PROBLEMS

Problem 7-1 (IAA)

On December 31, 2016, 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, 2017 2,000,000
Saving deposit in closed bank 100,000
Sinking find for bond payable due June 30, 2018 1,500,000
Petty cash fund 20,000

* The cash in bank included customer check of P200,000 outstanding for 18 months.

* Check of 250,000 in payment of accounts payable was dated and recoded on December 31,
2016 but mailed to creditors on January 15, 2017.

* Check of P100,000 dated January 31, 2017 in payment of accounts payable was recorded and
mailed December 31, 2016.

* The reporting period is the calendar year.

The cash receipts journal was held open until January 15, 2017 during which time an amount
of P450,000 was collected and recorded on December 31, 2016

Required:
1. Prepare adjusting entries on December 31, 2016.
2. Compute the total amount of cash and cash equivalents that should be reported on December
31, 2016.
3. Explain the presentation of the items excluded from cash and cash equivalents.

Problem 7-2 (IAA)

Argentina Company reported the following accounts on December 31, 2016:

Cash on hand 1,000,000

Petty cash fund 50,000
Security Bank current account 2,000,000
PNB current account 1,500,000
BDO current account (overdraft) (200,000)
BSP treasury bill – 120 days 3,000,000
BPI time deposit – 90 days 2,000,000
Bond sinking fund 2,500,000

* The cash on hand included a customer postdated check of P150,000 and postal money order of
P50,000.

* The petty cash fund included unreplenished petty cash vouchers for P10,000 and an employee
check for P5,000 dated January 31, 2017.

* The BPI time deposit is set aside for acquisition of land to be made in early January 2017.

* The bond sinking fund is set aside for payment of bond payable due December 31, 2017.

Required:
1. Prepare adjusting entries on December 31, 2016.
2. Compute the total amount of cash and cash equivalents.
3. Explain the presentation of the items excluded from cash and cash equivalents.
Problem 7-3 (IAA)
Armenia Company reported the following information on December 31, 2016:

Cash on hand 1,000,000

Petty cash fund 50,000
Cash in bank 4,000,000
Saving deposit 2,000,000
7,050,000
* Cash on hand included the following:
a. Customer check of 100,000 returned by bank December 26, 2016 due to insufficient fund
but subsequently redeposited and cleared by bank January 3, 2017.
b. Customer check for 150,000 dated January 15, 2017 received December 22, 2016.
c. Postal money orders received from customers, P200,000.
* The petty cash fund consisted of the following items:
Currency and coins 2,000
Employees’ IOUs 10,000
Currency in envelope marked “collections for
Christmas party” 5,000
Check drawn by Armenia payable to petty cashier 33,000
50,000

* Check written and dated December 22, 2016 and delivered to payee on January 5, 2017,
P200,000.
* Check written December 26, 2016 and dated January 31, 2017 delivered to payee on December
26, 2016, P300, 000.
Required:
1. Prepare adjusting entries on December 31, 2016.
2. Compute the total cash on December 31, 2016.
Problem 7-4 (PHILCPA Adapted)
Callous Company reported the following accounts on December 31, 2016:
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 saving account 250,000
Asia Bank time deposit, 90 days 2,000,000

* Cash on hand included the following items:

Customer check for P35,000 returned by bank December 26,2016 due to insufficient fund but
subsequently redeposited and cleared by the bank on January 10, 2017.
Customer check for P15,000 dated January 10, 2017, received December 23, 2016.
* The petty cash fund consisted of the following items:
Currency and coins 5,000
IOUs from officers 2,000
Unreplenished petty cash vouchers 12,000
* Included among the checks drawn by Callous Company against the Philippine Bank current
account and recorded in December 2016 were the following:
Check written and dated December 23, 2016 and delivered to payee on January 2, 2017,
P25,000.
Check written December 26, 2016 dated January 30, 2017, delivered to payee on December
28, 2016, P45,000.

Required:
1. Compute the total cash and cash equivalents.
2. Prepare adjusting entries on December 31, 2016
Problem 7-5 (ACP)
Zealous Company established a petty cash fund.
1. Established a petty cash fund of P10,000 on January 2.
2. Petty cash expenses – January 2-31 are:
Postage 1,500
Supplies 5,500
Transportation 1,200
Miscellaneous expense 800
3. The fund is replenished on February 1 and increased by P5,000.
Required:
Prepare journal entries to record the transaction under the fluctuating fund system and imprest
fund system.

Problem 7-6 (ACP)

Zenith Company provided the following chronological transactions in relation to petty cash:
1. The entity established a petty cash fun 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
20,000

Required:
Prepare journal entries to record the transactions under fluctuating fund system and imprest fund
system.