Sample Problems

PROBLEM NO. 1
The following data pertain to GalawGalaw Corp at December 31, 2017:

Current account at Metrobank P 1,000,000

Current account at Allied Bank (100,000)
Payroll account 250,000
Foreign bank account (in equivalent pesos) 750,000
Savings deposit in a closed bank 100,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from employees 10,000
Credit memo from a vendor for a purchase return 50,000
Traveler’s check 30,000
Money order 20,000
Petty cash fund (P6, 000 in currency and expense
receipts for P6, 000) 12,000
Pension fund 1,000,000
DAIF check of customer 15,000
Customer’s check dated 1/1/18 90,000
Time deposit – 30 days 200,000
Money market placement (due 6/30/18) 500,000
Treasury bills, due 3/31/16 (purchased 12/31/17) 200,000
Treasury bills, due 1/31/16 (purchased 2/1/17) 300,000

REQUIRED:
Determine the cash and cash equivalents to be reported on the entity’s December 31,
2017 statement of financial position.

SOLUTIONS:
Current account at Metrobank 1,000,000
Payroll account 250,000
Foreign bank account (in equivalent pesos) 750,000
Traveler’s check 30,000
Money order 20,000
Petty cash fund 6,000
Time deposit – 30 days 200,000
Treasury bills, due 3/3/18 (purchased12/31/17) 200,000
Cash and cash equivalents – Dec. 31, 2017 2,456,000
PROBLEM NO. 2
You are conducting an audit of the Hapitna Company for the year ended December 31,
2015. The internal control procedures surrounding cash transactions were not
adequate. The bookkeeper-cashier handles cash receipts, maintains accounting
records, and prepares the monthly bank reconciliations.

The bookkeeper-cashier prepared the following reconciliation at the end of the year:

Balance per bank statement P 350,000

Add: Deposit in transit P 175,250
Note collected by bank 15,000 190,250
Total
540,250
Less outstanding checks 246,750
Balance per general ledger P 293,500

In the process of your audit, you gathered the following:

• At December 31, 2015, the bank statement and general ledger showed balances of
P 350,000 and P293,000, respectively.
• The cut-off bank statement showed a bank charge on January 2, 2016 for P 30,000
representing correction of an erroneous bank credit.
• Included in the list of outstanding checks were the following:
a. A check payable to a supplier, dated December 29, 2015, in the amount of P
20,100 , released on January 5, 2016.
b. A check representing advance payment to a supplier in the amount of P
37,210, the date of which is January 4, 2016, and released in December, 2015.
• On December 31, 2015, the company received and recorded customer's postdated
check amounting to P 30,000.

REQUIRED:
1. Compute for the following as at December 31, 2015:
a. Adjusted deposit in transit c. Adjusted cash in bank
b. Adjusted outstanding check d. Cash shortage

2. Adjusting entries as of December 31, 2015

SOLUTIONS:
a. DIT, beg. P 175,250
Less: postdated checks (30,000)
Adjusted deposit in transit P 145,250

b. Unadjusted outstanding checks P 246,750

 Unreleased check (20,100)

Postdated check delivered (37,210)

Adjusted outstanding checks P 189,440

Book balance P 293,500 Bank balance P 350,000

Add: Add: DIT 145,250
Unreleased check 20,100 Total 475,250
Postdated check 37,210 Less: OC (189,440)
Credit memo 15,000 Erroneous bank
Total 360,460 credit ( 30,000)
Less: Adjusted bank bal. P 275,810
Postdated check received (30,000)
Cash Shortage (60,000)
Adjusted book balance P 275,810

Adjusting Entries:

a. Accounts Receivable 30,000

Cash in bank 30,000

b. Cash in Bank 20,100

Accounts Payable 20,100

c. Cash in Bank 37,210

Accounts Payable 37,210

d. Cash in bank 15,000

Account Receivable 15,000

e. Receivable from cashier 60,000

Cash in bank 60,000
PROBLEM NO. 3
You were engaged to audit the books of BSA Company. From the records of the
company, you gathered the following information:

Davao Company started operations on October 2, 2015 with the owners investing
P150,000 cash. Monthly bank reconciliation statements have not been prepared;
however, bank statements for October, November and December were made available
to you. Your analysis of these bank statement; showed total bang; credits (deposits) of
P575,000 including the owners' initial investment and a bank loan, details of which are
in additional data. The bank statement in December, 2015 showed an ending balance of
P91,500.

