S Announcement 19717

PROBLEM 1
Your audit client, TESSERACT Corporation, set up a petty cash fund for the first-time last
October 1, 2018, for P20,000. Transactions related to the fund are as follows:
• October and November fund disbursements (before the November 15
replenishment) include the following:
Transportation expense 4,500
Repairs for office equipment 6,780
IOU from employees 3,000
• The fund was replenished on November 15 when the petty cash on hand total to
P1,200. The check drawn is enough to bring the petty cash balance to P20,000.
The shortage is appropriately recorded by your client.
• November (after the November 15 replenishment) and December disbursements
include the following:
Transportation expense 3,600
Office supplies 2,200
Office furniture (purchased Dec. 31) 5,000
IOU from employees 800
• Cash count related to the fund revealed currencies totaling to P3,400. The fund
was replenished in January 2019. All supplies were used during the year.
Requirements:
1. Provide the journal entries for 2018 related to the petty cash fund.
2. How much expense should be recognized in 2018?
3. Provided that the entity did not prepare a year-end adjusting journal entry, for how
much is the 2018 net income overstated?
4. What is the balance of petty cash fund to be presented in the December 31, 2018
statement of financial position?
5. How much petty cash shortage should be recognized in 2018?
PROBLEM 2
SHIELD Corporation, your audit client, set up a petty cash fund with a balance of P30,000.
The entity assigned Mr. Kapitan Amerikano as its petty cash custodian. Your count
conducted on December 31, 2018 revealed the following breakdown of your client’s
fund:
• Currencies total to P2,350.
• Unreplenished expense vouchers include the following:
Transportation and meals expense for
employees 5,940
Postage stamps 500
Office supplies 680
Computer repairs 3,420
Miscellaneous expenses 400
• Included in the cash box was an employee IOU for P500.
• Checks include the following:
Date of Check Maker Payee Amount

December 30, 2018 SHIELD Corporation Kapitan Amerikano 10,000
December 20, 2018 Villegas Group Steve Rogelio 5,000
• Steve Rogelio is an employee of SHIELD, who indorsed the check to Amerikano.
The check was encashed last December 30, 2018 but was returned due to
insufficient funds.
Requirements:
1. How much is the overage or shortage?
2. At what amount should the petty cash fund be presented at December 31, 2018?
PROBLEM 3
On January 2, 2017, you conducted a surprise count in connection with your audit of the
financial statements of Doctor Corp. for the year ended December 31, 2016. The
following were identified on your examination:
Bills consist of one (1) P1,000 bill; three (3) P500 bill; three (3) P200 bill; six (6) P100 bill; seven
(7) P50 bill; and four (4) P20 bill. Coins consist of nine (9) P10 coin; eight (8) P5 coin; and
seven (7) P1 coin.
Checks include the following:

Date Maker Payee Amount
Dec. 30 John Floyd Cruz Doctor Corp. ₱13,000
Dec. 30 SLUU Inc. Doctor Corp. 5,000
Dec. 30 Indo Inc. Doctor Corp. 7,000
Dec. 31 Doctor Corp. Benedict, Custodian 10,000
Unreimbursed vouchers comprise of the following:

Date Description Amount
Dec. 27 Postage ₱1,000
Dec. 27 Transportation 2,000
Dec. 28 Computer repairs 1,500
Dec. 30 Supplies 800
Additional information:
• An open envelope was marked “P2,000 for Christmas Party” with vouchers totaling
to P1,850. Based on your inquiry, the whole amount was mingled with the petty
cash fund and only the expense vouchers were inserted back to the envelope.
• Official receipts dated December 24 to December 31 were as follows:
OR No. Form of Payment Amount
120141 Cash ₱566
120142 Check 7,000
120143 Cash 891
120144 Check 12,000
120145 Check 13,000
120146 Check 5,000
• The custodian is not authorized to cash checks.
• Cash collections from December 24 to December 31 were not yet deposited.
• Unused postage stamp amount to P350.
• The last replenishment was on December 25. The petty cash fund was set up at
P20,000.
Requirements:
1. What is the amount of undeposited collections on December 31, 2016?
2. What is the balance of the petty cash fund to be presented as of December 31, 2016?
3. What is the total amount of shortage/overage?
PROBLEM 4
Anying Velasco is reviewing the cash accounting for FOUR Inc. Anying’s review will focus
on the petty cash fund account and the bank reconciliation for the month ended May
31, 2016. She has collected the following information from FOUR’s bookkeeper for this
task.
Petty Cash Fund

a. The petty cash fund was established on May 2, 2016, in the amount of P10,000.
b. Expenditures from the fund by the custodian as of May 31, 2016, were evidenced by
approved petty cash vouchers for the following:
Various office Supplies P 3,920
IOU from employees 1,200
Shipping charges 2,298
Miscellaneous Expense 1,526
On May 31, 2016, the petty cash fund was replenished and increased to P12,000;
currency and coins in the fund at that time totaled P756.
Bank Reconciliation
Shore Bank
Bank Statement
Disbursements Receipts Balance
Balance, May 1, 2016 P350,760
Deposits P1,120,000
Note payment direct from customer (Interest 37,200
of P1,200)
Checks cleared during May P 1,246,000
Bank Service Charges 1,080
Balance, May 31, 2016 260,880
FOUR, Inc’s Cash Account
Balance, May 1, 2016 P 354,000
Deposits during May 2016 1,240,000
Checks written during May 2016 1,273,400
Deposits in transit are determined to be P120,000, and checks outstanding at May 31

total P34,000. Cash on hand (besides petty cash) at May 31, 2016, is P9,840.
Requirements:
1. What is the amount of petty cash shortage?
2. The journal entry to record the replenishment of, and increase in the petty cash fund
includes a credit to?
3. What amount of cash should be reported in the May 31, 2016, statement of financial
position?

S Announcement 19717

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PROBLEM 1

Date of Check Maker Payee Amount

Checks include the following:

Unreimbursed vouchers comprise of the following:

Petty Cash Fund

Deposits in transit are determined to be P120,000, and checks outstanding at May 31

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