AUDITING PROBLEMS

CASH AND CASH EQUIVALENT

Problem 1
Your audit of the December 31, 2016, financial statements of Mato Corporation reveals the following:
a. Current account at PBCom P (35,000)
b. Current account at PNB 65,000
c. Treasury bills (acquired 3 months before maturity) 200,000
d. Treasury bills (maturity date is 12/31/07) 500,000
e. Payroll account 175,000
f. Foreign bank account - restricted (translated using the 12/31/16 exchange rate) 900,000
g. Postage stamps 600
h. Employees checks marked DAIF 10,000
i. IOU from the vice-president 50,000
j. Credit memo from a supplier for a purchase returns 25,000
k. Travelers check 60,000
l. Money order 10,000
m. Companys check dated 12/30/16 but not mailed at year-end 30,000
n. Petty cash fund (P4,000 in currency and expense receipts for P6,000) 10,000
REQUIRED:
1) Mato Corporations adjusted cash and cash equivalents balance at December 31, 2016 is

Problem 2
The controller of Pacatang Company is attempting to determine the amount of cash to be reported on its December 31, 2016
balance sheet. The following information is provided:

a. Commercial savings account of P1,000,000 and a commercial checking account balance of P900,000 are held at Phil.
Banking Corporation.
b. Money market fund account held at Allied Bank, P600,000
c. Travel advance of P180,000 for executive travel for the first quarter of next year (employee to reimburse through salary
reduction)
d. A separate fund in the amount of P1,500,000 is restricted for the retirement of long-term debt.
e. Petty cash fund, P5,000
f. An IOU from David Santos, a company officer, in the amount of P10,000.
g. A bank overdraft of P110,000 has occurred at one of the banks the company uses to deposit its cash receipts. At the
present time, the company has no other deposits at this bank.
h. The company has two certificates of deposit, each totaling P500,000. These certificates of deposit have a maturity of
120 days.
i. Pacatang Company has received a check that is dated January 12, 2017 in the amount of P125,000.
j. Currency and coins on hand amounted to P5,300.

REQUIRED:
1) Pacatang Companys adjusted cash and cash equivalents balance at December 31, 2016

Problem 3

Present journal entries to record the following transactions in the books of Marites Corporation, which uses a calendar year as
accounting period. Assume that the company is using the imprest method in accounting for petty cash fund:

a. A petty cash fund was set up on November 1, 2016 in the amount of P2,400.

b. On November 29, 2016, a check was issued to replenish the fund, the composition of which was as follows:
Currency bills and coins 166
Vouchers showing expenditures for:
Office supplies 270
Charges from purchased of supplies 124
Repairs and maintenance 350
Wages paid to casual employees 950
Charges from purchased of goods to be sold 400

c. On December 18, 2016, the fund was replenished and correspondingly increased to P3,000; its composition
included the following:
Currency bills and coins 158
Vouchers showing expenditures for:
Store supplies 304
Accounts payable 914
 Charges from purchased of goods to be sold 242
Miscellaneous expenses 782

d. An examination on December 31, 2016, disclosed the following composition of the fund, although it was not
replenished on this date:

Currency bills and coins 958

Check of office manager, dated January 5, 2017 1,000
Vouchers showing expenditures for:
Office supplies 126
Miscellaneous expenses 90
Accounts payable 800

e. On January 5, 2017, the check of office manager was cashed and the proceeds were added to the petty cash
fund.
f. On January 6, 2017, replenished disbursement from December 18, 2016 to January 5, 2017.

REQUIRED:
1) The adjusted Petty Cash Fund balance of MARITES CORPORATION at December 31, 2016

Problem 4
Your audit of the petty cash (P10,000) of Juliet Company as of December 31, 2016 revealed the following: (cash count date is
January 3, 2017 at 5:00 pm)
Bills: 10 - P500 bill; 15 - P100 bill; 18 - P50; 15 - P20; and 5 - P10
Coins: 180 in P5; 42 in P1.00; and 23 in P0.25.

IOUs submitted were:

Dec. 18 Nap R. P 750
Dec. 28 Ruel R. 125
Dec. 30 Sonny S. 500

Cashed checks:
Dec. 28, 2016 check drawn by the manager P 1,125
Dec. 28, 2016 check drawn by an employee 500
Dec. 30, 2016 check drawn by a customer 350
Jan 1, 2017 check drawn by an employee 1,250

The cashier informed you that owing to the lack of cash it was necessary for him to open certain payroll envelopes unclaimed
by employees and use the cash found herein. They were as follows:
Dec. 15, 2016 - Ed A. P 1,250
Dec. 30, 2016 - Andoy 1,750
Dec. 30, 2016 - Macky 650
Dec. 30, 2016 - Paz 1,000

The cashier also informed you that all cash sales receipts were passed through his fund and that cash sales tickets Nos. 2059
to 2061 under dates of Dec. 30, Jan. 3 and Jan. 4 for P350, 500 and P545, respectively, had not yet been turned over to the
general cashier.

