CASH AND CASH EQUIVALENTS PROBLEM 1-3

Armenia Company reported the following information on

Source: Intermediate Accounting 1 by Valix (2021 ed)
December 31, 2021:
PROBLEM 1-1
Cash on hand 1,000,000
On December 31, 2021, Albania Company provided the Petty cash fund 50,000
following data: Cash in bank 4,000,000
Saving deposit 2,000,000
Cash in bank 3,000,000 7,050,000
Time deposit-30 days 1,000,000
 Cash on hand included the following:
Money Market Placement due on June 30,2022 2,000,000
o Customer check of P100,000 returned by
Saving deposit in closed bank 100,000
Sinking fund for bond payable due June 30, 2023 1,500,000 bank December 26, 2021 due to insufficient
Petty cash fund 20,000 fund but subsequently redeposited and
 The cash in bank included customer check of cleared by bank January 5, 2022.
P200,000 outstanding for 18 months. o Customer check for P150,000 dated January
 Check of P250,000 in payment of accounts payable 15, 2022 received December 22, 2021.
was dated and reported on December 31, 2021 but o Postal money orders received from
mailed to creditors on January 15,2022. customers P200,000.
 Check of P100,000 dated January 31, 2022 in  The petty cash fund consisted of the following items:
payment of accounts payable was recorded and
Currency and coins 2,000
mailed December 31, 2021.
Employees’ IOUs 10,000
 The reporting period is the calendar year. Currency in envelope marked collections 5,000
The cash receipts journal was held open until January 15, for Christmas party
2022 during which time an amount of 450,000 was collected Check drawn by Armenia payable to 33,000
and recorded on December 31, 2021. petty cashier
Total 50,000
Required:  Check written and dated December 22, 2021 and
delivered to payee on January 5, 2022, P200,000.
1. Prepare adjusting entries on December 31, 2021.
 Check written December 26,2021 and dated January
2. Compute the total amount of cash and cash
31, 2022 delivered to payee on December 26, 2021,
equivalents that should be reported on December 31,
P300,000.
2021.
3. Explain the presentation of the items excluded from Required:
cash and cash equivalents.
1. Prepare adjusting entries on December 31, 2021.
PROBLEM 1-2 2. Compute the total cash on December 31, 2021.
Argentina Company reported the following accounts on PROBLEM 1-4
December 31, 2021:
Calloues Company reported the following accounts on
Cash on hand 1,000,000 December 31, 2021:
Petty cash fund 50,000
Security Bank current account 2,000,000 Cash on hand 200,000
PNB current account 1,500,000 Petty cash fund 20,000
BDO current account (overdraft) (200,000) Philippine Bank current account 5,000,000
BSP treasury bill – 120 days 3,000,000 City Bank current account No. 1 4,000,000
BPI time deposit – 90 days 2,000,000 City Bank current account No. 2 (overdraft) (100,000)
Bond sinking fund 2,500,000 Asia Bank saving account 250,000
 The cash on hand included a customer postdated Asia Bank time deposit, 90 days 2,000,000
check of P150,000 and postal money order of 50,000.  Cash on hand included the following items:
 The petty cash fund included unreplenished petty o Customer check for P35,000 returned by
cash vouchers for P10,000 and an employee check bank December 26, 2021 due to insufficient
for P5,000 dated January 31, 2022. fund but subsequently redeposited and
 The BPI time deposit is set aside for acquisition of cleared by the bank on January 10, 2022.
land to be made in early January 2022. o Customer check for P15,000 dated January
 The bond sinking fund is set aside for payment of 10, 2022, received December 23, 2021.
bond payable due December 31, 2022.  The petty cash fund consisted of the following items:

Required: Currency and coins 5,000

IOUs from officers 2,000
1. Prepare adjusting entries on December 31, 2021. Unreplenished petty cash vouchers 12,000
2. Compute the total amount of cash and cash  Included among the check drawn by Callous
equivalents. Company against the Philippine Bank current account
3. Explain the presentation of the items excluded from and recorded in December 2021 were the following:
cash and cash equivalents.
 o Check written and dated December 23, 2021 July 15 The fund is replenished and increased to
and delivered to payee on January 31, 2022, P15,000.
P25,000. Currency and coin 3,000
o Check written December 26, 2021, dated Supplies 3,500
Postage 1,500
January 30, 2022, delivered to payee on
Transportation 1,500
December 28, 2021, P45,000.
Miscellaneous Expense 500
Required: Required:

1. Compute the total cash and cash equivalents. Prepare journal entries to record the transactions under
2. Prepare adjusting entries on December 31, 2021. imprest fund system and fluctuating fund system.

