CASH and CASH EQUIVALENTS

PROBLEM NO. 1
In connection with your audit of Caloocan Corporation for the year ended December 31, 2018, you gathered the
following:
Current account at Metrobank P2,000,000
Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account – restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P4,000 in currency and expense receipts for P6,000) 10,000
Treasury bills, due 3/31/19 (purchased 12/31/18) 200,000
Treasury bills, due 1/31/19 (purchased 1/1/18) 300,000

Question: Based on the above information and the result of your audit, compute for the cash and cash equivalent that
would be reported on the December 31, 2018 balance sheet.

a. P2,784,000 b. P2,790,000 c. P3,084,000 d. P2,704,000

PROBLEM NO. 2
In the course of your audit of the Las Piñas Corporation, its controller is attempting to determine the amount of cash to be
reported on its December 31, 2018 balance sheet. The following information is provided:
1. Commercial savings account of P1,200,000 and a commercial checking account balance of P1,800,000 are held at PS
Bank.
2. Travel advances of P360,000 for executive travel for the first quarter of the next year (employee to reimburse through
salary deduction).
3. A separate cash fund in the amount of P3,000,000 is restricted for the retirement of a long term debt.
4. Petty cash fund of P10,000.
5. An I.O.U. from a company officer in the amount of P40,000.
6. A bank overdraft of P250,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the
present time, the company has no deposits at this bank.
7. The company has two certificates of deposit, each totaling P1,000,000. These certificates of deposit have maturity of
120 days.
8. Las Piñas has received a check dated January 2, 2019 in the amount of P150,000.
9. Las Piñas has agreed to maintain a cash balance of P200,000 at all times at PS Bank to ensure future credit availability.
10. Currency and coin on hand amounted to P15,000.

Based on the above and the result of your audit, how much will be reported as cash and cash equivalent at December 31,
2018?
a. P3,025,000 b. P2,575,000 c. P2,825,000 d. P5,025,000

Problem No. 3
You were able to gather the following from the December 31, 2018 trial balance of Mandaluyong Corporation in
connection with your audit of the company:
Cash on hand P 500,000
Petty cash fund 10,000
BPI current account 1,000,000
Security Bank current account No. 01 1,080,000
Security Bank current account No. 02 (80,000)
PNB savings account 1,200,000
PNB time deposit 500,000

Cash on hand includes the following items:

a. Customer’s check for P40,000 returned by bank on December 26, 2018 due to insufficient fund but subsequently
redeposited and cleared by the bank on January 8, 2019.
b. Customer’s check for P20,000 dated January 2, 2019, received on December 29, 2018. c. Postal money orders
received from customers, P30,000.
The petty cash fund consisted of the following items as of December 31, 2018.
Currency and coins P 2,000
Employees’ vales 1,600
Currency in an envelope marked “collections for charity”
with names attached 1,200
Unreplenished petty cash vouchers 1,300
Check drawn by Mandaluyong Corporation,
payable to the petty cashier 4,000
P10,100

Included among the checks drawn by Mandaluyong Corporation against the BPI current account and recorded in
December 2018 are the following:
a. Check written and dated December 29, 2018 and delivered to payee on January 2, 2019, P80,000.
b. Check written on December 27, 2018, dated January 2, 2019, delivered to payee on December 29, 2006, P40,000.

The credit balance in the Security Bank current account No. 2 represents checks drawn in excess of the deposit balance.
These checks were still outstanding at December 31, 2018.

The savings account deposit in PNB has been set aside by the board of directors for acquisition of new equipment. This
account is expected to be disbursed in the next 3 months from the balance sheet date.

Based on the above and the result of your audit, determine the adjusted balances of following:
1. Cash on hand
a.P410,000 b. P470,000 c. P530,000 d. P440,000

2. Petty cash fund

a. P6,000 b. P2,000 c. P7,200 d. P4,900

3. BPI current account

a. P1,000,000 b. P1,080,000 c. P1,120,000 d. P1,040,000

4. Cash and cash equivalents

a. P2,917,200 b. P3,052,000 c. P3,146,000 d. P3,066,000

Problem No. 4
The books of Manila's Service, Inc. disclosed a cash balance of P687,570 on December 31, 2018. The bank statement as
of December 31 showed a balance of P547,800. Additional information that might be useful in reconciling the two
balances follows:
(a) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(b) A customer's note dated September 25 was discounted on October 12. The note was dishonored on December 29
(maturity date). The bank charged Manila's account for P142,650, including a protest fee of P2,650.
(c) The deposit of December 24 was recorded on the books as P28,950, but it was actually a deposit of P27,000.
(d) Outstanding checks totaled P98,850 as of December 31.
(e) There were bank service charges for December of P2,100 not yet recorded on the books.
(f) Manila's account had been charged on December 26 for a customer's NSF check for P12,960.
(g) Manila properly deposited P6,000 on December 3 that was not recorded by the bank.
(h) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(i) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been collected on December 27,
and the bank charged a P360 collection fee.