Examination of the paid checks disclosed that checks totaling P4,500 were issued by
the company in December, 2015, and were presented for payment only in January,
2016. Cash count of the cashier's accountability amounted to P5,000. You were told by
the cashier that these were collection; from credit sales on December 30, 20I5,
deposited on January 2, 2016:

Additional information are as follows:

a. At counts receivable subsidiary ledgers had a total balance of P70,000 at December

31, 2015. P5,000 of this was ascertained to be uncollectible.

b. Suppliers' unpaid invoices for merchandise totaled P15,000; while an account for
store fixtures bought for P50,000 had an unpaid balance of P5,000.

c. Merchandise inventory at December 31, 2015 amounted to P30,000 but P5,000 of

these were spoiled with no resale value.

d. The bank statement in October showed a bank credit for P98,000, dated October 2,
2015. Inquiry from the cashier disclosed that the amount represents proceeds of a
90-day, discounted bank note. P 80,000 of this loan was paid by check in December,
2015.

e. Operating expenses paid during the period totaled P 180,000; while merchandise
purchases amounted to P250,000.

f. The gross profit rate is 120% of cost.

REQUIRED:

Determine the cash shortage as of December 31, 2015.

SOLUTIONS:

Unadjusted balance per bank, Dec. 31 91,500

Outstanding checks ( 4,500)
Deposit in transit 5,000
Adjusted balance per bank 92,000
Cash balance per books, Dec. 31 122,000
Cash over (short) ( 30,000)

Cash receipts:
Owner’s investment 150,000
Proceeds from loan 98,000
Collections from customers 414,000
Total 662,000
Cash disbursements:
Purchases (250,000 – 15,000) 235,000
Store fixtures (50,000 – 5,000) 45,000
Loan payment 80,000
Expenses paid 180,000 540,000
Cash balance per books, Dec. 31 122,000

PROBLEM NO. 4
The Cash in Bank account of Dollar Company disclosed a balance of P203,000 as of
December 31. The bank statement as of December 31 showed a balance of P106,000.
Upon comparing the bank statement with cash records, the following facts were
developed:

a. The company’s account was charged on December 26 for a customer’s uncollectible

check amounting to P30,000.

b. A two-month, 17% P60,000 customer’s note dated October 25, discounted on

November 25, was dishonored on December 25, and the bank charged the company
P62,000, which included a protest fee of P2,000.

c. A customer’s check for P15,400 was entered as P14,500 by both the depositor and
the bank but was later corrected by the bank.

d. Check no. 142 for P12,425 was entered in the cash disbursements journal at
P12,245 and check no. 156 for P3,290 was entered as P32,900.
e. Bank service charges of P1,830 for December were not yet recorded on the books.

f. A bank memo stated that a customer’s note for P25,000 and interest of P1,000 had
been collected on December 28; and the bank charged P500. (No entry was made
on the books when the note was sent to the bank for collection).

g. Receipts on December 31 for P24,000 were deposited on January 2.

h. The following checks were outstanding on Dec. 31:

No. 123 P3,000 No. 154 P4,000
No. 143 * 2,000 No. 157 6,000
No. 144 7,000 No. 159 7,000
No. 147 3,000 No. 169 5,000
* Certified by the bank in December

i. A deposit of P20,000 was recorded by the bank on December 5, but it should have
been recorded for Dolor Company rather than Dollar Company.

j. Petty cash of P10,000 was included in the Cash in Bank balance

k. Proceeds from cash sales of P60,000 for December 18 were stolen. The company
expects to recover this amount from the insurance company. The cash receipts were
recorded in the books, but no entry was made for the loss.

l. The December 21 deposit included a check for P20,000 that had been returned on
December 15 marked NSF. Dollar Company had made no entry upon return of the
check. The redeposit of the check on December 21 was recorded in the cash
receipts journal of Dollar Company as a collection on account.