PROBLEM 1-5 PROBLEM 1-8

Zealous Company established a petty cash fund. Tacit Company provided the following transactions:

1. Established a petty cash fund of P10,000 on January 2021

2. Nov 2 The entity established an imprest petty cash fund
2. Petty cash expenses – January 2-31 are: of P10,000.
30 An examination of the cash fund disclosed:
Postage 1,500
Supplies 5,500 Currency and Coin 3,000
Transportation 1,200 Memoranda showing expenditures for:
Miscellaneous Expense 800 Postage 2,000
3. The fund is replenished on February 1 and increased Supplies 5,000
by P5,000. A check was drawn to replenish the fund and to
increase its amount to P20,000.
Required: Dec 31 The fund was not replenished.
Currency and coin 11,000
Prepare journal entries to record the transactions under the Memoranda showing expenditures for:
fluctuating fund system and imprest fund system. Postage 3,000
Supplies 4,000
PROBLEM 1-6 Deposit for 20 cases of softdrinks 2,000
Zenith Company provided the following chronological 2022
transactions in relation to petty cash: Jan 2 The deposit for the 20 cases of softdrinks is
collected
1. The entity established a petty cash fund of P10,000. Jan 31 A check was drawn to replenish the fund.
2. Petty cash disbursement were: Currency and coin 1,000
Postage stamps 500
Postage 1,500 Memoranda showing expenditures since
Supplies 3,000 November 30, 2021 for:
3. Petty cash disbursements were: Postage 5,000
Supplies 6,000
Transportation 1,000 Payment of account 7,000
Accounts Payable 3,500 Required:
Required:
Prepare journal entries to record the transactions.
Prepare journal entries to record the transactions under
fluctuating fund system and imprest fund system. PROBLEM 1-9
PROBLEM 1-7 On December 1, 2021, Wacky Company established an
imprest petty cash fund.
Laborious Company closed the accounts on June 30. The
entity provided the following transactions: 2021
Dec 1 Establised an imprest petty cash fund of P10,000
May 2 The entity established an imprest fund of by writing a check on National Bank.
P10,000 20 Replenished the petty cash fund by writing a
29 The fund is replenished. The petty cash items check on National Bank. The fund contained:
include: Currency and coins 1,000
Currency and coin 2,000 Vouchers for selling expenses 5,000
Postage 1,000 Vouchers for miscellaneous expenses 2,000
Supplies 3,000 Vouchers for equipment 2,000
Transporation 2,500 Dec 31 The petty cash fund was not replenished. The
Miscellaneous expense 1,500 fund contained:
June 30 The fund was not replenished. The fund is Currency and coins 6,000
composed of the following: Postdated employee’s check 2,000
Currency and coin 6,000 Vouchers for selling expenses 1,500
Supplies 2,000 Vouchers for transporation 500
Postage 1,000 2022
Transportation 1,000 Jan 15 Encashed the employee’s check. The proceeds
 were retained in the fund. A 7,050,000
31 Replenished the petty cash fund by writing a B 5,500,000
check on National Bank. The petty cash vouchers C 7,010,000
for January expenditures were: D 5,510,000
Distribution costs 500
Administrative expenses 2,000
Transportation 1,000 PROBLEM 1-13
Payment for supplier’s invoice 1,200 At year-end, ABC Company reported cash account per ledger
Required:
at P4,700,000 which consisted of the following:
1. Prepare journal entries to record the transactions.
Petty cash fund 50,000
2. How much is the petty cash on January 31, 2022 Undeposited receipts, including a postdated 1,500,000
before the replenishment? customer check for P100,000
PROBLEM 1-10 Cash in bank 2,500,000
Deposit in bank closed by BSP 500,000
Tranvia Company revealed the following information on Vouchers paid out of collections, not yet 150,000
December 31, 2021: recorded
IOUs signed by employees, taken from 100,000
Cash in checking account 350,000 collections
Cash in money market account 750,000 4,800,000
Treasury bill, purchased November 1, 2021 3,500,000 What amount should be presented as cash at year-end?
maturing January 31, 2022
Time deposit purchased December 1, 2021 4,000,000 A 3,750,000
maturing March 31, 2022 B 3,950,000
What amount should be reported as cash and cash C 4,250,000
equivalents on December 31, 2021? D 4,050,000

A 1,100,000
B 3,850,000 PROBLEM 1-14
C 4,600,000
D 8,600,000 Thor Company provided the following data on December 31,
2021:

