Answered: A proof of cash * a. Is a summary of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

FAR Cash and Cash Equivalent

Kindly help me answer the following:

1. Sherwin Company reported the checkbook balance on December 31, 2015 at P8,000,000. In addition, the entity held the following items in the safe on that date: Check payable to Sherwin, dated January 2, 2016 in payment of a sale, not included in December 31 check book balance - 1,000,000; Check payable to Sherwin, deposited December 15 and included in December 31 checkbook balance, but returned by bank on December 30 stamped "NSF". The check was redeposited on January 2, 2016 and cleared on January 5, 2016 - 3,000,000; Check drawn on Sherwin's account, dated and recorded on December 31, 2015 but not mailed. until January 15, 2016 - 2,500,000; Coins and currencies on hand - 800,000; Three-month money market instruments - 1,500,000.

What is the correct amount of "cash" on December 31,2015? *

a. 9,800,000

b. 9,300,000

c. 7,500,000

d. 8,300,000

2. A proof of cash *

a. Is a summary of cash receipts and cash payments.

b. Is a formal statement showing the total cash receipts during the year.

c. Is a four-column bank reconciliation showing reconciliation of cash balances per book and per bank at the beginning and end of the current month and reconciliation of cash receipts and cash disbursements of the bank and the depositor during the current month.

d. Is a physical count of currencies on hand at the end of reporting period.

3. Charm Carpet Cleaning prepares a bank reconciliation at the end of every month. At the end of July, the balance in the general ledger checking account, was P2,750 and the bank balance on the bank statement was P2,980. Outstanding checks totaled P680 and deposits in transited were P400. The bank statement revealed that a check written for P120 was incorrectly recorded by Charm as a P220 disbursement. The bank statement listed service charges and NSF check charges totaling P150.

The corrected cash balance is: *

a. P2,470

b. P2,700

c. P2,550

d. P2,270

4. Carefree Company's newly hired assistant prepared the following bank reconciliation on March 31, 2012:Check No. 175 was made for the proper amount P249,000 in payment of account. However it was entered in the cash payments journal as P294,000. Carefree authorized the bank to automatically pay its water bill as submitted directly to the bank.

The correct cash in bank balance is *(See attached picture)

a. P3,660,000

b. P3,600,000

c. P2,880,000

d. P3,630,000

5. Which of the following statements in relation to bank reconciliation is true? *

a. The cash amount reported in the statement of financial position must be the balance reported in the bank statement.

b. Outstanding checks will cause the cash balance per ledger to be greater than the balance reported by the bank, all other things being equal

c. Credit memos will cause the cash balance per ledger to be higher than that reported by the bank, all other things being equal.

d. Bank service charge will cause the cash balance per ledger to be higher than that reported by the bank, all other things being equal.

6. Which of the following statements in relation to petty cash is incorrect? *

a. Entries are made to the petty cash account only to increase or decrease the size of the fund or to adjust the balance if not replenished at year-end

b. The petty cash fund is reported as part of current assets.

c. The petty cash account is debited when the fund is replenished.

d. The imprest petty cash system in effect adheres to the rule of disbursement by check.

7. What is a compensating balance? *

a. Minimum deposit required to be maintained in connection with a borrowing arrangement

b. Saving account balance

c. Demand deposit account balance

d. Temporary investment serving as collateral for outstanding loan

8. Which of the following is not considered as a cash equivalent? *

a. A three-year treasury note maturing on May 30 of the current year purchased by the entity on January 15 of the current year

b. A 90-day T-bill

c. A 60-day money market placement

d. A three-year treasury note maturing on May 30 of the current year purchased by the entity on April 15 of the current year

9. Which of the following statements is false? *

a. A certified check is a liability of the bank certifying it.

b. A certified check will be accepted by many persons who would not otherwise accept a personal check.

c. A certified check is one drawn by a bank upon itself.

d. A certified check should not be included in the outstanding checks.

10. Which is false concerning measurement of cash and cash equivalents? *

a. Cash is measured at face value.

b. Cash in foreign currency is measured at the current exchange rate.

c. Cash equivalents should be measured at maturity value, meaning face value plus interest.

d. If a bank or financial institution holding the funds of the entity is in bankruptcy or financial difficulty, cash should be written down to estimated realizable value.

Carefree Company's newly hired assistant prepared the following bank
reconciliation on March 31, 2012:Check No. 175 was made for the proper amount
P249,000 in payment of account. However it was entered in the cash payments
journal as P294,000. Carefree authorized the bank to automatically pay its water
bill as submitted directly to the bank. The correct cash in bank balance is *
Book balance
P1,405,000
P 750,000
2,500,000
150,000
Add: March 31 deposit
Collection of note
Interest on note
3,400,000
4,805,000
Total
Less: Careless Company's deposit to our account 1,100,000
Bank service charge
Adjusted book balance
45,000
1,145.000
3,660,000
Bank balance
P5,630,000
45,000
5,675,000
Add: Error on check No. 175
Total
205,000
220,000
1,650,000
Less: Preauthorized payments for water bills
NSF check
Outstanding check
Adjusted bank balance
2,075,000
3,660,000
O P3,660,000

Definition Definition Financial statement that provides a snapshot of an organization's financial position at a specific point in time. It summarizes a company's assets, liabilities, and shareholder's equity, detailing what the company owns, what it owes, and what is left over for its owners. The balance sheet serves as a crucial tool to assess the financial health and stability of a company, as well as to help management make informed decisions about its future investments and financial obligations.

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