POST TEST

Cash and Cash Equivalents

NAME: Date:
Professor: Section: Score:

1. The following data pertain to Angat Corporation on December 31, 2005:

Current account at Metrobank P2,000,000

Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account – restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P4,000 in currency and expense receipts for P6,000)
10,000
Treasury bills, due 3/31/06 (purchased 12/31/05) 200,000
Treasury bills, due 1/31/06 (purchased 1/1/05) 300,000

Based on the above information, compute for the cash and cash equivalent that would be reported
on the December 31, 2005 balance sheet.
a. P2,784,000 c. P2,790,000
b. P3,084,000 d. P2,704,000

2. The following data pertain to Balagtas Corporation on December 31, 2005:

Checkbook balance P10,000,000

Bank statement balance 15,000,000
Check drawn on Balagtas’ account, payable to supplier, dated and recorded
on Dec. 31, 2005, but not mailed until Jan. 15, 2006 3,000,000
Cash in sinking fund 4,000,000
Money market, three months due January 31, 2006 5,000,000

On December 31, 2005, how much should be reported as “cash and cash equivalents”?
a. P13,000,000 c. P18,000,000
b. P12,000,000 d. P17,000,000

3. On December 31, 2005, Baliuag Company had the following cash balances:

Cash in bank P15,000,000

Petty cash fund (all funds were reimbursed on December 31, 2005) 50,000
Time deposit 5,000,000
Saving deposit 2,000,000

Cash in bank includes P500,000 of compensating balance against short term borrowing arrangement
at December 31, 2005. The compensating balance is legally restricted as to withdrawal by Baliuag.
A check of P300,000 dated January 15, 2006 in payment of accounts payable was recorded and
mailed on December 31, 2005. In the current assets section of the December 31, 2005 balance
sheet, what amount should be reported as “cash and cash equivalents”?
a. P21,850,000 c. P21,800,000
b. P16,850,000 d. P14,850,000

4. Bocaue Company had the following account balances on December 31, 2005.
 Petty cash fund P50,000
Cash in bank – current account 10,000,000
Cash in bank – payroll account 2,000,000
Cash on hand 500,000
Cash in bank – restricted account for plant additions, expected to
be disbursed in 2006 4,000,000
Treasury bills, due February 15, 2006 3,000,000

The petty cash fund includes unreplenished December 2005 petty cash expense vouchers of P20,000
and employee IOUs of P10,000. The cash on hand includes a P100,000 check payable to Bocaue
dated January 15, 2006. What should be reported as “cash and cash equivalents” on December 31,
2005?
a. P12,420,000 c. P15,420,000
b. P19,420,000 d. P15,450,000

5. Bulacan Corporation's checkbook balance on December 31, 2005, was P800,000. In addition, Bulacan
held the following items in its safe on December 31:

Check payable to Bulacan Corporation, dated January 2, 2006, not included in

December 31 checkbook balance P200,000
Check payable to Bulacan Corporation, deposited December 20, and included
in December 31 checkbook balance, but returned by bank on December
30, stamped "NSF." The check was redeposited January 2, 2006, and
cleared January 7 40,000
Post-dated checks 15,000
Check drawn on Bulacan Corporation's account, payable to a vendor, dated
and recorded December 31, but not mailed until January 15, 2006 100,000

The proper amount to be shown as cash on Bulacan's balance sheet at December 31, 2005, is
a. P760,000 c. P860,000
b. P800,000 d. P975,000

6. You noted the following composition of Hagonoy Company’s “cash account” as of December 31, 2005:

Demand deposit account P2,000,000

Time deposit – 30 days 1,000,000
NSF check of customer 40,000
Money market placement (due June 30, 2006) 1,500,000
Savings deposit in a closed bank 100,000
IOU from employee 20,000
Pension fund 3,000,000
Petty cash fund 10,000
Customer check dated January 1, 2006 50,000
Customer check outstanding for 18 months 40,000
Total P7,760,000

Additional information follows:

a) Check of P200,000 in payment of accounts payable was recorded on December 31, 2005 but
mailed to suppliers on January 5, 2006.
b) Check of P100,000 dated January 15, 2006 in payment of accounts payable was recorded and
mailed on December 31, 2005.
c) The company uses the calendar year. The cash receipts journal was held open until January 15,
2006, during which time P400,000 was collected and recorded on December 31, 2005.