PROBLEM 1-11 Checkbook balance 4,000,000

Bank statement balance 5,000,000
At year-end, Myra Company reported cash and cash Check drawn on Thor’s account, payable to 500,000
equivalents which comprised the following: supplier, dated and recorded on December 31,
2021 but not mailed until January 31, 2022
Cash on hand 500,000 Cash in sinking fund 2,000,000
Demand deposit 4,000,000 On December 31, 2021, what amount should be reported as
Certificate of deposit 2,000,000 cash under current assets?
Postdated customer check 300,000
Petty cash fund 50,000 A 4,500,000
Traveler check 200,000 B 5,500,000
Manager check 100,000 C 3,500,000
Money order 150,000 D 6,500,000
What total amount should be reported as cash at year-end?
A 7,000,000 PROBLEM 1-15
B 4,800,000
C 6,800,000 Joana Company had the following account balances in
D 5,000,000 December 31, 2021:
Petty cash fund 50,000
PROBLEM 1-12 Cash on hand 500,000
Cash in bank – current account 4,000,000
Starex Company provided the following information at year- Cash in bank – payroll account 1,000,000
end: Time deposit 2,000,000
Cash in bank -restricted account for plant 500,000
Checking account at Metrobank 3,000,000 addition, expected to be disbursed in early
Employee’s postdated check 120,000 January 2022
Foreign bank account unrestricted and in 2,500,000 Cash in sinking fund set aside for bond 1,500,000
equivalent pesos payable due June 30, 2022
IOU from company president 500,000 The petty cash fund included unreplenished December 2021
NSF customer check 100,000 petty cash expense vouchers of P5,000 and employee IOU of
Petty cash fund, expense receipts P40,000 50,000
P5,000.
Postage stamps 10,000
Treasury bonds 500,000 The cash on hand included a P100,000 check payable to
Value added tax account 1,500,000 Joana Company dated January 31, 2022.
What amount should be reported as unrestricted cash?
What total amount should be reported as cash and cash  A check for P100,000 was drawn against First Bank
equivalents on December 31, 2021? current account dated and recorded December 29,
2021 but delivered to payee on January 15, 2022.
A 6,940,000
B 8,940,000  The Fourth Bank time deposit is set aside for land
C 7,940,000 acquisition in early January 2022.
D 7,440,000 What total amount should be reported as cash and cash
equivalents on December 31, 2021?
PROBLEM 1-16
A 5,050,000
On December 31, 2021 Lamentable Company had the B 5,150,000
following cash balances: C 4,900,000
D 4,150,000
Cash in bank – current account 6,000,000
Petty cash fund – all funds were reimbursed at 50,000
year-end PROBLEM 1-19
Time deposit – three months, due January 15, 2,500,000 On December 31, 2021, Roma Company reported cash
2022
balance of P9,950,000.
Saving deposit 1,000,000
Cash in bank included P400,000 of compensating balance Undeposited collections 600,000
against short term borrowing arrangement. Cash in bank – BDO checking account 4,000,000
Undeposited NSF check received from 150,000
The compensating balance is legally restricted as to customer, dated December 1, 2021
withdrawal. Undeposited check from a customer, dated 250,000
What total amount should be reported as cash and cash January 15, 2022
Cash in bank – BDO fund for payroll 1,000,000
equivalents?
Cash in bank – BDO time deposit, 90 days 2,000,000
A 9,500,000 Cash in foreign bank restricted 1,500,000
B 9,150,000 Cash in bank – BDO value added tax account 450,000
C 9,100,000 9,950,000
D 6,950,000 On December 31, 2021, what total amount should be reported
as cash and cash equivalents?
PROBLEM 1-17 A 7,600,000
B 8,200,000
Baloney Company had the following account balances on C 6,050,000
December 31, 2021: D 8,050,000
Cash in bank 2,250,000
Cash on hand 125,000 PROBLEM 1-20
Cash restricted for addition to plant in 1,600,000
January 2022 Ral Company reported the checkbook balance on December
Cash in bank included P600,000 of compensating balance 31, 2021 at P5,000,000 and held the following items on same
against short-term borrowing arrangement. date:
The compensating balance is not legally restricted as to Check payable to Ral, dated January 2, 2022 2,000,000
withdrawal. in payment of sale made in December 2021,
not included in December 31 checkbook
What total amount should should be reported as cash on balance
