Cash practical auditing solution manual

8/10/2019 Cash practical auditing solution manual

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Chapter 3

Cash

MULTIPLE CHOICE

Problem 1

(a) Audit adjustments

Cash Equivalents 3,000,000

Cash 3,000,000

Other Non-current Financial Assets 3,200,000

Cash 3,200,000

Cash 35,000

Accrued Salaries Expense 35,000

Other Non-current Financial Assets 900,000

Cash 900,000

Miscellaneous Expenses 6,800

Advances to Employees 1,200

Cash (Petty Cash Fund) 8,000

Cash 5,300

Accrued Utilities Expense 5,300

Accounts Receivable 25,000

Cash 25,000

(b) Cash and Cash Equivalents

Savings account with Metrobank P1,500,000

Checking account with Metrobank 800,000 + 5,300 805,300

Certificates of deposit 3,000,000

Payroll fund 1,200,000 + 35,000 1,235,000


2/24

Tax fund 500,000

Petty cash fund 12,000

Undeposited collections 85,00025,000 60,000

Correct cash and cash equivalents P7,112,300

Problem 2 (Sta. Monica, Inc.)

Expenses 10,500

Petty Cash Fund 10,500

Correct balance of petty cash fund = P20,000P10,500 = P9,500

1. C 2. B 3. D 4. A 5. B

6. B 7. C 8. C 9. C 10. D

11. B 12. C 13. C 14. D 15. D

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Problem 3 (Victor Company)

(a) Correct amount of petty cash fund

Currencies and coins P6,400

(b) Per count

Currencies and coins P 6,400

Paid petty cash vouchers 2,250

Employees NSF check 1,200

Wedding gift contribution (with bills) 1,500

Total per count P11,350

Cashiers accountability:

Petty cash fund, per ledger P10,000


3/24

Wedding gift contribution 1,500 11,500

Cash shortage P 150

(b) Audit Adjusting Entries

Delivery Expense 250

Office Supplies Expense 160

Employees Medicine 240

Transportation Expense 400

Repairs and Maintenance 400

Receivables from Employees 2,000

Cash Shortage (or Misc. Expenses or Receivables fr Employees) 150


Problem 4 (Rainbow Corporation)

(a) Total per count P 35,000

Cashiers Accountability

Petty Cash Fund, per ledger P35,000

Unused postage stamps 1,800

Unused office supplies 1,200

Wedding gift contribution 1,000 39,000

Cash shortage P 4,000

(b). Telephone Expense 1,500

Water Expense 1,600

Office Supplies Expense (3,7001,200) 2,500

Postage Expense (2,8001,800) 1,000

Prepaid Expenses (1,200 + 1,800) 3,000

Receivables from Employees (3,900 + 4,000) 7,900


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(c) Correct amount of petty cash fund = P35,000P17,500 = P17,500

Cash items in the petty cash fund:

Bills and Coins P 2,500

Replenishment check 15,000

Total P17,500

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Problem 5

Bills and Coins (show details of denomination and pieces per denomination) P6,717.50

Checks:

Date Maker Amount

12-28-12 Urquiola, employee P 3,000.00

12-29-12 Sta. Maria, employee 1,500.00

12-31-12 L. Chua, customer 2,500.00

01-02-13 A. Bobadilla, customer 3,200.00

01-12-13 C. German, employee

(check received 12-28-12) 1,500.00 11,700.00

Vouchers

Date Voucher No. Particulars Amount

12-13-12 151 Freight out P 500.00

12-28-12 183 Supplies 300.00

12-29-12 184 Freight In 394.20

12-31-12 189 Freight on cabinet 741.10


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01-02-13 001 Freight in 244.70 2,180.00

IOUs

12-21-12 S. Dechavez 300.00

Unused office supplies 40.00

Total per count P20,937.50

Cashiers accountability:

Petty cash fund, per ledger P15,000.00

Unremitted cash sales

Inv. # 118 December 30 P1,000.40

Inv. # 129 December 31 2,500.00

Inv. # 133 January 2 3,200.00 6,700.40

Unused office supplies 40.00 21,740.40

Cash shortage P 802.90

Audit Adjusting Entries:

Receivables from Employees (1,500.00 + 300.00) 1,800

Freight out 500

Supplies Expense (10040) 260

Prepaid Expenses 40

Furniture and Equipment 741.10

Freight in 394.20

Cash Shortage (Receivable from Employees) 802.90

Petty Cash Fund 4,538.20

Cash in Bank (1,000.40 + 2,500.00) 3,500.40

Sales 3,500.40

Correct balance of petty cash fund (P15,0004,538.20) P10,461.80


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Composed of the following cash items at December 31, 2009

Bills and coins P6,717.50

Checks dated December 7,000.00

Petty cash vouchers dated January (undisbursed as

of December 31) 244.70

Total cash items as of December 31 P13,962.20

Unremitted cash sales as of December 31

( 1,000.40 + 2,500) (3,500.40)

Petty cash fund, per audit, December 31 P10,461.80

Chapter 3

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Problem 6 (Da King Company)

Bills and coins

500 x 1 P 500

100 x 8 800

50 x 3 150

10 x 4 40

5 x 2 10

1 x 3 3 P 1,503

Checks:

12/29/12 M. Roxas, employee P2,000

12/30/12 J. Madrigal Company 1.500

01/02/13 J. Estrada Junk Shop 2,450

01/15/13 F. Chavez, employee (received 12/27/12) 1,800 7,750


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Paid petty cash vouchers:

12/16/12 Vo. No. 145 Freight on goods bought P500

12/26/12 164 Postage 200

12/29/12 165 Transportation of messenger 50

01/02/13 166 Repairs, completed Dec. 29, 2012 1,500 2,250

IOU

Ed Gil, employee 1,200

Postage stamps 10 pcs x P12 120

Total per count P 12,823

Cashiers accountability

Petty cash fund P10,000

Unremitted collections

12/30/12 Refund for merchandise returned P 1,500

01/06/13 Sale of junk and scrap materials 2,450 3,950

Unused postage stamps 120 14,070

Cash shortage P1,247

Adjusting entries

Receivable from Employees (1,800 + 1,200 + shortage of 1,247) 4,247

Freight in/Cost of Goods Sold 500

Transportation Expense 50

Postage Expense (200120) 80

Prepaid Expenses 120


Repairs and Maintenance 1,500

Accrued Expenses 1,500


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Cash in Bank 1,500

Purchase Returns and Allowances /Cost of Goods Sold 1,500

Correct Petty Cash Fund = P10,000P4,997 = P5,003

Cash items as of December 31:

Bills and coins P1,503

Checks dated December 3,500

Petty cash voucher dated January 2013 1,500

Cash refund for purchase returns (1,500)

Correct petty cash fund balance P5,003

Chapter 3

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Problem 7 (Cisco Systems, Inc.)

(1) Bank reconciliation:

Per bank Per books

Unadjusted balances P 1,463,212 P1,352,312*

Outstanding checks (140,000)

Undeposited receipts 59,500

Error in recording check issued for rental payment 1,800

Bank charge for payment of loan and interest (45,000)

Bank service charges (1,400)

Deposit of another company (87,500)

Customers DAIF check (12,500)

Adjusted balances P1,295,212 P1,295,212

(2) Adjusting entry:


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Notes PayableBank 40,000

Interest Expense 5,000

Bank Service Charges 1,400


Rent Expense 1,800

Cash in Bank 57,100

(3) Cash and cash equivalents:

Petty cash fund P 20,000

Cash in bank 1,295,212

Treasury bills maturing in 2 months 500,000

Total cash and cash equivalents P1,815,212

Problem 8 (Sunshine Corporation)

1. Per Bank Per Books

Unadjusted Balances P 424,000 P465,000


Undeposited collections 48,000

Customers note collected by bank 19,000

Bank service charge (1,500)

Adjusted balances P359,000 P482,500

Cash shortage (123,500)