REQUIRED:

1. Bank reconciliation using:

a. Bank to book method;
b. Book to bank method; and
c. Adjusted balance method

2. Adjusting entries as of December 31, 2015.

SOLUTIONS:
A. Bank to book method Dec. 31
Bank balance 106,000
Deposit in Transit 24,000
Outstanding Checks (35,000)
Bank error - check of another company charged by the bank (20,000)
Customer’s uncollectible check 30,000
Dishonored checks 62,000
Book error – customer’s check (900)
Book error –understatement of cash disbursement 180
Book error – overstatement of cash disbursement (29,610)
Bank charges 1,830
Customer’s note collected by bank (25,500)
Petty cash fund – included in the cash in bank 10,000
Claims from insurance company 60,000
NSF Checks returned 20,000
Book Balance 203,000

B. Book to Bank Method Dec. 31

Book Balance 203,000
Customer’s uncollectible check (30,000)
Dishonored checks (62,000)
Book error – customer’s check 900
Book error – understatement of cash disbursement (180)
Book error – overstatement of cash disbursement 29,610
Bank charges (1,830)
Customer’s note collected by bank 25,500
Petty cash fund – included in the cash in bank (10,000)
Claims from insurance company (60,000)
NSF Checks returned (20,000)
Deposit in Transit 24,000
Outstanding Checks (35,000)
Bank error - check of another company charged by the bank (20,000)
Bank Balance 106,000
 Dec. 31
Unadjusted Bank Balance 106,000
Deposit in Transit 24,000
Outstanding checks (35,000)
Bank error – check by another company charged by the bank (20,000)
Adjusted Cash Balances 75,000

C. Dec. 31
Unadjusted Book Balance 203,000
Customer’s uncollectible check (30,000)
Dishonored checks (62,000)
Book error – customer’s check 900
Book error – understatement of cash disbursement (180)
Book error – overstatement of cash disbursement 29,610
Bank service charge (1,830)
Customer’s note collected by bank 25,500
Petty cash fund – included in the cash in bank (10,000)
Claims from insurance company (60,000)
NSF Checks returned (20,000)
Adjusted Cash Balances 75,000

Dec. 31
Unadjusted Bank Balance 106,000
Deposit in Transit 24,000
Outstanding checks (35,000)
Bank error – check by another company charged by the bank (20,000)
Adjusted Cash Balances 75,000

Adjusting Entries:
a) Accounts Receivable 30,000
Cash in Bank 30,000

b) Notes Receivable – dishonored 62,000

Cash in Bank 62,000

c) Notes Receivable – discounted 60,000

Notes Receivable 60,000

d) Cash in Bank 900

 Accounts Receivable 900

e) Accounts Payable 180

Cash in Bank 180

f) Cash in Bank 29,610

Accounts Payable 29,610
g) Bank Service Charge 1,830
Cash in Bank 1,830

h) Cash in Bank 25,500

Bank Service Charge 500
Notes Receivable 25,000
Interest Income 1,000

i) Petty Cash Fund 10,000

Cash in Bank 10,000

j) Claims from insurance company 60,000

Cash in Bank 60,000

k) Accounts Receivable 20,000

Cash in Bank 20,000

PROBLEM NO. 5
You were able to obtain the following information during your audit of Euro Company

Reconciling items:
Nov. 30 Dec. 31
Undeposited collections P 200,000 P120,000
Outstanding checks 80,000 60,000
Customer's notes collected by bank 100,000 120,000
Bank service charges 2,000 3,000
Erroneous bank debits 10,000 20,000
Erroneous bank credits 40,000 30,000
NSF checks not redeposited 5,000 7,000
Customers check deposited December 10,
returned by bank on December 16 marked NSF,
and redeposited immediately;
no entry made on books for return or redeposit 10,000
Unadjusted balances:
Books ? P90,000
Bank 230,000 ?

