 2%,000
1% %,000
1 *0,000 2%,000
.eceipts of December 31, deposited the following month 2*%,000
The ban# statement shows the following charges:
2ervice charge for December %,000
428 chec# received from a customer 5%,000
+dditional information:
The stub for chec# number 000%51 and the invoice relating thereto show that it was for
&3%,000 but was incorrectly recorded as &%%,000! This was in payment of the accounts
payable!
&ayment has been stopped on chec# number 000%* which was drawn in payment of
accounts payable! The payee cannot be located!
Included in the ban# statement was a canceled chec# the company had failed to record!
The chec# was in payment of accounts payable!
Questions
15

1! The unrecorded disbursement of CG>>4>TJ C63&+49 at December 31, 200 is:
a! & 50,000 b! & %0,000 c! & /0,000 d! & 10,000
2! Cancellation of chec# number %* should be recorded as:
a! Debit to +ccounts &ayable c! Credit to +ccounts &ayable
b! Credit to Cash d! 4o ad$ustment<entry
3! Cash shortage of CG>>4>TJ C63&+49 at December 31, 200 is:
a! & 0 b! & %0,000 c! & /0,000 d! & 10,000
/! The ad$usted cash balance of CG>>4>TJ C63&+49 at December 31, 200 is:
a! & 1,2,0,000 b! & 1,2/0,000 c! & 1,210,000 d! & 1,150,000
Problem 16
Dema7ala Company is very profitable small business! It has not, however, given much
consideration to internal control! 8or e=ample, in an attempt to #eep clerical and office
e=penses to a minimum, the company has combined the $obs of cashier and boo##eeper!
+s a result, 3aria handles all cash receipts, #eeps the accounting records, and prepares the
monthly ban# reconciliation!
The balance per ban# statement on 6ctober 31, 200, was &*3,%20! 6utstanding chec#s
were: 4o! 2 for &%0*, 4o! 153 for &00, 4o! 25/ for &1,103, 4o! 52 for &*2!5/, 4o! 53
for &,0*!20, 4o! 5/ for &1!12! Included with the statement was a credit memorandum
of &500 indicating the collection of a note receivable for Dema7ala Company by the ban# on
6ctober 2%! Dema7ala Company has not recorded this memorandum!
The company"s ledger showed one cash account with a balance of &5*,%*0!55! The balance
included undeposited cash on hand! 1ecause of the lac# of internal control, 3aria too# for
personal use all the undeposited receipts in e=cess of &1%,152!0/! 2he then prepared the
following ban# reconciliation in an effort to conceal her theft of cash!
Cash balance per boo#s, 6ctober 31 & 5*,%*0!55
+dd: 6utstanding chec#s
4o! 52 & *2!5/
4o! 53 ,0*!20
4o! 5/ 1!12 1,,31!1
& 5,,%02!0/
Gess: 0ndeposited receipts 1%,152!0/
0nad$usted balance per ban#, 6ctober 31 & */,320!00
Gess: 1an# credit memorandum 500!00
Cash balance per ban# statement, 6ctober 31 & *3,%20!00
Questions
1! D>3+7+G+ C63&+49"2 cash shortage at 6ctober 31 is:
a! & /,210 b! & 3,/10 c! & 1,00 d! & 500
2! D>3+7+G+ C63&+49"2 ad$usted cash balance at 6ctober 31 is:
a! & 55,3*0!55 b! & 5*,%*0!55 c! & 5,**0!55 d! & 5/,10!55
16