Cash balance, December 31, per audit P359,000 P359,000

2. Understated book balance 456,000465,000 P 9,000

Overstated bank balance 424,000454,400 30,400

Omitted outstanding checks

183 4,500


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198 12,500

Understated outstanding checks

52,00025000 27,000

9,000900 8,100

25,00015,000 10,000

Overstated undeposited collections 3,000

Omission of bank credit memo 19,000

Total cash shortage P123,500

Chapter 3

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30

3. Undeposited collections, December 31 P 48,000

Collections, January 115 199,000

Total amount available for deposit P247,000

Amount deposited, per deposit slips (110,000)

Undeposited collections, January 15 P137,000

Cash on hand, January 15 (52,000)

Additional cash shortage in January P 85,000

.4. Adjusting Entries

Bank Charges 1,500

Receivable from Employees (or Loss) 123,500

Cash 106,000

Notes Receivable 19,000

Problem 9 (Pamela Manufacturing Company)

Nov. 30 Receipts Disbursements. Dec. 31


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Unadjusted bank balance 876,750 9,153,760 8,526,550 1,503,960

Outstanding checks

November 30

(254,720)

(254,720)

December 31 335,610 (335,610)

Deposits in transit

November 30 164,220 (164,220)

December 31 209,180 209,180

Check of Pamplona Company (5,830) 5,830

Adjusted Balances 786,250 9,198,720 8,601,610 1,383,360

Nov. 30 Receipts Disbursements Dec. 31

Balance per books 821,950 9,198,720 8,613,010 1,407,660

Error in recording check no. 359 2,700 2,700

Bank service charge

November (3,500) (3,500)

December 2,250 (2,250)

NSF check returned in November (34,900) (34,900)

Interest charged by the bank 24,750 (24,750)

Adjusted Balances 786,250 9,198,720 8,601,610 1,383,360

Audit adjusting entries:

Cash in Bank 2,700

Office Furniture 2,700

Bank Service Charge 2,250

Cash in Bank 2,250


12/24

Interest Expense 24,750

Cash in Bank 24,750

Chapter 3

Cash

31

Problem 10 (Golden Bells Company)


Unadjusted bank balance 2,500,000 2,300,000 1,700,000 3,100,000

Deposits in transit

November 30 58,000 (58,000)

December 31 47,000 47,000

Outstanding checks

November 30 (97,000) (97,000)

December 31 46,000 (46,000)

Erroneous bank charges

November 30 25,000 (25,000)

December 31 (37,000) 37,000

Erroneous bank credit

November 30 (45,000) (45,000)

December 31 (50,000) (50,000)

Adjusted balances 2,441,000 2,214,000 1,567,000 3,088,000


Unadjusted book balances (squeezed) 2,390,000 2,206,000 1,549,000 3,047,000

NSF checks returned by bank

November 30 (15,000) (15,000)


13/24

December 31 25,000 (25,000)

Bank service charges

November (10,000) (10,000)

December 18,000 (18,000)

Note collected by bank

November 76,000 (76,000)

December 84,000 84,000

Adjusted balances 2,441,000 2,214,000 1,567,000 3,088,000


Cash in Bank 25,000

Bank Service Charges / Miscellaneous Expenses 18,000

Cash in Bank 18,000

Cash in Bank 84,000


Chapter 3

Cash

32

Problem 11 (Starr Company)

May 1-31

Apr. 30 Receipts Disb. May 31

Unadjusted bank balance 470,360 883,200 1,320,600 32,960

Deposits in transit

April 30 29,360 (29,360)

May 31 (squeezed) 40,560 40,560

Outstanding checks


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April 30 (144,800) (144,800)

May 31 133,600 (133,600)

Adjusted balances 354,920 894,400 1,309,400 (60,080)

May 1-31

Apr. 30 Receipts Disb. May 31

Unadjusted book balances (squeezed) 363,040 654,400 621,240* 396,200

DAIF checks returned by bank

April 30 (8,000) (8,000)

May 31


April (120) (120)

