Cash and Cash Equivalents

ANSWERS:
1. D 4. B
2. A 5. A
3. D

6. C (35,000 + 75,000 + 350,000) = 460,000

7. D
Solution:
Cash on hand 400,000
Cash in Bank – current account (1.2M + 30K stale check) 1,230,000
Cash in Bank – peso savings deposit (5M – 800K bond) 4,200,000
Cash in Bank – dollar (unrestricted) ($100K x ₱45) 4,500,000
Cash in money-market account 500,000
3-month unrestricted time deposit ($20K x ₱45) 900,000
Treasury note, purchased 12/1/20x1, maturing 2/28/20x2 400,000
Redeemable P/S, purchased 12/1/20x1, due on 3/1/20x2 740,000
Cash and cash equivalents - adjusted balance 12,870,000
Bank Reconciliation
ANSWERS:
1. A 3. D
2. B 4. B

5. A
Solution:
Balance per bank statement, 12/31/x1 38,075
Deposit in transit, 12/31/x1 5,200
Outstanding checks, 12/31/x1 (6,750)
Amount erroneously credited by bank to ABC's account, 12/28/x1 (400)
Adjusted balance 36,125

6. D
Solution:
18,050 + 3,250 – 2,750 = 18,550

7. A
Solutions:
SUBSIDIARY LEDGER
CASH IN BANK - BPI CURRENT ACCOUNT
Date Description Debit Credit Balance
6/1 Bal. forwarded 881,000
6/11 Check #1113 130,800 750,200
6/15 Check #1114 220,000 530,200
6/16 Deposit 295,800 826,000
6/22 Deposit 670,000 1,496,000
6/24 Check #1115 80,000 1,416,000
6/28 Check #1116 380,000 1,036,000
6/29 Deposit 160,000 1,196,000

METROBANK
BANK STATEMENT - ENTITY A
Date Description Debit Credit Balance
6/1 Bal. forwarded 881,000
6/10 Deposit 350,000 1,231,000
6/15 Payment 2,000 1,229,000
6/15 Check #1114 220,000 1,009,000
6/16 Deposit 295,800 1,304,800
6/20 Payment 50,000 1,254,800
6/22 Deposit 670,000 1,924,800
6/24 Check #1115 80,000 1,844,800
6/26 Check #1113 130,800 1,714,000
6/28 Deposit 410,000 2,124,000

Bank reconciling items:

 Deposit in transit: ₱160,000 deposit on 6/29.
 Outstanding check: ₱380,000 Check #1116.

Book reconciling items:

 Credit memos: ₱350,000 deposit on 6/10 + ₱410,000 deposit on 6/28 = ₱760,000.
 Debit memos: ₱2,000 payment on 6/15 + ₱50,000 payment on 6/20 = ₱52,000.

Bal. per books, end. 1,196,000 Bal. per bank, end. 2,124,000
Add: CM 760,000 Add: DIT 160,000
Less: DM (52,000) Less: OC (380,000)
Add/Less: Book errors - Add/Less: Bank errors -
Adjusted balance 1,904,000 Adjusted balance 1,904,000

8. C

9. D

10. A (See solutions below)

11. D (See solutions below)

12. A (See solutions below)

Solutions:
Per books Per bank
Oct. 31 4,440 5,520 Oct. 31
Book Dr. (squeeze) 6,280 Bank Dr. 2,800 1,840 Bank Cr. (squeeze)
8,320 Book Cr.
2,400 Nov. 30 Nov. 30 4,560

Deposit in transit as of November 31 is computed as follows:

Deposits in transit
DIT, Oct. 31 4,500
Book debits 6,280 1,840 Bank credits
CM, Oct. (1,200) (600) CM, Nov.
Understated Understated
collections in Oct. deposits in Nov.
(1,620) 3,460 2,140 900
(1,800 - 180) (1,050 - 150)

5,820 DIT, Nov. 30

Outstanding checks as of November 31 is computed as follows:

Outstanding checks
3,800 OC, Oct. 31
Bank debits 2,800 8,320 Book credits
DM, Nov. (300) (900) DM, Oct.
Understated bank Overstated book
debits in Oct. (290) (800) debits in Oct.
Overstated bank
credit in Oct. (370) 1,840
Overstated book
6,320 (300) credits in Nov.
OC, Nov. 30 8,280

The bank reconciliation is prepared as follows:

Bal. per books, Nov. 30 2,400 Bal. per bank statement, Nov. 30 4,560
Add: Credit memos : Add: Deposits in transit 5,820
Proceeds from loan 600 Less: Outstanding checks (8,280)
Less: Debit memos: Add/Less: Bank errors:
NSF check (300) Understatement of deposit 900
Add/Less: Book errors:
Overstatement of
Payments 300

