TANAUAN INSTITUTE, INC.

COLLEGE DEPARTMENT
PRELIMINARY EXAMINATION - INTERMEDIATE ACCOUNTING 2

DIRECTION: SOLVE EACH NUMBER AND CHOOSE YOUR ANSWER FROM THOSE GIVEN
IN THE BOX.

A. In connection with your audit of the financial statements of

Onor Company for the year ended December 31, 2016, you gathered
the following information:

I. The company maintains its current account with Tsunami Bank.

The bank statement on December 31, 2016, showed the balance of
P638 340.

Your audit of the company’s account with Tsunami Bank

disclosed the following:
 A check for P22 500, received from a customer whose account
is current had been deposited and then returned by the bank
on December 28, 2016. No entry was made for the return of
this check. The customer replaced the check on January 15,
2017.

 A check for P5 720 was cleared by the bank as P7 520. The

bank made the correction on January 2, 2017.

 A check for P3 500 representing payment of an employee

advance was received and deposited on December 27, 2016,
but was not recorded until January 3, 2017.

 Postdated checks totaling P67 300, were included in the

deposits in transit. These represent collections of current
accounts receivable from customers. The checks were
actually deposited on January 5, 2017.

 Various debit memos for drafts purchased for payment of

importation of equipment totaling P230 000 were not yet
recorded. These purchases were previously set up as
accounts payable. Said equipment arrived in December 2016.

 Interest earned on the bank balance for the 4th quarter of

2016, amounting to P1 950 was not recorded.

 Bank service charges totaling P1 260 were not recorded.

 Deposit in transit and outstanding checks at December 31,

2016, totaled P136 250 and P276 380, respectively.

II. Various expenses from the company’s imprest petty cash fund
dated December 2016, totaled P16 250, while those dated January
2017, amounted to P5 903. Another disbursement from the fund
dated December 2016 was a cash advance to an employee amounting
to P3 500. A replenishment of the petty cash fund was made on
January 8, 2017.

III. The company’s trial balance on December 31, 2016, includes

the following accounts:
Cash in bank - Tsunami Bank P 748 320
 TANAUAN INSTITUTE, INC.
COLLEGE DEPARTMENT
PRELIMINARY EXAMINATION - INTERMEDIATE ACCOUNTING 2

Cash in bank - Earthquake Bank (restricted

account for plant expansion, expected to be
disbursed in 2017) 700 000
Petty cash fund 30 000
Time deposit, placed Dec. 20, 2016, and
due March 20, 2017 1 000
000
Money market placement - Prudential Bank 4 000 000

1. What is the adjusted petty cash fund balance on December 31,

2016?

2. The petty cash shortage on December 31, 2016, is

3. What is the adjusted Cash in Bank - Tsunami Bank balance in

December 31, 2016?

4. The entry to adjust the Cash in Bank - Tsunami Bank account

should include a debit to

5. The December 31, 2016, statement of financial position should

show cash and cash equivalents at

B. On January 1, Tanya Co. establishes a petty cash account and

designates Orly Reyes as petty cash custodian. The original
amount included in the petty cash fund is P10 000. The following
disbursements are made from the fund:

Office supplies P 3 460

Postage 2 240
Entertainment 840

The balance in the petty cash box is P3 200.

1. The person responsible, at all times, for the amount of the

petty cash fund is the

2. The following are appropriate procedures for controlling the

petty cash fund, except

3. The entry to replenish the fund is

4. The objective of establishing a petty cash fund is to

5. What is the effect of not replenishing the petty cash at year-

end and not making the appropriate adjusting entry

C. The cash of Velasco Company shows the following activities:

DATE DEBIT CREDIT

BALANCE
Nov 30 Balance P115 000
 TANAUAN INSTITUTE, INC.
COLLEGE DEPARTMENT
PRELIMINARY EXAMINATION - INTERMEDIATE ACCOUNTING 2

Dec 2 November bank charges P 50 114 950

4 November bank credit for notes
receivable collected P10 000 P10 000 124
950
15 NSF Check 1 300 123 650
20 Loan proceeds 48 500 172
150
21 December bank charges 60 172 090
31 Cash receipts book 707 300 879 390
31 Cash disbursements book 408 000 471 390

CASH BOOKS
RECEIPTS PAYMENT

DATE OR NO. AMOUNT CHECK NO. AMOUNT

Dec 1 110-120 P 11 000 801 P 2 000
2 121-136 21 300 802 3 000
3 137-150 20 000 803 1 000

4 151-165 56 000 804 3 000

5 166-190 39 000 805 12 000
8 191-210 66 000 806 19 000
9 211-232 88 000 807 26
000
10 233-250 77 000 808 30 000
11 251-275 21 000 809 61 000
12 276-300 30 000 810 7 000
15 301-309 55 000 811 8 000
16 310-350 8 000 812 16 000
17 351-390 19 000 813 20 000
18 391-420 9 000 814 22 000
19 421-480 17 000 816 36 000
22 481-500 21 000 817 11 000
23 501-525 32 000 818 50 000
23 - - 819 7 000
23 - - 820 4 000
26 526-555 74 000 821 3 000
28 556-611 5 000 822 12 000
28 - - 823 13 000
29 612-630 38 000 824 29 000
29 - - 825 2 000
29 - - 826 11 000
TOTALS P 707 300 P 408 000

BANK STATEMENT

DATE CHECK NO. CHARGES CREDITS

Dec. 1 792 P 2 500 P 8 500
2 802 3 000 11 000
3 - - 21 300
4 804 3 000 20 000
5 EC 81 000 81 000
8 805 12 000 95 000
9 CM 16 - 12 000
 TANAUAN INSTITUTE, INC.
COLLEGE DEPARTMENT
PRELIMINARY EXAMINATION - INTERMEDIATE ACCOUNTING 2

10 799 7 050 154 000

11 DM 57 1 300 77 000
12 808 30 000 21 000
15 803 1 000 -
16 809 61 000 85 000
17 DM 61 60 8 000
18 813 20 000 19 000
19 CM 20 - 48 500
22 815 6 000 -
23 816 36 000 47 000
23 811 8 000 -
23 801 2 000 -
26 814 22 000 32 000
28 818 50 000 74 000
28 DM 112 120 -
29 821 3 000 5 000
29 CM 36 - 12 000
29 820 4 000 -
TOTAL P 353 030 P 831 300

Additional information:
a. DMs 61 and 112 are for service charges.
b. EC is error corrected.
c. DM 57 is for an NSF Check.
d. CM 20 is for loan proceeds, net of P150 interest charges for
90 days.
e. CM 16 is for the correction of an erroneous November bank
charge.
f. CM 36 is for customer’s notes collected by bank in December.
g. Bank balance on December 31 is P592 270.
1. The total outstanding checks at November 30 should be
2. The total outstanding checks at December 31 should be
3. The deposit in transit at November 30 should be
4. The deposit in transit at December 31 should be
5. The adjusted book balance at November 30 should be
6. The adjusted bank receipts for the month of December should be
7. The adjusted book disbursements for the month of Dec. should
be
8. The adjusted bank balance at December 31 should be
767 800 477 270 9 550 124 950
Petty Cash
10 250 38 000 432 710 0 Custodian

To monitor variations in
5 442 960 153 000 different types of
expenditures, the petty
cash custodian files cash
8 500 415 480 vouchers by category of
Facilitate payment of small, expenditure after
miscellaneous items replenishing the fund.

Cash will be overstated

Office Supplies Expense 3 460
and expenses understated
Postage Expense 2 240

Entertainment Expense 840

Cash over and short 260 Accounts Receivable for 89 800

Cash 6 800