May 280 (280)

Check issued by the treasurer to himself 696,000 (696,000)

Proceeds of loan granted by bank

May 240,000 240,000

Adjusted balances 354,920 894,400 1,309,400 (60,080)

*621,240 = 613,120 + 8,000 + 120

(a) 1. P363,040

2. P40,560

3. P696,000

4. P(60,080)

(b) Adjusting entries:

Bank Service Charges 280

Cash in Bank 280

Loss from Theft/Receivable from Officers 696,000


15/24

Cash in Bank 696,000

Cash in Bank 240,000

Notes PayableBank 240,000

Chapter 3

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33

Problem 12 (Rocky Mountain High)


Unadjusted bank balance P888,800 P555,500 P666,600

Deposits in transit

November 30 148,900 (148,900)

December 31 (102,00012,000) 90,000 90,000

Payment from collections 12,000 12,000

Outstanding checks

November 30 (116,200) (116,200)

December 31 = 62,000 + 105,000 + 30,000 +

40,000

237,000

(237,000)

Adjusted balances 921,500 508,600 799,400 630,700


Unadjusted book balances (squeezed) 921,500 508,600 571,400 858,700

Bank charges in December (200,000 + 28,000) 228,000 (228,000)


Answers:


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(a) P148,900

(b) P116,200

(c) P921,500

(d) P630,700

Problem 13

1. A,D 6. M, P 11. D, F 16. I, L

2. C, G. 7. I, L 12. A, D 17. Not a reconciling item

3. B, F 8. K, O 13. F, G 18. J, N

4. E, H 9. D, H 14. D, F 19. L, N

5. J, N 10. B, F 15. J, N 20. N, O

Problem 14 (Contronics Company)

Petty Cash

Fund

Purchasing

Fund

Cash in Bank Total

Balances, per ledger P 15,000 P 35,000 P134,500 P184,500

Disbursed in 2012 (6,000) (20,000) (26,000)

Bank credit memo 58,000 58,000

Balances per audit P9,000 P15,000 192,500 P216,500

Adjusting entries

Gasoline Expense 4,500

Miscellaneous Expenses 500

Transportation Expense 1,000



17/24

Purchases or Inventory 20,000

Purchasing Fund 20,000

Cash in Bank 58,000


Chapter 3

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34

Problem 15 (Fortune Company)

(a) Audit Adjustments

Sales 285,200

Cash 285,200

Cash 19,300

Utilities Payable 19,300


Cash 57,800


Cash 32,500

No entry, dividend fund is part of cash.


Cash 3,500

Cash Shortage/ Receivable from Employees 550

Cash 550

No entry, payroll fund is part of cash.

Cash Shortage / Receivable from Employees 300

Miscellaneous Expenses 5,500


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Cash 5,800

Cash 13,500

Miscellaneous Income 13,500

(b) Correct amount of cash

Cash balance, per ledger P1,640,000

Cash sales of 2013 (285,200)

Unreleased check for utilities 19,300

Postdated checks received (57,800)

Customers NSF checks (32,500)

Stale check (3,500)

Shortage in the change fund (550)

2012 vouchers in petty cash fund (5,500)

Cash shortage in the petty cash fund (300)

Unrecorded deposits (sale of scrap) 13,500

Cash balance, per audit 1,287,450

Supply the Answers

Note to the Teacher: Please supply the petty cash imprest balance of P50,000 in problem B. (You may supply

another figure for variation in your other classes.)

