CORDILLERA CAREER DEVELOPMENT COLLEGE

College of Accountancy
Buyagan, Poblacion, La Trinidad, Benguet

Accounting 9A-Auditing

EXERCISE 1
The accountant of SANCHEZ COMPANY is in the process of preparing the company’s financial
statements for the year ended December 31; 2018.He is trying to determine the correct balance of cash
and cash equivalents to be reported as a correct asset of the statement of the financial position. The
following items are being considered:
 Balance in the company’s accounts at the Metropolitan Bank:
 Current account (based on bank statement) P18, 000
 Saving account P132, 600
 Undeposited customer checks of P22, 200 (including a customer dated January 2, 2019 for P3,
000).
 Currency and coins on hand of P3,480
 Saving account at the Northern Philippines Bank with a balance of P2, 400, 000. This account is
being accumulate cash for future plant expansion (in 2019)
 Petty cash of P4,000 (currency of P1, 200 and unreplenished vouchers for P2, 800)
 P120, 000 in a current account at the Northern Philippines Bank. This represent a 20%
compensating balance for P600, 000 loan with the bank. Sanchez Company is legally restricted to
withdraw the funds until the loan is due in 2021.
 Treasury bills :
 Two-month maturity bills P90, 000
 Seven-month bills P120, 000
 Time deposit P100, 000

1. What is the correct balance of cash and cash equivalents to be reported in the current asset section of
the statement of financial position?
a. P547, 480 b. P427, 480 c. P430, 280 d. P327, 480

EXERCISE 2
You are the auditor of the BULAGA Inc. you obtained the statement and checks directly from the bank.
In reconciling the bank balance at December 31, 2018, you observed the following facts:

Balance per general ledger, 12/31/2018

P28, 064
Balance per bank statement, 12/31/2018
11, 046
Outstanding checks, 12/31/2013(including certified checks of P15, 000)
45, 500
Receipts of 12/31/2013, deposited 1/2/19
22, 482
Proceeds of bank loan, 12/31/2018, discounted for 90-days at 10% per year omitted from records
48, 750
Deposit of 12/23/2018, omitted from the bank statement
12, 871
Check 143 of BULAG charge by the bank in error to BULAGA Inc.
7, 200
Deposit of BULAG Inc. credited in error to BULAGA Inc. on 12/06/2018
8, 755
Debited memo for the cost of a checkbook
150
Check of BULAGA in payments of accounts payable and had been recorded by the bookkeeper
as the correct amount is;
12,300
The Ledger account for Cash in bank included petty cash fund amounting to
4, 200
Proceeds from cash sales for July 18 were stolen. The company expects to recover this amount
from the insurance company. The cash receipt was recorded in the books, but no entry was made for
the loss.
15, 700
The company’s account was charged on December 26 for a customer uncollectible check amounting to
31, 350

1. Prepare a bank reconciliation statement to arrive at the adjusted balances at December 31, 2018.
2. Adjusting journal entries as of December 31, 2018
/dbay-an