1. Adjusted cash in bank balance

a. P583,200 b. P589,200 c. P577,200 d. P512,400
2. Net adjustment to cash as of December 31, 2018
a. P104,370 b. P 98,370 c. P110,370 d. P175,170
Problem No. 5
Shown below is the bank reconciliation for Marikina Company for November 2018:
Balance per bank, Nov. 30, 2018 P150,000
Add: Deposits in transit 24,000
TOTAL 174,000
Less: Outstanding checks P28,000
Bank Credit recorded in error 10,000 38,000
Cash balance per books, Nov. 30, 2018 P136,000

The bank statement for December 2018 contains the following data:
Total deposits P110,000
Total charges, including an NSF
check of P8,000 and a service charge of P400 96,000

All outstanding checks on November 30, 2018, including the bank credit, were cleared in the bank 1n December 2006.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December 31, 2018.

1. How much is the cash balance per bank on December 31, 2018?
a. P154,000 b. P164,000 c. P150,000 d. P172,400
2. How much is the December receipts per books?
a. P124,000 b. P110,000 c. P 96,000 d. P148,000
3. How much is the December disbursements per books?
a. P96,000 b. P89,600 c. P79,600 d. P98,000
4. How much is the cash balance per books on December 31, 2018?
a. P150,000 b. P180,400 c. P170,400 d. P162,000
5. The adjusted cash in bank balance as of December 31, 2006 is
a. P141,600 b. P172,000 c. P162,000 d. P196,000

Problem No. 6
The accountant for the Muntinlupa Company assembled the following data:
June 30 July 31
Cash account balance P 15,882 P 39,745
Bank Statement balance 107,082 137,817
Deposit in transit 8,201 12,880
Outstanding checks 27,718 30,112
Bank service charge 72 60
Customer’s check deposited July 10, returned by
bank on July 16 marked NSF, and redeposited
Immediately; no entry made on books for return
Or redeposited 8,250
Collection by bank of company’s notes receivable 71,815 80,900

The bank statements and the company's cash records show these totals:
Disbursements in July per bank statement P218,373
Cash receipts in July per Muntinlupa's books 236,452

1. How much is the adjusted cash balance as of June 30?

a. P87,565 b. P107,082 c. (P3,695) d. P15,822
2. How much is the adjusted bank receipts for July?
a. P253,787 b. P245,537 c. P214,802 d. P232,881
3. How much is the adjusted book disbursements for July?
a. P220,767 b. P181,782 c. P212,517 d. P206,673
4. How much is the adjusted cash balance as of July 31?
a. P137,817 b. P22,513 c. P112,335 d. P120,585
Problem 7
The books of Manila's Service, Inc, the bank statement as of December 31 showed a balance of P547,800. Additional
information that might be useful in reconciling the two balances follows:
(j) Check number 748 for P30,000 was originally recorded on the books as P45,000.
(k) A customer's note dated September 25 was discounted on October 12. The note was dishonored on December 29
(maturity date). The bank charged Manila's account for P142,650, including a protest fee of P2,650.
(l) The deposit of December 24 was recorded on the books as P28,950, but it was actually a deposit of P27,000.
(m) Outstanding checks totaled P98,850 as of December 31.
(n) There were bank service charges for December of P2,100 not yet recorded on the books.
(o) Manila's account had been charged on December 26 for a customer's NSF check for P12,960.
(p) Manila properly deposited P6,000 on December 3 that was not recorded by the bank.
(q) Receipts of December 31 for P134,250 were recorded by the bank on January 2.
(r) A bank memo stated that a customer's note for P45,000 and interest of P1,650 had been collected on December 27,
and the bank charged a P360 collection fee.

1. How much is the unadjusted balance of cash per book? adjusted: 589,200
a. P687,570 b. P637,750 c. P587,780 d. P760,570

Problem 8
At the end of the month, the bank statement of Dior Company showed a balance of P102,000, service charges of
P6,000, a customer’s no-sufficient fund check of P20,000 and the proceeds of note collected by the bank Dior’s Company.
The note had a face value of P15,000.
Dior Company reported a balance of P128,000 in its cash account at the end of the month. At this time, there were
P28,300 deposits in transit and P12,000 of outstanding checks.
1. How much is the interest on the note collected by the bank?
a. P13,000 b. P8,700 c. P3,000 d. P1,300

RECEIVABLES
PROBLEM 1
McRonald Company’s terms of sale is 3/10, 1/20, n/60 and it provides for uncollectible accounts based on aging of
its receivable at year end. The balance of selected accounts taken from the December 31, 2015 statement of financial
position of McRonald Company are as follows:

Accounts Receivable- P674,000 Allowance for bad debts - P24,000

The following transactions (in summary) affecting accounts receivable occurred during the year ended December 31,
2016:
Sales on account 3,000,000
Cash received from customers 3,200,000
Cash received includes the following:
Customers paying within the 10-day discount period 1,746,000 1,800,000
Customers paying within the 20-day discount period 990,000 1,000,000
Recovery of accoounts written off 6,000
Customers paying beyond the discount period ? 394,000
Accounts receivable written off as worthless 22,000
Credit memoranda for sales returns 12,000