December Transactions:

Bank Books
Receipts P420,000 P270,000
Disbursements 500,000 407,000

REQUIRED:

1. Prepare a 4-column bank reconciliation for the month of December

a. Bank to book method;
b. Book to bank method; and
c. Adjusted balance method

2. Adjusting entries as of December 31, 2015.

SOLUTIONS:
A. Bank to Book Method
Nov. 30 Receipts Disbursement Dec. 31
Bank balance 230,000 420,000 500,000 150,000
Deposit in Transit
November 200,000 (200.000)
December 120,000 120,000
Outstanding Checks
November (80,000) (80,000)
December 60,000 (60,000)
Error – bank debits
November 10,000 (10,000)
December (20,000) 20,000
Error – bank credits
November (40,000 (40,000)
December (30,000) (30,000)
Bank charges
November 2,000 2,000
December (3,000 3,000
Customer’s note collected by
bank
 November (100,000) 100,000
December (120,000) (120,000)
NSF Checks returned
November (5,000 5,000
December (7,000) 7,000
NSF Checks redeposited (10,000) (10,000)
Book Balance 227,000 270,000 407,000 90,000

B. Book to Bank Method

Disbursemen
Nov. 30 Receipts t Dec. 31
Book Balance 227,000 270,000 407,000 90,0000
Bank charges
November (2,000) (2,000)
December 3,000 (3,000)
Collections by bank not
recorded to book
November 100,000 (100,000)
December 120,000 120,000
Check of another company
erroneously charged by the
bank
NSF Checks returned
November (5,000) (5,000)
December 7,000 (7,000)
Error
Deposit in Transit
November (200,000) 200,000
December (120,000) (120,000)
Outstanding checks
November 80,000 80,000
December (60,000) 60,000
Error – bank debits
November (10,000) 10,000
December 20,000 (20,000)
Error – bank credits
November 40,000 40,000
December 30,000 30,000
NSF Checks Redeposited 10,000 10,000
Bank Balance 230,000 420,000 500,000 150,000
C. Adjusted Balance Method
Disbursemen
Nov. 30 Receipts t Dec. 31
Unadjusted Book Balance 227,000 270,000 407,000 90,000
Bank charges
November (2,000) (2,000)
December 3,000 (3,000)
Collections by bank not
recorded to book
November 100,000 (100,000)
December 120,000 120,000
Check of another company
erroneously charged by the
bank
NSF Checks returned
November (5,000) (5,000)
December 7,000 (7,000)
Error
Adjusted book Balances 320,000 290,000 410,000 200,000

Disbursemen
Nov. 30 Receipts t Dec. 31
Unadjusted Bank Balance 230,000 420,000 500,000 150,000
Deposit in Transit
November 200,000 (200,000)
December 120,000 120,000
Outstanding checks
November (80,000) (80,000)
December 60,000 (60,000)
Bank debits error
November 10,000 (10,000)
December (20,000) 20,000
Bank credits error
November (40,000) (40,000)
December (30,000) (30,000)
NSF checks returned;
redeposited (10,000) (10,000)
Adjusted Bank Balances 320,000 290,000 410,000 200,000
Adjusting Entries:
1. Cash in Bank 120,000
Notes Receivable 120,000

2. Bank Service Charge 3,000

Cash in Bank 3,000

3. Accounts Receivable 7,000

Cash in Bank 7,000

PROBLEM NO. 6
In your audit of the cash account of Cebu Company, you were requested by the client to
prepare a four-column reconciliation of receipts, disbursements, and balances to
reconstruct the balances per books.

Nov. 30 Dec. 31
a. Balances per bank P14,010 P19,630
b. Deposits in transit 2,740 3,110
c. Outstanding checks 4,260 3,870
d. Bank collections not in books 1,200 1,600
e. Bank charges not in books 950 640

f. Of the checks outstanding on December 31, one check for P700 was certified at the
request of the payee.

g. Receipts for December, per bank statement P281,070.

h. DAIF check from customer was charged by the bank on December 28, and has not
been recorded P 800.

i. DAIF check returned in November and recorded in December P1,050.

j. DAIF check returned and recorded in December, P900.

k. Check of Cibo Company charged by the hank in error, P2,010.

l. Receipt on December 6 paid out in cash for travel expenses, P 750 Recorded as
receipts and disbursements per books.
m. Error in recording customer's check on December 20, P165 instead P465.

n. Error in disbursements journal for December, P3,250 instead of P325:

You noted in your audit that the DAIF checks returned by the bank recorded as a
reduction on the cash receipts journal instead of recording it at cash disbursements
journal; redeposits are recorded as regular cash receipts.