December 31, 2021? Check payable to Ral, deposited December 15 500,000
and included in December 31 checkbook
A 1,775,000
balance, returned by bank on December 30
B 2,250,000
stamped “NSF”. The check was redeposited
C 2,375,000
on January 2, 2022 and cleared on January 9,
D 3,975,000
2022.
Check drawn on Ral’s account, payable to a 300,000
PROBLEM 1-18 vendor, dated and recorded in Ral’s books on
December 31, 2021 but not mailed until
Yasmin Company provided the following on December 31, January 10, 2022.
2021: Certificate of time deposit 1,000,000
What amount should be reported as cash on December 31,
Petty cash fund 50,000 2021?
Current account – First BANK 4,000,000
Current account – Second Bank (overdraft) (250,000) A 4,800,000
Money market placement – Third Bank 1,000,000 B 5,300,000
Time deposit – Fourth Bank 2,000,000 C 6,500,000
D 5,800,000
PROBLEM 1-21 Love Company reported the following information in relation to
cash on December 31, 2021:
Everlast Company reported the following information at year-
end:  Checkbook balance, P4,000,000.
 Undeposited collections, P400,000.
 Share investments of P1,000,000 that are very
 A customer check amounting to P200,000 dated
actively traded.
January 2, 2022 was included in the December 31,
 Government treasury bills of P2,000,000 with a 10-
2021 checkbook balance.
year term but purchased on December 31 with 2
 Another customer check for P500,000 deposited on
months to go until maturity.
December 22, 2021 was included in the checkbook
 Cash of P3,400,000 in the form of coin, currency,
balance but returned by the bank for insufficiency of
saving account and checking account.
fund.
 Commercial papers of P1,500,000 with term of nine
This check was redeposited on December 26, 2021
months but purchased on December 31 with 3
and cleared 2 days later.
months to go until maturity.
 A P400,000 check payable to supplier dated and
What total amount should be reported as cash and cash recorded on December 30, 2021 was mailed on
equivalents? January 16, 2022.
 A petty cash fund of P50,000 comprised the following
A 6,900,000 on December 31, 2021:
B 7,900,000
C 3,400,000 Coins and currencies 5,000
D 5,400,000 Petty cash vouchers 40,000
Refundable deposit for returnable 5,000
containers
PROBLEM 1-22
50,000
Isabel Company provided the following information on  A check of P40,000 was drawn on December 31,
December 31, 2021: 2021 payable to Petty Cash.
1. What amount should be reported as adjusted cash in
Cash on hand 400,000 bank on December 31, 2021?
Security Bank current account 5,000,000
Manila Bank current account No. 1 4,000,000 A 4,600,000
Manila Bank current account No. 2 (bank (500,000) B 4,200,000
overdraft) C 4,400,000
BDO account set aside for bond payable due 3,000,000 D 3,700,000
December 31, 2022
United Bank saving account for equipment 1,500,000
acquisition 2. What total amount should be reported as cash on
United Bank time deposit, 90 days 2,000,000 December 31, 2021?
Treasury bills 1,000,000
Included among the checks drawn by Isabel Company against A 4,645,000
B 4,845,000
the Security Bank current account and recorded in December
C 4,600,000
2021 are: D 4,650,000
 Check written and dated December 23, 2021 and
delivered to payee on January 3, 2022, P100,000. Problem 1-24
 Check written December 26, 2021, dated January 30,
2022 delivered to payee on December 28, 2021, Majorie Company established a petty cash fund of P50,000
P150,000. with the following information:
1. What total among should be reported as cash on Coins and currency 22,000
December 31, 2021? Petty cash vouchers:
A 12,150,000 Gasoline 3,000
B 12,650,000 Medical supplies 1,000
C 9,150,000 Repairs 1,500
D 9,400,000 IOU from an employee 3,500
2. What total amount should be reported as cash Check drawn payable to the order of Ann Cruz, 15,000
petty cash custodian, representing her salary.
equivalents on December 31, 2021?
Check of an employee returned by bank marked 3,000
A 3,000,000 “NFS”
B 4,500,000 A sheet of paper with the names of several 5,000
C 2,000,000 employees together with a contribution for a
D 2,500,000 birthday party and attached to the sheet of paper
is a currency of
What amount of petty cash fund should be reported?
PROBLEM 1-23
A 42,000
B 27,000
 C 37,000 A Petty cash fund
D 22,000 B Money order
C Coin and currency
D IOU