The cash and cash equivalents to be shown on the December 31, 2005 balance sheet is
a. P3,310,000 c. P1,910,000
b. P2,910,000 d. P4,410,000
7. The following information pertains to Bustos Company as of December 31, 2005:

Cash balance per general ledger P15,000,000

Cash balance per bank statement 14,550,000
Checks outstanding (including certified check of P100,000) 1,000,000
Bank service charge shown in December bank statement 50,000
Error made by Bustos in recording a check that cleared the bank in
December (check was drawn in December for P500,000
but recorded at P700,000) 200,000
Deposit in transit 1,500,000

At the December 31, 2005 balance sheet cash in bank should be

a. P15,150,000 c. P14,250,000
b. P14,650,000 d. P14,550,000

8. The bookkeeper of Calumpit Company recently prepared the following bank reconciliation on
December 31, 2005:

Balance per bank statement 20,000,000

Add: Deposit in transit 1,500,000
Checkbook and other bank charge 50,000
Error made by Calumpit in recording check No.
1005 (issued in December) 150,000
Customer check marked DAIF 500,000 2,200,000
Total 22,200,000
Deduct: Outstanding checks 1,900,000
Note collected by bank (includes P200,000 interest) 2,300,000 4,200,000
Balance per book 18,000,000

Calumpit has P1,000,000 cash on hand on December 31, 2005. The amount to be reported as cash
on the balance sheet as of December 31, 2005 should be
a. P19,600,000 c. P20,600,000
b. P18,600,000 d. P19,750,000

9. The petty cash fund of Guiguinto Company on December 31, 2005 is composed of the following:

Coins and currencies P14,000

Petty cash vouchers:
Gasoline payments 3,000
Supplies 1,000
Cash advances to employees 2,000
Employee’s check returned by bank marked NSF 5,000
Check drawn by the company payable to the order of Kristine
Anson, petty cash custodian, representing her salary 20,000
A sheet of paper with names of employees together with contribution
for a birthday gift of a co-employee in the amount of 8,000
Total P53,000

The petty cash ledger account has an imprest balance of P50,000. What is the correct amount of
petty cash on December 31, 2005?
a. P34,000 b. P39,000 c. P14,000 d. P42,000

10. Cash equivalents are

A. Short-term highly liquid investments that are readily convertible to known amount of cash.
B. Investments subject to an insignificant risk of change in value.
C. Short-term highly liquid investments that are readily convertible to known amount of cash and
which are subject to an insignificant risk of change in value.
D. Short-term highly liquid investments that are readily convertible to known amount of cash and
which are subject to a significant risk of change in value.
11. Which of the following is considered cash?
A. Certificates of deposit C. Money market saving certificates
B. Money market checking accounts D. ICU

12. Star Company placed P1.5 million in the money market for 60 days subject to pre-termination The
PI.5 million should be
A. Included as part of cash and cash equivalents with the appropriate disclosure in the notes to the
financial statements.
B. Recorded as part of its marketable securities without need of any disclosure.
C. Treated as short-term receivable with the appropriate disclosure in the notes to the financial
statements.
D. Considered as part of its marketable securities with the appropriate disclosure in the notes the
financial statements.

13. Daffy Company placed P1.5 million in the money market for 120 days subject to a pretermination
clause. The P1.5 million should be
A. Included as part of the cash and cash equivalents with the appropriate disclosure on the notes to
the financial statements.
B. Recorded as part of its marketable financial assets without need of any disclosure.
C. Treated as short-term receivable with appropriate disclosure in the notes to the financial
statements.
D. Considered as part of its marketable financial assets with appropriate disclosure in the notes to
financial statements.