Summary of Answers:

1. 308.40

2. 4,606.60

Chapter 3

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35

3. 5,000 shortage


19/24

4. 35,000

5. 800

6. 5,700

7. 400

8. 5,300

9. 53,800

10. 838,600

11. 157,950

12. 780,650 or 761,650 (NSF checks may be treated as deduction from receipts)

13. 625,700 or 606,700 (NSF checks may be treated as deduction from receipts)

14. 3,000

15. 92,000

16. 145,600

17. 71,950

18. 1,828,212

19. imprest systemdeposit of collections intact to the bank

20. segregation of duties of custodial function and bookkeeping function

21. 125,250

22. 194,550

23. 255,700

24. 55,000

SUPPORTING COMPUTATIONS

A. 1. Total per count P 10,761.60




20/24

Postage stamps 220

Other collections 350 11,070

Cash shortage P308.40

2. Correct petty cash fund = 1,156.60 + 3,450 P4,606.60

B. 3. Total per count P 53,500



Check payable to Meralco 3,500

Birthday gift contribution 4,500

Unused postage 500 58,500

Cash shortage P 5,000

4. Correct petty cash fund = P17,000 + P18,000 P35,000

C. 5. Total per count P19,700


Petty cash fund P 15,000.00

Undeposited collections 5,500.00 20,500

Cash shortage P 800

6. Bills and coins P6,400

Customerschecks 4,800

Undeposited collections (5,500)

Petty cash fund, per audit P5,700

Chapter 3

Cash

36

D. 7. Total per count (exclude the unsigned pay envelope with no contents) P 19,600


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Petty cash fund P15,000

Unreleased payroll 5,000 20,000

Cash shortage P 400

8. Bills and coins P7,300

Vouchers with January 2013 dates 200

Employees check dated December 2012 2,800

Total cash items as of December 31 P10,300

Unreleased payroll (5,000)

Correct petty cash balance on December 31 P5,300

E. Bank Books

9. Unadjusted balances P850,000 P750,500

Bank credit memo 150,000

Bank debit memo (4,500)


Check of Kin 21,000

Error in recording check (3,600)

Cash on hand 88,000

Balances before cash shortage P838,600 P892,400

Cash shortage ( 53,800)

10. Cash balance, per audit P838,600 P838,600

F. January 31 Receipts Disbursements Feb. 28

Unadjusted balances per bank 13,500 790,450 647,700 156,250

Outstanding checks

January 31 (65,000) (65,000)


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February 28 43,000 (43,000)

Deposits in transit

January 31 54,500 (54,500)

February 28 44,700 44,700


January 31 Receipts Disbursements Feb. 28

Unadjusted balances, per books (92,250) 805,350 630,300 82,800

Bank credit memo

January 123,500 (123,500)

February 98,800 98,800


January (3,250) (3,250)

February 4,650 (4,650)

NSF checks returned by bank

January (25,000) (25,000)

February 19,000 (19,000)


Chapter 3

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37

G. December Disbursements

Per bank Per books

15. Unadjusted disbursements P195,000 P190,400

Outstanding checks, November 30 (90,000)

Customers NSF checks


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November (6,000)

December 12,000


November (2,400)

December 3,000

Balances before outstanding checks, December 31 P105,000 P197,000

105,000

Outstanding checks, December 31 P92,000

H. June Receipts

Per bank Per books

16. Unadjusted receipts in June P310,000 420,000

Collections made directly by bank in May (30,300)

Deposits in transit, May 31 (15,000)

Loans granted by bank in June 50,000

Error in recording deposit 900

Balances before deposits in transit, June 30 P295,000 P440,600

295,000

Deposits in transit, June 30 P145,600

I. Per bank Per books

Unadjusted balances 1,555,000 1,890,162

Credit memo for collections by bank 10,000


Undeposited receipts 379,441

Balances before shortage P1,828,212 P1,900,162

17. Amount stolen (71,950)


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18. Actual cash existing P1,828,212 P1,828,212

19. and 20. Features of internal control missing: Imprest system and segregation of duties

J. Per bank Per books

Unadjusted balances P350,000 P293,500

Erroneous bank credit (25,000)

22. Outstanding checks (246,75015,00037,200) (194,550)

Unreleased checks 15,000

Postdated checks issued and recorded as disbursements 37,200

Customers postdated check (50,000)

21. Deposits in transit (175,25050,000) 125,250

Note collected by bank 15,000

Balances before cash shortage P255,700 P310,700

24. Cash shortage (55,000)

Actual cash existing P255,700 P255,700

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