The petty cash vouchers found in the petty cash box were as follows:
Dec. 30, 2016 Transportation P 515
Dec. 30, 2016 Token gifts to visitors 650
Dec. 30, 2016 Freight for office supplies purchase 215
Jan. 1, 2017 Freight for mdse. purchased 125
Jan. 2, 2017 Freight for mdse. sold 575

REQUIRED:
1) Juliet Companys cash shortage at December 31, 2016 is
2) The adjusted petty cash balance of Juliet Company at December 31, 2016 is:
3) The entry to adjust the unclaimed payroll at December 31, 2016 is:
4) The Cash account (excluding PCF) of Juliet Company is understated at December 31, 2016 by:

Problem 5
Mary Jane is the cashier of Adlawan Corporation. AS representative of the Zarate and Associates, CPAs, you were assigned to
verify her cash on hand in the morning of January 3, 2017. You began to count at 9:00 AM in the presence of Mary Jane. In the
course of your counting, you found currencies in paper bills and coins together with checks, vouchers, and other items, which
are mentioned below:
Bills: (2) P500; (8) P100; (12) P50; (5) P20
 Coins:
P 5.00 11 loose
1.00 24 loose
0.25 5 rolls and 32 loose (50 pieces to a roll)
0.10 10 rolls and 15 loose (50 pieces to a roll)
0.05 14 rolls and 20 loose (40 pieces to a roll)

Checks:
Date Maker Payee Amount
12/22/16 Vivian, Asst. Mgr Adlawan Corp. P 6,000
12/26/16 Mary Jane, cashier Adlawan Corp. 4,000

IOUs:
Date Maker Amount
12/20/16 Yap, Janitor P 500
12/22/16 Felix, clerk 750
12/24/16 Ablay, bookkeeper 500

PETTY CASH VOUCHERS FOR REPLENISHMENT

Date Payee Accounts Charged Amount
12/16/16 Wagan, messenger Advances to employees P 1,000.00
12/17/16 Maren and Co. Supplies 545.00
12/18/16 Eeman Liner Freight in 982.50
12/18/16 Posts Office Supplies 300.00
12/20/16 Alejandre, carpenter Repairs 2,950.00
12/21/16 Violan Miscellaneous expense 554.00

Your investigation also disclosed the following:

i. The balance of petty cash fund per books is P20,000.00.
ii. Cash sale of January 2, 2017 amounted to P8,650 per sales records, while cash receipts book and bank deposit slip
showed that only P7,650 was deposited in the bank on January 3, 2017
iii. The following employees pay envelopes had been opened and the money removed.
iv. Each envelope was marked Unclaimed - Ernesto, P332.50; Secinando, P447.50.

REQUIRED
1) The petty cash shortage of Adlawan Corporation at December 31, 2016
2) The adjusted petty cash balance of Adlawan Corporation at December 31, 2016
3) The undeposited sales/collection of Adlawan Corporation at December 31, 2016

Problem 6
The following data are gathered from the cash books and bank statement received from Davao Bank by Company:

The cash in bank ledger account shows a debit balance of P290,438.50 as of May 31.
The bank statement shows a credit balance of P318,560 as of May 31.
An examination of the checks encashed by the bank shows that the following checks are not presented for payment:
o No. 187, P3,608
o No. 189, P15,499
o No. 191, P4,400
o No. 192, P1,545.50
o No. 193, P23,001
A certified check for P24,750 payable to creditor, was encashed by the bank during May.
The bank statement shows a deduction of P10,802 for check No. 184. The check was actually made out at P10,208.
A check deposited on May 27 for P34,100 was returned by the bank on May 28 marked Refer to Maker.
A non-interest bearing note for P44,000 was collected by the bank for the account Company. Collection fee deducted
by the bank is P330. A deposit for P20,900 was recorded in the books twice. Check No. 179 for P26,400 was
erroneously recorded in the books as P46,200. Interest on an outstanding loan payable, deducted by the bank on May
31, P1,320. Collections on May 31 to be deposited on June 1, P26,488.