2. Which of the following is usually considered cash?

PROBLEM 1-25 A Certificate of deposit
Admirable Company had a petty cash fund which included the B Checking account
following details: C Money market certificate
D Postdated check
Coins and currency 2,000 3. Which of the following should not be included in
Paid vouchers cash?
Transportation 600
Gasoline 400 A Travel cash advance
Office supplies 500 B Certified check
Postage stamps 300 C Personal check
Due from employees 1,200 3,000 D Manager check
Employee’s check returned by bank marked 1,000 4. All of the following may be included in cash, except
“NSF” A Currency
Check drawn to the order of petty cash 4000 B Money market instrument
custodian C Checking account balance
What amount of petty cash should be reported? D Saving account balance
A 2,000 5. Under IFRS, which of the following statements is true
B 7,000 about reporting bank overdraft?
C 6,000 A Overdraft typically cannot be offset against positive
D 9,000 balance in other cash account but reported as current
liability
PROBLEM 1-26 B Generally, cash overdraft is not allowed.
C Overdraft can be offset against other bank account
On December 1, 2021, Andi Company established a petty when payable on demand and often fluctuates from
cash fund of P50,000. On December 31, 2021, the petty cash positive to overdrawn as an integral part of cash
fund was examined and found to comprise the following management.
information: D All of these statements are true about bank overdraft
6. Technically, cash may not include
Coins and currencies 6,000
Petty cash vouchers for expenses 46,000 A Foreign currency
The petty cash fund was replenished on December 31, 2021. B Money order
C Restricted cash
1. What amount should be reported as cash shortage or D Undeposited customer check
cash overage? 7. Restricted deposits in foreign bank are classified as

A 2,000 over A Current asset with appropriate disclosure

B 2,000 short B Noncurrent asset with appropriate disclosure
C 4,000 short C Be written off as loss
D 0 D As part of cash and cash equivalents
2. What entry should Andi Company make on December 8. What is a compensating balance?
31, 2021 to record the replenishment of petty cash
A Saving account balance
fund?
B Demand deposit account balance
A Petty Cash 46,000 C Temporary investment as collateral for loan
Cash in bank 44,000 D Minimum deposit required to be maintained in
Cash short or over 2,000 connection with a borrowing arrangement.
B Miscellaneous expenses 46,000 9. Compensating balance represents
Cash in bank 44,000
A Fund in a bank account that cannot be spent
Cash short or over 2,000
B Balance in a payroll checking account
C Miscellaneous expenses 44,000
C Account that is subject to bank service charge
Cash short or over 2,000
D Account on which a bank pays interest
Cash in bank 46,000
10. A compensating balance
D Miscellaneous expenses 46,000
Petty cash 44,000 A Must be included in cash and cash equivalent
Cash short or over 2,000 B Which is legally restricted and related to a long-term
loan is classified as current asset
C Which is legally restricted and related to a short-term
PROBLEM 1-27
loan is classified separately as current asset
1. Which of the following should not be considered D Which is not legally restricted as to withdrawal is
cash? classified separately as current asset
 D Is a contra account to cash
5. Petty cash fund is
PROBLEM 1-28
A Separately classified as current asset
1. A cash equivalent is a short-term, highly liquid B Money kept in hand for making minor disbursements
investment readily convertible into known amount of C Set aside for the payment of payroll
cash and D Restricted cash.
A Is acceptable as a means to pay current liability
B Has a greater current fair value
C Bears a prime interest rate
D Is so near maturity that it presets insignificant risk of
change in interest rate
2. Highly liquid investments are cash equivalents if the
maturity is 90 days or less
A From the date the investments are acquired
B From the end of the reporting period
C From the date of issue of financial statements
D From the beginning of reporting period
3. All of the following can be classified as cash and cash
equivalents, except
A Redeemable preference shares due in 60 days
B Commercial papers due for repayment in 90 days
C Equity investments
D A bank overdraft
4. Cash equivalents do not include
A Money market funds
B High grade marketable equity investments
C BSP treasury bills
D Commercial papers
5. Cash equivalents are
A Treasury bills and money market instruments
B Investments with original maturity of three months or
less.
C Readily convertible into known amount of cash
D All of these features of cash equivalents

PROBLEM 1-29
1. The internal control feature specific to petty cash is
A Separation of duties
B Assignment of responsibility
C Proper authorization
D Imprest system
2. What is the major purpose of an imprest petty cash
fund?
A To effectively plan cash inflows and outflows
B To ease the payment of cash to vendors
C To determine the honesty of the petty cashier
D To effectively control cash disbursements
3. The imprest petty cash fund account is debited
A Only when the fund is created
B When the fund is created and everytime it is
replenished.
C When the fund is created and when the size of the
fund is increased.
D When the fund is created and when the size of the
fund is decreased.
4. A cash over and short account
A Is not generally accepted
B Is debited when the petty cash fund proves out over.
C Is debited when the petty cash fund proves out short.