Adjusted balance 3,000 Adjusted balance 3,000

13. C (See solutions below) 15. A (See solutions below)

14. A (See solutions below)
Solutions:
Per books
30-Jun Receipts Disbursements 31-Jul
Balance per books 5,600 30,700 27,000 9,300
Note collected by bank:
June 2,250 (2,250)
July 3,000 3,000
Bank service charges
 June (20) (20)
July 100 (100)
NSF checks: (880) (880)
June 1,400 (1,400)
July
Book errors:
June 1,900 (1,900)
July 1,200 1,200
Adjusted balances 8,850 30,750 27,600 12,000

Per bank
30-Jun Receipts Disbursements 31-Jul
Balance per bank 10,200 27,900 21,300 16,800
Deposits in transit
June 6,000 (6,000)
July 11,250 11,250
Outstanding checks
June (9,750) (9,750)
July 17,850 (17,850)
Bank errors:
June 2,400 (2,400)
July (1,800) 1,800
Adjusted balances 8,850 30,750 27,600 12,000
Accounts Receivable
ANSWERS:
1. D
2. A
3. B Solutions:
Trade receivables:
Accounts receivable 100,000
Add back credit balance in customers' accounts 8,000
Adjusted accounts receivable 108,000
Notes receivable (trade) 15,000
Total trade receivables 123,000
Non-trade receivables currently collectible:
Notes receivable (current portion only) 15,000
Dividends receivable 2,000
Advances to officers and employees 4,000
Advances to suppliers (from debit bal. in accounts payable) 10,000
Total current non-trade receivables 31,000
Trade and other receivables 154,000

4. C
Dec. 31, 20x1 -
No entry
-
Jan. 2, 20x2 Accounts receivable 2,980
Freight-out 20
Sales 3,000
to record sale on account and freight accommodated by the buyer

Jan. 5, 20x2 Cash 2,980

Accounts receivable 2,980
to record collection of account receivable net of reimbursement for the
freight

5. A
Total sales 2,280,000
Cash sales (380,000)
Gross credit sales 1,900,000
Sales returns & discounts on credit sales (22,800 – 3,800) (19,000)
Net credit sales 1,881,000
Multiply by: Percentage of net credit sales 3%
Bad debt expense 56,430

Allowance for doubtful

accounts
30,400 Jan. 1
Write-off 19,000 3,800 Recoveries
56,430 Bad debts expense
Dec. 31 (squeeze) 71,630

Accounts receivable, Dec. 31 – gross 570,000

Allowance for doubtful accounts, Dec. 31 (71,630)
Accounts receivable, Dec. 31 – net 498,370

6. B
Solution:

Accounts receivable
Jan. 1 80,000 5,000 Write-off
Collections on accounts,
excluding recovery (140,000 -
Net credit sales 270,000 139,000 recovery of 1,000)

206,000 Dec. 31 (squeeze)

 Allowance for doubtful accounts
10,000 Jan. 1
Write-off 5,000 1,000 Recovery
4,300 Bad debts expense (squeeze)
Dec. 31 (206K x 5%) 10,300

7. A
Solution:
Days past due Receivable balances % Uncollectible Required allowance
(a) (b) (a) x (b)
 Not due (cash discounts available) - 0 to 15 days of age 180,000 None -
 Not due (cash discounts forfeited) - 16 to 30 days of age 108,000 None -
 1 - 30 days past due 90,000 3% 2,700
 31 - 60 days past due 72,000 10% 7,200
 61 - 90 days past due 54,000 15% 8,100
 91 - 120 days past due 36,000 35% 12,600
Totals 540,000 30,600

Doubtful accounts expense for the year is computed as follows:

Allowance for doubtful accounts
18,000 Beg. bal.
Write-offs 6,000 3,000 Recoveries
15,600 Doubtful accounts expense (squeeze)
End. Bal. 30,600

8. B
Solution:
Allowance for doubtful accounts
18,900 Jan. 1, 20x1 (squeeze)
Write-offs 119,700 28,350 Recoveries
Unadjusted bad debts
126,000
(6.3M x 2%)
Dec. 31 unadjusted bal. 53,550

9. D
Solution:
Days outstanding Receivable balances % uncollectible Required allowance
(a) (b) (c) = (a) x (b)
 0 – 60 378,000 1% 3,780
 61 - 120 (283.5K – 63K) 220,500 2% 4,410
 Segregated account 63,000 5% 3,150
 Over 120 (315K – 31.5K) 283,500 6% 17,010
Totals 945,000 28,350
Allowance for doubtful accounts
18,900 1/1/x1 [see previous question]
Write-offs 151,200 28,350 Recoveries
(119.7K + 31.5K)
132,300 Adjusted bad debts (squeeze)
12/31/x1 bal. 28,350

10. C
Solution:
Allowance for doubtful accounts
Beg. bal. – debit 18,000
Write-offs 22,800 3,000 Recoveries
49,800 Bad debts expense (squeeze)
End. Bal. (600K x 2%) 12,000