An aging of the accounts receivable and estimate of uncollectible accounts at December 31, 2016 revealed the
following:

Age Amount Probability of non-collection

Less than 30 days 150,000 2% 3,000
31-90 days 120,000 8% 9,600
91-120 days 86,000 15% 12,900
More than 120 days Balance 118,000 30%
474,000
1. What are the balances of accounts receivable and the related allowance account at December 31, 2016?
a. P376,000 and P25,300 b. P376,000 and P33,300 c. P382,000 and P25,300 d. P382,000 and
P33,300
 2. How much is the bad debts expenses for the year 2016?
a. P41,300 b. P33,300 c. P31,300 d. P25,300

PROBLEM 2
Bantay Company’s unadjusted trial balance at December 31, 2018, included the following accounts:
Debit Credit
Accounts receivable P1,000,000
Allowance for doubtful accounts 40,000
Sales P15,000,000
Sales returns and allowances 700,000
Bantay Company estimates its bad debt expense to be 1 1/2% of net sales. Determine its bad debt expense for 2018.
a. P225,000 b. P214,500 c. P254,500 d. P 55,000

PROBLEM 3
On January 1, 2016, Rockets Corporation sold equipment costing P760,000 with accumulated depreciation of P320,000
on the date of sale. Rockets received as consideration for the sale, a P800,000, non-interest bearing note, due January
2019. There was no established exchange price for the equipment and the note had no ready market. The prevailing on
interest for a note of this type at January 1, 2016 was 10%. The present value of 1 at 10% for three periods is .75.

1. In Rocket’s 2016 profit or loss, how much should be reported as interest revenue?
a. P80,000 b. P66,000 c. P60,000 d. P27,000

2. What is the note’s carrying amount at December 31, 2016?

a. P680,000 b. P660,000 c. P600,000 d. P270,000

PROBLEM 4
On January 1, 2016, Randolf Company sold land that originally cost P800,000 to the Egi Company. As payment, Egi
gave Randolf a P1,200,000 note. The note bears an interest rate of 8% and is to be repaid in three annual installments of
P400,000 plus interest on the outstanding balance. The first payment is due on December 31, 2016. The market price of
the land is not reliably determinable. The prevailing interest rate for notes of this type is 12%

1. How much should the note be recorded on January 1, 2016?

a. P1,200,000 b. P1,120,244 c. P960,733 d. P854,160

2. How much is the interest revenue for the year 2016?

a. P134,429 b. P115,288 c. P102,500 d. P96,000

3. What is the amortized cost of the note receivable at December 31, 2016?
a. P1,200,000 b. P800,000 c. P758,673 d. P580,006

372,959
4. How much is the current section of notes receivable at December 31, 2016? ________
5. How much is the non-current section of notes receivable at December 31, 2016? __________
385,714

6. Assume the same facts given in the problem, but change the prevailing interest rate for notes of this type to 8%
(instead of 12%). How much is the interest revenue for the year 2016?
a. P96,000 b. P64,0000 c. P32,000 d. 0

PROBLEM 5
Grizzlers Company accepted P400,000 face value, six month, 10% note dated may 15 from a customer. After
holding the note for two months, Grizzlers discounted the note to East Bank at a 12% discount rate.
1. How much cash should Grizzler receive from the bank on May 15? (PROCEEDS)
a. P386,400 b. P400,000 c. P403,200 d. P411,600

PROBLEM 6
Sizzlers Company accepted a P400,000 face value, six month , 10% note dated May 15 from a customer. After
holding the note for two months, Sizzlers discounted the note without recourse at East Bank at a 12% discount rate and
appropriately accounted the discounting as a sale. Accrued interest was appropriately recorded prior to discounting.
1. What was the gain or loss recognized by sizzlers on the sale of notes receivable?
a. P3,466.67 loss b. P3,466.67 gain c. P3,200 loss d. P3,200 gain
PROBLEM 6
On December 31, 2016, The Reliable Finance Company had a P5,000,000 notes receivable from Loyal Company.
The note bears 10% interest. The books reported accrued interest pf P500,000 on this date. Because of financial distress
being suffered by Loyal Company, Reliable Finance agreed to the restructuring and modification of the terms of its loan
to Loyal Company as follows:
 Reduction of principal to P4,000,000 
 Reduction of interest to 8% payable annually beginning December 31, 2017 
 Accrued interest on December 31, 2016 is condoned; and 
 Principal payment was reset to December 31, 2018.
The prevailing market rate of interest for similar obligations on the date of restructuring decreased to 9%. Used present
value factors rounded to two decimal places.

1. How much impairment loss should Reliable Finance Company record on December 31, 2016 as a result of the
restructuring?
a. P1,1623,200 b. P1,576,800 c. P1,123,200 d. P1,076,800

2. . At what amount would the restructured notes receivable be reported at December 31, 2016?
a. P5,500,000 b. P4,640,000 c. P3,923,200 d. P3,876,800