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Cabigon Problem 1 Audit

Ursula Company provided financial information for cash and cash equivalents as of December 31, 2019. This included cash on hand, bank accounts, time deposits, and other items. To prepare the correct amount for the financial statements, the auditor needs to determine which items qualify as cash equivalents based on their liquidity. Certain checks and deposits were not included in the balances provided based on their dates. The summary working paper shows the correct amount of cash and cash equivalents is P1,314,000 based on the qualifying balances identified from the financial information.

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Gianrie Gwyneth Cabigon
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1K views

Cabigon Problem 1 Audit

Ursula Company provided financial information for cash and cash equivalents as of December 31, 2019. This included cash on hand, bank accounts, time deposits, and other items. To prepare the correct amount for the financial statements, the auditor needs to determine which items qualify as cash equivalents based on their liquidity. Certain checks and deposits were not included in the balances provided based on their dates. The summary working paper shows the correct amount of cash and cash equivalents is P1,314,000 based on the qualifying balances identified from the financial information.

Uploaded by

Gianrie Gwyneth Cabigon
Copyright
© © All Rights Reserved
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
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Cabigon,Gianrie Gwyneth A.

Auditing and Assurance Concepts and Applications 1 PrE2


Problem 1 (Ursula Company)
This is a problem about cash and cash equivalent:

The following information has been extracted from the accounting records of Ursula Company at
December 31, 2019.
a. Cash on hand (see note below) P 230,000
b. Impukan Bank savings account (the required minimum monthly
average daily balance (MDAB) is P10,000 9,500
c. 230-day treasury bills purchased March 1, 2019 400,000
d. Petty cash fund (see note below) 20,000
e. Tipid Bank current account (see note below) 160,000
f. Time deposit placements:
Date Terms
12.15.2019 30 days 30,000
10.31.2019 90 days 40,000
11.30.2019 180 days 25,000
g. Employee travel advances 7,000
h. Cash in bond sinking fund 500,000
i. Customer's note receivable 45,000
j. Postage stamps 2,400
The following are included in cash on hand:
* A customer check for P43,000 returned by the bank on December 28, 2019. It was
redeposited and cleared by the bank on January 2, 2020.
* A customer check for P75,000 dated January 3, 2020, received December 27, 2019.
* Philpost money orders received from customers, P30,000.

The petty cash fund consists of the following:


Currency and coins P 3,500
IOUs from officers and employees 3,000
Unreplenished petty cash disbursements 1,500
Currency in envelope with the notation
"We were Bang Quay's co-workers. Words may not be
adequate to express how sorry we feel. Please accept
our heartfelt sympathies on the loss of your loved one." 1,500
__________
P 20,000
=========
The following information pertains to Tipid Bank current account:
* A check for P13,000 was dated and recorded on December 29, 2019, but was delivered to
payee on January 5, 2020.
* A check for P5,000 dated January 10, 2020, payable to a supplier was recorded and released to
payee on December 19, 2019. Tipid Bank requires current account depositors to maintain a
[monthly average daily balance of P50,000.

REQUIRED:
Prepare an audit working paper to show the correct amount of cash and cash equivalents that
Ursula Company should report Units December 31, 2019 statement of financial position.

Answer:

Cash on Hand (230,000 – 430,000 – 75,000) P 112,000


Impukan Bank Savings Account 950,000
Petty Cash Fund 3,500
Bank Current Account (160,000 + 13,000 + 5,000) 178,500
Time Deposits
30 Days 30,000
90 Days 40,000

Total Cash & Cash Equivalent P 1,314,000

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