REQUIRED
1) Companys adjusted cash balance at May 31, 2016

Problem 7
The following data pertaining to the cash transactions and bank account of Abiso Company for May 2016 are available to you:
Cash balance, per accounting records, May 31, 2016 P 51,582
Cash balance, per bank statement, May 31, 2016 95,874
Bank service charge for May 327
 Debit memo for the cost of printed checks delivered by the bank;
the charge has not been recorded in the accounting records 375
Outstanding checks, May 31, 2016 20,184
Deposit of May 30 not recorded by bank until June 1 14,610
Proceeds of bank loan on May 30, not recorded in the accounting
records, net of interest of P900 17,100
Proceeds from a customers promissory note; principal amount P24,000,
collected by the bank, taken up in the books with interest 24,300
Check No. 1086 issued to a supplier entered in the accounting records
as P6,300 but deducted in the bank statement at an erroneous amount 3,600
Stolen check lacking an authorized signature, deducted from Abisos
account by the bank in error 2,400
Customers checks returned by the bank marked NSF, indicating that the
customers balance was not adequate to cover the checks; no entry has
been made in the accounting records to record the returned check 2,280

REQUIRED
1) The adjusted cash in bank balance of Abiso Company at May 31, 2016 is:

Problem 8

In connection with an audit, you are given the following bank reconciliation.

BANK RECONCILIATION
December 31, 2016

Balance per ledger, 12/31/16 P 34,349.72

Add: Collections received on the last day of
December and charged to Cash in Bank
on books but not deposited 5,324.50
Debit memo for customers checks returned
unpaid (check is on hand but no entry has been
made on the books) 4,000.00
Debit memo for bank service charge for December 1,000.00
P 46,674.22
Deduct:
Outstanding checks (see details below) P 18,625
Credit memo for proceeds of a note receivable
which had been left at the bank for collection
but which has not been recorded as collected 8,000
Check for an account payable entered on books
as P12,625 but drawn and paid by bank as
16,225 3,600
P 32,225.00
Computed balance P 14,449.22
Unlocated difference 36,601.00
Balance per bank (check to confirmation) P 51,050.22

LIST OF OUTSTANDING CHECKS

December 31, 2016
Check No. Amount
14344 P 5,820
14358 1,295
14367 3,543
14399 2,001
14401 4,892
14407 5,074
P 18,625

REQUIRED:
1) The adjusted cash balance at December 31, 2016
2) The outstanding checks at December 31, 2016 is:

Problem 9
The cash books of show the following entries during the month of June 2016.
Cash Receipts Journal Check Register
Date Amount Date Check No. Amount
June 1 Balance 762,000 June 2 801 15,625
 4 Deposit 113,000 3 802 7,526
4 Deposit 811,000 5 803 229,205
7 Deposit 152,200 7 804 169,555
10 Deposit 11,300 8 805 74,936
10 Deposit 12,700 10 806 274,600
11 Deposit 73,000 11 807 34,842
17 Deposit 110,075 13 808 250,000
18 Deposit 3,725 14 809 1,070,000
18 Deposit 65,000 17 810 167,300
19 Deposit 26,463 19 811 3,130
20 Deposit 133,037 21 812 82,730
27 Deposit 273,628 23 813 127,200
30 Deposit 92,400 25 814 93,080
30 815 720

The bank statement for the month of June 2016 shows:

Check No. Deposits Date Amount
Balance May 31 798,000
924,000 June 5 1,722,000
800 36,000 6 1,686,000
804 169,555 7 1,516,445
805 74,936 217,200 8 1,658,709
801 16,525
803 229,205 9 1,412,979
807 34,842 97,000 12 1,475,137
924 75,000
200 40,400 CM 13 1,440,337
809 1,070,000 14 370,337
808 250,000 15 120,337
198,000 CM 16 318,337
810 167,300 113,800 19 264,837
812 82,730 159,500 21 341,607
806 274,600 24 67,007
273,628 28 340,635
811 3,130
DM 300 30 337,205

Upon investigation, the following are discovered:

o CM - Represents a 60-day, 6% note for P40,000 collected by the bank for the account of Company.
o CM - Represents a 60-day, 6% own note for P200,000 discounted by with the bank and not yet recorded in the books.
o DM - Represents bank service charge for the month.
o Check No. 924 represents a check signed by Graciele Company.
o Collection charge represents collection fee charged by the bank.

REQUIRED:
1) The unadjusted cash ledger balance at June 30, 2016
2) The unadjusted cash bank balance at June 30, 2016 is:
3) The deposit in transit at June 30, 2016 is:
4) The outstanding checks at June 30, 2016 is:
5) The adjusted cash balance at June 30, 2016 is:

END
The difference between the impossible and the possible lies in a man's determination