REQUIRED:

1. Prepare a 4-column bank reconciliation for the month December

a. Bank to book method;
b. Book to bank method; and
c. Adjusted balance method

2. Adjusting entries as of December 31, 2015.

SOLUTIONS:
A. Bank to Book Method
Nov. 30 Receipts Disbursement Dec. 31
Bank balance 14,010 281,070 275,450 19,630
Deposit in Transit
November 2,740 (2,740)
December 3,110 3,110
Outstanding Checks
November (4,260) (4,260)
December 3,870 (3,870)
Certified check request of the
payee (700) 700
Check of another company
erroneously charged by the
bank (2,010) 2,010
Cash receipts used as
payment 750 750
Bank charges
November 950 950
December (640) 640
Collections by bank not
recorded to book
November (1,200) 1,200
December (1,600) (1,600)
NSF Checks returned
November and recorded in
Dec. 1,050 (1,050)
December and recorded in (900) (900)
 Dec.
December and not recorded (800) 800
Book error – overstatement
of recording customer’s check (300) (300)
Book error – overstatement of
disbursement 2,925 (2,925)
Book Balance 13,290 279,540 274,635 18,195

B. Book to Bank Method

Nov. 30 Receipts Disbursement Dec. 31
Book Balance 13,290 279,540 274,635 18,195
Bank charges
November (950) (950)
December 640 (640)
Collections by bank not
recorded to book
November 1,200 (1,200)
December 1,600 1,600
NSF Checks returned
November and recorded in
Dec. (1,050) 1,050
December and recorded in
Dec. 900 900
December and not
recorded 800 (800)
Book error –
overstatement of recording
customer’s check 300 300
Book error – overstatement
of disbursement (2,925) 2,925
Deposit in Transit
November (2,740) 2,740
December (3,110) (3,110)
Outstanding checks
November 4,260 4,260
December (3,870) 3,870
Certified check request of
the payee 700 (700)
Check of another company
erroneously charged by the
bank 2,010 (2,010)
Cash receipts used as
payment (750) (750)
Bank Balance 14,010 281,070 275,450 19,630

Adjusted Balance Method

Nov. 30 Receipts Disbursement Dec. 31
Unadjusted Book Balance 13,290 279,540 274,635 18,195
Bank charges
November (950) (950)
December 640 (640)
Collections by bank not
recorded to book
November 1,200 (1,200)
December 1,600 1,600
NSF Checks returned
November and recorded in
Dec. (1,050) 1,050
December and recorded in
Dec. 900 900
December and not
recorded 800 (800)
Book error –
overstatement of recording
customer’s check 300 300
Book error – overstatement
of disbursement (2,925) 2,925
Adjusted Cash Balances 12,490 282,190 273,100 21,580

Nov. 30 Receipts Disbursement Dec. 31

Unadjusted Bank Balance 14,010 281,070 275,450 19,630
Deposit in Transit
November 2,740 (2,740)
December 3,110 3,110
Outstanding checks
November (4,260) (4,260)
December 3,870 (3,870)
Certified check request of
the payee (700) 700
Check of another company
erroneously charged by the
bank (2,010) 2,010
Cash receipts used as
payment 750 750
Adjusted Bank Balances 12,490 282,190 273,100 21,580
Adjusting Entries:
a. Cash in Bank 1,600
Notes Receivable 1,600

b. Bank Service Charge 640

Cash in Bank 640

c. Accounts Receivable 800

Cash in Bank 800

d. Cash in Bank 300

Accounts Receivable 300

e. Cash in Bank 2,925

Accounts Payable 2,925

PROBLEM NO. 7
In connection with your examination, the MQM Company presented to you the following
information regarding its Cash in Bank account for the month of December 2015:

a) Balances per bank statements: November 30, P215,600, and December 31,
P230,400.

b) Balances of cash in bank account in company's books: November 30, P165,450,

and December 31, 226,800.

c) Total receipts per books were P2,221,900 of which P12,100 was paid in cash to a
creditor on December 24.

d) Total charges in the bank statement during December were P2,189,700.

e. Undeposited receipts were: November 30, P90,600 and December '11, P101,200.

f) Outstanding checks were: November 30, P26,750, and December 31, P19,300: of
which a check for P5,000 was certified by the hank on December 26.

g) NSF checks returned, recorded as reduction of cash receipts, were:

• Returned by bank on December, recorded also in December, P10,400.
• Returned by bank on December but recorded in January, P8,600
h) Collections by bank not recorded by Company were P121,500 in November and
P116,400 in December:

i) Bank service charges not entered in company's books were: November 30, P7,500
and December 31, P4,200.

j) A check for P9,500 of QMQ Company was charged to MQM Company in error.

k) A check drawn for P8,400 was erroneously entered in the books as P4,800.