Problem 17
6n December 1% of the current year, Darwin, who owns Jerald Corporation, as#s you to
investigate the cash7handling activities in his firm! Je thin#s that an employee might be
stealing funds! ?I have no proof@ he say, ?but I"m fairly certain that the 4ovember 30
undeposited receipts amounted to more than &,000 although the 4ovember 30 ban#
reconciliation prepared by the cashier shows only &3,1,!20! +lso, the 4ovember ban#
reconciliation doesn"t show several chec#s that have been outstanding for a long time! The
cashier told me that these chec#s needn"t appear on the reconciliation because he has
notified the ban# to stop payment on them and he had made the necessary payment on the
boo#s!
+t your re;uest, Darwin showed you the following 4ovember 30 ban# reconciliation
prepared by the cashier!
1al! &er ban# statement & 2,30!12 1al! &er 1oo#s & %,35%!22
Deposit in transit 3,1,!20 1an# 2ervice charge ' 30!00(
6utstanding chec#s 0nrecorded ban# C3 ' 00!00(
H 23%1 %%0!10
23%3 25,!1
23%/ /5/!5/ ' 1,22/!10 ( LLLLLLLL
Adjusted Balance P4,755.22 Adjusted Balance P 4,755.22
9ou discover that the &00 unrecorded ban# credit represents a note collected by the ban#
on Darwin"s behalf! It appears in the deposits column of the 4ovember ban# statement!
9our investigation also reveals that the 6ctober 31 ban# reconciliation showed three chec#s
that had been outstanding longer than 10 months: 4o! 1/32 for &300, 4o! 1/%5 for
&233!/%, and 4o! 1%12 for &12!%%!
9ou also discover that these items were never added bac# into the cash account in the
boo#s! In confirming that the chec#s shown on the cashier"s 4ovember 30 ban#
reconciliation were outstanding on that date, you discover that chec# 4o! 23%3 was actually
a payment of &52,!1 and had been recorded on the boo#s for the amount!
To confirm the amount of undeposited receipts at 4ovember 30, you re;uest a ban#
statement for December 1712 'called a cut7off ban# statement(! This indeed shows a
December 1 deposit of &3,1,!20!
Questions
1! The amount of fund stolen by the cashier is:
a! & 3,10 b! & 2,%00 c! & 1,5/0 d! & %50
2! The total outstanding chec#s of J>.+GD C6.&6.+TI64 at 4ovember 30 is:
a! & 2,%2/!10 b! & 1,55/!10 c! & 1,5/!10 d! &1,22/!10
3! The ad$usted cash balance of J>.+GD C6.&6.+TI64 at 4ovember 30 is:
a! & %,,%%!22 b! & %,3%%!22 c! & /,11%!22 d! & 3,/%%!22
17

Problem 18
In connection with the general e=amination of the accounts of 4elson Trading Company at
December 31, 200, you obtained the information and data as shown below relative to your
verification of Cash!
The record #ept by the accountant showed the following:
'a( 1alances at the end of the month:
December 1, 200 December 31, 200
&er 1an# 2tatement & %/,000 &101,100
&er 1oo#s %0,/00 *0,21%
0ndeposited collections 3,300 *,200
6utstanding chec#s ,,00 M 12,000 M
M Composed of the following H%1% %10 H%%2 & 1,500
%1* 2,2%0 %%3 %,*00
%15 2,/00 %%/ 2,%%0
%1, 1,*/0 %%% 1,,%0
'b( Totals for the month of December, 200:
Cash 1oo#:
.eceipts & /2%,%%0
Disbursement /0%,*3%
1an# 2tatement
.eceipts & ///,22%
Disbursement 3,*,12%
+fter application of the necessary auditing procedures, the following were noted:
a! 8ooting of disbursement should be & /0/,23%, instead of & /0%,*3%!
b! 1an# service charge of &1% for December has not been boo#ed!
c! Cancelled chec#s 'returned together with the December ban# statement( include the
following which were charged in the statement:
1! Chec# H%30 dated December 1%, 200 for &2,/00 7 this was issued as
replacement of chec# H %15 which was returned by the payee because of
certain erasures! 4o entry has been made to record the cancellation of chec#
H%15!
2! Chec# H%1* for &22% 7 this was erroneously recorded on the boo#s as
&2,2%0!
3! Chec# of 4eil Trading for &,00 7 this was charged by ban# in error!
d! &roceeds from sale of stoc#s amounting to &23,2%0 'cost is &15,000( transmitted
directly by the bro#er to the ban# and credited on December 31, 200! 4o entry has
been made on the boo#s to record this sale of stoc# investment!
e! The company failed to record disbursement for payment of accounts payable at
December 31, 200 for &1,%00!
Questions
1! The ad$usted cash receipts per ledger of 4>G264 T.+DI4A C63&+49 at December 31,
200 is:
18

a! & //5,500 b! & //5,12% c! & ///,22% d! & /2%,%%0
2! The ad$usted cash disbursement per ban# of 4>G264 T.+DI4A C63&+49 at December
31, 200 is:
a! & /01,32% b! & /02,000 c! & /0%,*3% d! & /0,12%
3! The ad$usted cash ledger balance of 4>G264 T.+DI4A C63&+49 at December 31,
200 is:
a! & ,1,3%0 b! & ,%,/00 c! & ,*,200 d! & ,*,%00
/! The ad$usted cash in ban# balance of 4>G264 T.+DI4A C63&+49 at December 31,
200 is:
a! & ,1,3%0 b! & ,%,/00 c! & ,*,200 d! & ,*,%00
%! The cash shortage of 4>G264 T.+DI4A C63&+49 at December 31, 200 is:
a! & *% b! & *% c! & %*% d! & 3,0
19