ACCOUNTING MISC / AUDITING-PROBLEMS-TESTBANK .

I - AUDIT OF CASH AND CASH EQUIVALENTS

PROBLEM NO. 1 - Composition of Cash and Cash Equivalents

The following data pertain to PRTC Corporation at December 31, 2015:

Current account at Metrobank P
1,800,000
Current account at Allied Bank (100,000)
Payroll account 500,000
Foreign bank account (in equivalent pesos) 800,000
Savings deposit in a closed bank 150,000
Postage stamps 1,000
Employee's postdated check 4,000
IOUs from employees 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler's check 50,000
Money order 30,000
Petty cash fund (P4,000 in currency and expense receipts for 10,000
P6,000)
Pension fund 2,000,000
DAIF check of customer 15,000
Customer's check dated 1/1/16 80,000
Time deposit - 30 days 200,000
Money market placement (due 6/30/16) 500,000
Treasury bills, due 3/31/16 (purchased 12/31/15) 200,000
Treasury bills, due 1/31/16 (purchased 2/1/15) 300,000
REQUIRED:
Determine the cash and cash equivalents to be reported on the entity's December 31, 2015
statement of financial position.

SOLUTION:
Items included:
Current account at Metrobank 1,800,000

Payroll account 500,000
Foreign bank account (in equivalent pesos) 800,000
Traveler’s check 50,000
Money order 30,000
Petty cash fund - currency 4,000
Time deposit – 30 days 200,000
Treasury bills, due 3/31/13 (purchased
12/31/12) 200,000
3,584,000



1

,Items not included:

Current account at Allied Bank (100,000) Short term borrowing
Savings deposit in a closed bank 150,000 Other noncurrent assets
Postage stamps 1,000 Unused supplies (Other CA)
Employee’s post dated check 4,000 Trade and other receivables

IOU from employees 10,000 Trade and other receivables
Credit memo from a vendor for a purchase Deduction from accounts
return 20,000 payable
Petty cash fund - expense receipts 6,000 Expenses
Pension fund 2,000,000 Noncurrent asset
DAIF check of customer 15,000 Trade and other receivables
Customer’s check dated 1/1/13 80,000 Trade and other receivables
Money market placement (due 6/30/13) 500,000 Short term investment
Treasury bills, due 1/31/13 (purchased 2/1/12) 300,000 Short term investment


PROBLEM NO.2 - Computation of adjusted cash and cash equivalents

You were able to gather the following from the December 31, 2015 trial balance of PRTC
Corporation in connection with your audit of the company:

Cash on hand P 372,000

Petty cash fund 10,000

BPI current account 950,000

Security Bank current account No.01 1,280,000

Security Bank current account No.02 (40,000)

PNB savings account 500,000

PNB time deposit 300,000


Cash on hand includes the following items:
a) Customer's check for P60,000 returned by bank on December 26, 2015 due to insufficient
fund but subsequently redeposited and cleared by the bank on January 8, 2016.
b) Customer's check for P30,000 dated January 2, 2016, received on December 29, 2015.
c) Postal money orders received from customers, P36,000.

2

,The petty cash fund consisted of the following items as of December 31, 2015:
Currency and coins P 2,100

Employees' vales 1,600

Currency in an envelope marked "collections for charity" with names 1,200
attached

Unreplenished petty cash vouchers 800

Check drawn by PRTC Corporation, payable to the petty cashier 4,600

P10,300




Included among the checks drawn by PRTC Corporation against the BPI current account and
recorded in December 2015 are the following:
a) Check written and dated December 29, 2015 and delivered to payee on January 2, 2016,
P50,000.
b) Check written on December 27, 2015dated January 2, 2016, delivered to payee on
December 29, 2015, P86,000.
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 31,2015.

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.

REQUIRED:
1. Compute for the adjusted balances of following:
a. Cash on hand
b. Petty cash fund
c. BPI current account
d. Cash and cash equivalents
2. Adjusting entries as of December 31, 2015

SOLUTION:
Requirement No. 1.a

Cash on hand, per trial balance 372,000

3

, (a) NSF check (60,000)

(b) Postdated check received (30,000)

Cash on hand, as adjusted 282,000

Adjusting journal entries
Accounts receivable 60,000

Cash on hand 60,000

Accounts receivable 30,000

Cash on hand 30,000

Requirement No. 1.b
Petty cash fund per total 10,300

Employees' vales (1,600)

Currency in envelope marked "collections for charity" (1,200)

Unreplenished petty cash vouchers (800)
Petty cash fund, as adjusted 6,700
Alternative computation:
Currency and coins 2,100
Replenishment check 4,600
Petty cash fund, as adjusted 6,700

Adjusting journal entries:
Advances to officers and employees 1,600
Expenses 800
Cash short/over (balancing figure or see computation
below) 900
Petty cash fund (P10,000 - P6,700) 3,300

Computation of shortage:
Currency and coins 2,100
Employees' vales 1,600
Unreplenished petty cash vouchers 800
Replenishment check 4,600
Cash and cash items counted 9,100
Cash accountability 10,000
Unaccounted/Shortage

4