REQUIRED:

1. Prepare a 4-column bank reconciliation for the month. December

a. Bank to book method;
b. Book to bank method; and
c. Adjusted balance method

2. Adjusting entries as of December 31, 2015.

SOLUTIONS:
A. Bank to Book Method
Nov. 30 Receipts Disbursement Dec. 31
Bank balance 215,600 2,204,500 2,189,700 230,400
Deposit in Transit
November 90,600 (90,600)
December 101,200 101,200
Outstanding Checks
November (26,750) (26,750)
December 14,300 (14,300)
Cash payment to creditor 12,100 12,100
Bank charges
November 7,500 7,500
December (4,200) 4,200
Collections by bank not
recorded to book
November (121,500) 121,500
December (116,400) (116,400)
Check of another company
erroneously charged by the
bank (9,500) 9,500
NSF Checks returned
November (10,400) (10,400)
December (8,600) 8,600
Error (3,600) 3,600
Book Balance 165,450 2,221,900 2,160,550 226,800

B. Book to Bank Method

Nov. 30 Receipts Disbursement Dec. 31
Book Balance 165,450 2,221,900 2,160,550 226,800
Bank charges
November (7,500) (7,500)
December 4,200 (4,200)
Collections by bank not
recorded to book
November 121,500 (121,500)
December 116,400 116,400
Check of another company
erroneously charged by the
bank 9,500 (9,500)
NSF Checks returned
November 10,400 10,400
December 8,600 (8,600)
Error 3,600 (3,600)
Deposit in Transit
November (90,600) 90,600
December (101,200) (101,200)
Outstanding checks
November 26,750 26,750
December (14,300) 14,300
Cash payment to creditor (12,100) (12,100)
Bank Balance 215,600 2,204,500 2,189,700 230,400

C. Adjusted Balance Method

Nov. 30 Receipts Disbursement Dec. 31
Unadjusted Book Balance 165,450 2,221,900 2,160,550 226,800
Bank charges
November (7,500) (7,500)
December 4,200 (4,200)
Collections by bank not
recorded to book
November 121,500 (121,500)
December 116,400 116,400
NSF Checks returned
November 10,400 10,400
 December 8,600 (8,600)
Error 3,600 (3,600)
Adjusted Cash Balances 279,450 2,227,200 2,179,850 326,800

Nov. 30 Receipts Disbursement Dec. 31

Unadjusted Bank Balance 215,600 2,204,500 2,189,700 230,400
Deposit in Transit
November 90,600 (90,600)
December 101,200 101,200
Outstanding checks
November (26,750) (26,750)
December 14,300 (14,300)
Check of another company
erroneously charged by the
bank (9,500) 9,500
Cash payment to creditor 12,100 12,100
Adjusted Bank Balances 279,450 2,227,200 2,179,850 326,800

Adjusting Entries:

a. Accounts Receivable 8,600

Cash in Bank 8,600

b. Cash in bank 116,400

Notes Receivable 116,400

c. Bank Service Charge 4,200

Cash in Bank 4,200

d. Cash in bank 3,600

Accounts payable 3,600
PROBLEM NO. 8
Hangover Company received the following bank statement on August 1, 2015:
DATE DEBITS CREDITS BALANCE
July I 66,405
2 2,502 63,903
3 2,240 1,050 62,713
5 2,106 64,819
6 5,535 70,354
8 5,817 76,171
9 8,181 67,990
10 4,317 72,307
11 6,819 4,926 65,488
12 7,425 62,989
13 62,989
15 3,509 66,498
16 9,777 56,721
17 6,221 7,702 58,202
18 6,484 51,718
19 3,418 55,136
20 5,310 60,446
22 6,492 66,938
23 5,546 61,392
24 61,392
25 8,735 52,657
26 8,246 60,903
27 9,385 70,288
29 7,060 63,228
30 63,228
31 6,405 8,987 65,810

TOTALS P77,395 P76,800

Hangover's cash account shows the following information for the month of July, 2015:

The June 30, 2015 balance was P62,150.