14. The one item that should be excluded from cash and cash equivalent on the December 31, 2003
balance sheet of Zebra Company is
A. A P10,000 minimum balance in the firm’s current account which is maintained to avoid service
charges
B. A check issued by Zebra Company on December 27, 2003, but dated January 15, 2004
C. A P500,000 time deposit which matures on one year
D. A customer’s check denominated in a foreign currency

15. An item that should be excluded from cash and cash equivalents on the December 31, 2005 balance
sheet of Haydee Company is
A. A customer's check denominated in a foreign currency.
B. A check issued by Haydee Company on December 30, 2005, but dated January 10, 2006.
C. A P1,000,000 time deposit which matures in 4-months.
D. A P100,000 balance in the company's current account maintained as a payroll fund.

16. Which among the following is not considered as a cash equivalent for purposes of a cash flow
statement?
A. A three-year treasury note maturing on May 30, 2003 purchased by the enterprise on April 15,
2003
B. A three-year treasury note maturing on May 30, 2003 purchased by the enterprise on January 2,
2003
C. A 90-day T-bill
D. A 60-day money market placement

17. The following statements relate to cash. Which statement is false?

A. Cash equivalents are short-term and highly liquid investments that are readily convertible into
cash and so near their maturity that they represent insignificant risk of changes in value because
of changes in interest rates.
B. Classification of a restricted cash balance as current or noncurrent should parallel the classification
of the related obligation for which the cash was restricted.
C. Legally restricted bank deposit held as compensating balance should be segregated from the cash
account and reported as current or noncurrent depending on the term of the related loan.
D. A six-month money market placement with remaining maturity of two months on balance sheet
date should be classified as cash equivalents

18. 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.

19. As of December 31, of the current year, Green Company had various checks and papers in its safe.
Which item should not be included in its cash account in the current year-end balance sheet?
A. US $20,000 cash
B. Past due promissory note issued in favor of Green by its President
C. Red Company's December 15, of the current year, P150,000 check payable to Green Company
D. Green Company's December 28, of the current year, check payable to Blue Company, a supplier

20. Which of the following is not considered cash for financial reporting purposes?
A. Petty cash fund and change fund
B. Money order, certified check and personal check
C. Coin, currency and available fund
D. Postdated check

21. Bank overdraft, if material, should be

A. reported as deduction from the current asset section
B. reported as a deduction from cash
C. netted against cash and a net cash amount reported
D. reported as a current liability

22. Deposits held as compensating balances

A. Usually do not earn interest.
B. If legally restricted and held against short-term credit may be included as cash.
C. If legally restricted and held against long-term credit may be included among current assets.
D. If legally restricted, should be segregated from the cash account and reported as current or
noncurrent depending on the term of the related credit.

Valuation
29. Which is false concerning valuation of cash and cash equivalents?
A. Cash is valued at face value
B. Cash in foreign currency is valued at the current exchange rate
C. If a bank or financial institution holding the funds of the company is in bankruptcy of financial
difficulty, cash should be written down to estimated realizable value
D. Cash equivalents should be valued at maturity value, meaning face value plus interest

Petty Cash Fund

30. The internal control feature that is specific to petty cash is
A. Separation of duties C. Proper authorization
B. Assignment of responsibility D. Imprest system

31. When a petty cash fund is used, which of the following is true?
A. The balance of the petty cash fund should be reported on the balance sheet as a long-term
investment
B. The petty cashier’s summary of petty cash payments serves as a journal entry that is posted to
the appropriate general ledger account
C. The reimbursement of the petty cash fund should be credited to the cash account
D. Entries that include a credit to the cash account should be recorded at the time the payments
from the petty cash fund are made

32. The following statements pertain to accounting for petty cash fund. Which statement is false?
A. Each disbursement from petty cash should be supported by a petty cash voucher.
B. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund out of the
general cash account.
C. At any time, the sum of the cash in the petty cash fund and the total of the petty cash vouchers
should equal the amount for which the imprest petty cash fund was established.
D. With the establishment of the imprest petty cash fund, one person is given authority and
responsibility for issuing checks to cover minor disbursements.