DATE DEBITS CREDITS

July 1 3,729 165
2 5,535
3 8,181
5 5,817
 6 4,317
8 6,819
9 4,926 7,425
12 3,509
13 9,391
15 7,702
16 6,221
17 3,418 6,484
18 5,310
19 6,492
20 5,074
22 8,735
23 8,246
26 8,913 6,885
29 5,152 5,913
30 2,238
31 5,857
TOTALS P 75,304 P 77,150

Additional information:

1. Hangover makes a journal entry for service charges, direct deposits, and interest
earned in the month subsequent to the month the items are reflected on the bank
statement.

2. Barek Co. makes a direct deposit of P675 to Hangover's account at the bank on the
30th of every month. This payment, which is Tent revenue to Hangover, is not
recorded by Hangover until the bank statement is received.

3. On the 23rd of July, an NSF check for P472 was returned by the bank. The check
was redeposited on July 27th, and no entry was made by Hangover.

4. Check no. 1145 dated July 29 was written for P1,492 of wages, but recorded by
Hangover on its books as P1,000.

5. On July 16, the bank recorded a withdrawal of P386 for Hangover that should have
been for Handover Company.

6. The bank service charge for June was P165 and for July was P175.

7. The interest earned on June was P3,054 and in July was P3,160.
8. During June, Hangover wrote check no. 1095 for P9,850 for rent expense but
recorded the check on its books as P8,955. Hangover discovered the mistake in
July, when the cancelled checks were returned with the June bank statement but
neglected to correct the error on the books at that time.

9. At the end of June, Hangover had P3,156 of deposits in transit, and checks totaling
P4,742 that had not cleared the bank. In addition, all of Hangover's transactions with
the bank after July 29 have not cleared the bank.

REQUIRED:

1. Prepare a 4-column bank reconciliation for the month of July

a. Bank to book method;
b. Book to bank method; and
c. Adjusted balance method

2. Adjusting entries as of July 31, 2015

Solutions:
A. Bank to Book Method
Nov. 30 Receipts Disbursement Dec. 31
Bank balance 66,405 76,800 77,395 65,810
Deposit in Transit
June 3,156 (3,156)
July 2,238 2,238
Outstanding Checks
June (4,742) (4,742)
July 5,857 (5,857)
Erroneous bank debit – Nov. (386) 386
Bank charges
June 165 165
July (175) 175
Direct Deposit (675) (675)
NSF Checks returned –
Dec. (472) (472)
Error Check 1145 (492) 492
Interest earned
June (3,054) 3,054
July (3,160) (3,160)
Error on recording check 895 895
Book Balance 62,150 75,304 77,150 60,304
B. Book to Bank Method
Nov. 30 Receipts Disbursement Dec. 31
Book Balance 62,150 75,304 77,150 60,304
Bank charges
November (165) (165)
December 175 (175)
Direct deposit 675 675
NSF Checks 472 472
Error check 1145 492 (492)
Interest earned
June 3,054 (3,054)
July 3,160 3,160
Error on recording check (895) (895)
Deposit in Transit
November (3,156) 3,156
December (2,238) (2,238)
Outstanding checks
November 4,742 4,742
December (5,857) 5,857
Erroneous bank debit – Nov. 386 (386)
Bank Balance 66,405 76,800 77,395 65,800

C. Adjusted Balance Method

June 30 Receipts Disbursement July 31
Unadjusted Book Balance 62,150 75,304 77,150 60,304
Bank charges
June (165) (165)
July 175 (175)
Direct deposit 675 675
NSF Checks 472 472
Error check 1145 492 (492)
Interest earned
June 3,054 (3,054)
July 3,160 3,160
Error on recording check (895) (895)
Adjusted Cash Balances 64,819 75,882 78,124 62,577

Nov. 30 Receipts Disbursement Dec. 31

Unadjusted Bank Balance 66,405 76,800 77,395 65,810
Deposit in Transit
November 3,156 (3,156)
December 2,238 2,238
Outstanding checks
November (4,742) (4,742)
December 5,857 (5,857)
Erroneous bank debit – Nov. (386) 386
Adjusted Bank Balances 64,819 75,882 78,124 62,577

Adjusting Entries:
a. Cash in Bank 675
Rent income 675

b. Wages expense 492

Cash in Bank 492

c. Bank Service Charge 175

Cash in Bank 175

d. Cash in Bank 3,160

Interest income 3,160

e. Rent expense 895

Cash in Bank 895

PROBLEM NO. 9
KAYAPA Company had the following bank reconciliation on June 30, 2015:

Balance per bank statement, June 30, 2015 P 3,000,000

Add: Deposit in transit 400,000
Total 3,400,000
Less: Outstanding checks 900,000
Balance per book, June 30 P 2,500,000

The bank statement for the month of July 2015 showed the following:
Deposits (including P200,000 note collected for Celtics) P9,000,000
Disbursements (including P140,000 NSF
check and PI0,000 service charge) 7,000,000
All reconciling items on June 30, 2015 cleared through the bank in July its outstanding
checks totaled P600,000 and the deposits in transit amounted to P1,000,000 on July 31,
2015.

REQUIRED:
Determine the following:
1. Cash receipts per books in July
2. Cash disbursement per books in July
3. Cash balance per books at July 31
4. Adjusted cash balance at July 31

SOLUTIONS:
1. Deposits per bank statement for July P 9,000,000
Note collected by bank in July (200,000)
Deposit in transit- June 30 (400,000)
Deposit in transit- July 31 1,000,000
Cash receipts per book for July P 9,400,000

2. Disbursements per bank statement for July P 7,000,000

NSF check in July (140,000)
Service charge in July ( 10,000)
Outstanding checks- June 30 (900,000)
Outstanding checks- July 31 600,000
Cash Disbursements per book for July P 6,550,000

3. Balance per book- June 30 P 2,500,000

Book receipts for July 9,400,000
Book disbursements for July (6,550,000)
Balance per book- July 31 P 5,350,000

4. Balance per book- July 31 P 5,350,000

Note collected by bank in July 200,000
NSF customer check in July (140,000)
Service charge in July ( 10,000)
Adjusted cash balance P 5,400,000

PROBLEM NO. 10
The bank statement for the account of JB Company at December 31, 2006 showed a
credit balance of P20,000, while the company’s ledger balance of the cash account as
of November 30, 2006 was a debit of P40,000. During December, 2006, the ledger
showed two postings, a debit of P60,000 and a credit of P39,000 from the Cash
Receipts and Check Disbursements Journal, respectively.
Your examination revealed that the cash column of the receipts book was underfooted
by P6,400. The receipts book recorded only the collections from customers and did not
include a bank credit in December for P8,000, representing loan proceeds of a P10,000
promissory note.

An examination of the customers’ subsidiary ledgers showed total credits to individual

accounts amounting to P70,400. The December Check Disbursements Journal which
was overfooted by P500, records only the checks issued by the company. In the month
of December, 2006, the bank charged ARNOLD COMPANY for P5,000 representing a
loan guaranteed by the client but was dishonored by the maker, the company vice-
president. The December bank service charges of P1,200 were erroneously charged
by the bank to the account of Ronald Company. The bank made the correction in
January, 2007. The outstanding checks as of December 31, 2006 amounted to P5,600.

On the morning of January 2, 2007, a cash count conducted produced the following:

Bills and coins P 5,200

Three (3) duplicate copies of ARNOLD CO.
official receipts, all dated Jan. 2, 2007 1,800
Checks 2,900
NSF check charged by the bank on Jan. 2, 2007 1,400

REQUIREMENTS:
1. Deposit in Transit
2. Cash shortage at December 31, 2006
3. Adjusted cash balance at December 31, 2006

SOLUTIONS:
 Book Bank
Unadjusted balance 61,000 20,000
Understatement of receipts 6,400
CM 8,000
Overstatement of disbursements 500
DM – service charge (5,000)
DM – service charge not recorded
in the book and erroneously
recorded by the bank (1,200) (1,200)
Outstanding checks (5,600)
Deposit in transit
(5,200 + 2,900 – 1,800) ______ _6,300_
Total 69,700 19,500
Cash shortage (50,200) _______
Adjusted cash balance 19,500 19,500