(03B) Cash SPECIAL Quiz ANSWER KEY

ADAMSON UNIVERSITY
INTERMEDIATE ACCOUNTING 1
CASH & CASH EQUIVALENT - QUIZ
USE THE FOLLOWING INFORMATION FOR NOS. 1 TO 3
Solid Company’s bank statement for the month of December included the following information:
Ending balance, December 31 – 2,800,000
Bank service charge for December – 12,000
Interest on deposit paid by the bank to Solid Company for December – 10,000
In comparing the bank statement to its own cash records, Solid found the following:
Deposit made but not yet recorded by the bank – 350,000
Checks drawn and mailed but not yet recorded by the bank – 650,000
In addition, Solid discovered that it had drawn a P64,000 check and recorded it for P46,000
1. What is the unadjusted cash balance per ledger of Solid on December 31?
a. 2,500,000
b. 2,520,000
c. 2,540,000
d. 2,800,000
Prepare a reconciliation using the BANK TO BOOK method
Unadjusted BANK balance 2,800,000

Add: Deposit in Transit 350,000
Add: Bank Service Charge 12,000
Add: Erroneous recording of check (64,000 – 46,000) 18,000
Less: Outstanding Checks (650,000)
Less: Interest on Deposit (10,000)
----------------
Unadjusted BOOK balance 2,520,000
2. What is the adjusted balance per bank on December 31?

a. 2,500,000
b. 2,520,000
c. 2,540,000
d. 2,800,000
To prove, prepare a bank reconciliation showing the BANK and BOOK in their adjusted
balances
BANK BOOK
UNADJUSTED balances 2,800,000 2,520,000
Add (Deduct) Reconciling Items
Deposit in Transit 350,000
Outstanding Checks (650,000)
Bank Service Charge (12,000)
Interest on Deposit 10,000
Erroneous recording of check (64,000 – 46,000) (18,000)
------------------ ------------------
ADJUSTED balances 2,500,000 2,500,000
3. The journal entries for the reconciling items will result in a Debit (Credit) to Cash of
a. 300,000
b. (20,000)
c. (280,000)
d. 320,000
The journal entries for the reconciling items per BOOK are as follows
Bank Charges 12,000

Cash 12,000
To record bank charges for December
Cash 10,000
Interest Income 10,000
To record interest on deposit
Accounts Payable 18,000

Cash 18,000
To rectify erroneous recording of check (64,000 – 46,000)
(Assuming this is a payment of a previous purchase on account)
Total CREDITS to Cash of P30,000 minus Total DEBITS to Cash of P10,000 will result in
P20,000 Credit

On June 30, 2021, the bank statement of Timothy Corporation had an ending balance of P3,735,000.
The following data were assembled in the course of reconciling the bank balance:
 The bank erroneously credited Timothy for P21,000 in June 22

 During the month, the bank returned NSF checks amounting to P23,000, of which P8,000 had
been redeposited and cleared in June 25
 Collection for June 30 amounting P103,000 was deposited the following month
 Checks outstanding on June 30 amounted to P302,000
 Note collected by the bank for Timothy was P80,000, and the corresponding bank charges was
P5,000
4. What is the unadjusted cash in bank per ledger on June 30, 2021?
a. 3,515,000
b. 3,557,000
c. 3,455,000
d. 3,497,000
Prepare a reconciliation using the BANK TO BOOK method
Unadjusted BANK balance 3,735,000

Add: Deposit in Transit 103,000
Add: NSF Checks (23,000 – 8,000) 15,000
Add: Bank charges on note collected by the bank 5,000
Less: Outstanding Checks (302,000)
Less: Bank erroneous credit to Timothy’s account (21,000)
Less: Note collected by the bank (80,000)
----------------
Unadjusted BOOK balance (4) 3,455,000
5. What is the adjusted balance per book on December 31?

a. 3,515,000
b. 3,557,000
c. 3,455,000
d. 3,497,000
balances
BANK BOOK
UNADJUSTED balances 3,735,000 3,455,000
Bank erroneous credit to Timothy’s account (21,000)
NSF Checks (23,000 – 8,000) (15,000)
Note collected by the bank 80,000
Bank charges on note collected by the bank (5,000)
------------------ ------------------
ADJUSTED balances 3,515,000 (5) 3,515,000
6. The journal entries for the reconciling items will result in a Debit (Credit) to Cash of
a. (220,000)
b. 60,000
c. (60,000)
d. 220,000
Accounts Receivable 15,000

Cash 15,000
To record NSF checks returned by the bank (23,000 – 8,000)
(Assuming these are customers’ payment of previous sale on account)
Cash 80,000
Notes Receivable 80,000
To record note collected by bank
Bank Charges 5,000

Cash 5,000
To record bank charges on note collected by bank
Total DEBITS to Cash of P80,000 minus Total CREDITS to Cash of P20,000 will result in
P60,000 Debit

Liberty Company’s bank statement for the month of April included the following information:
Bank service charge for April – 15,000

Check deposited by Liberty during April was not collectible and was returned and marked NSF by the
bank – 40,000
In comparing the bank statement to its own record, Liberty found the following:
Deposit made but not yet recorded by the bank – 130,000

Checks written and mailed but has not yet cleared the bank – 100,000
All deposits in transit and outstanding checks have been properly recorded in Liberty’s books.
Liberty Company found a check for P35,000, payable to Liberty Company that had not yet been
deposited and had not yet been recorded in Liberty’s books. Liberty’s books show a cash in bank
account balance of P920,000
7. What is the adjusted cash in bank on April 30?

a. 900,000
b. 865,000
c. 870,000
d. 965,000
Prepare a reconciliation showing ADJUSTED BOOK balance
Unadjusted BOOK balance 920,000

Add: Unrecorded Check 35,000
Less: Bank service charge (15,000)
Less: Customer’s NSF Check (40,000)
----------------
Adjusted BOOK balance 900,000
8. What is the unadjusted balance per bank statement on April 30?

a. 900,000
b. 865,000
c. 870,000
d. 965,000
Prepare a reconciliation using the BOOK TO BANK method
Unadjusted BOOK balance 920,000

Add: Outstanding Checks 100,000
Add: Unrecorded Check 35,000
Less: Bank service charge (15,000)
Less: Customer’s NSF Check (40,000)
Less: Deposit in Transit (130,000)
----------------
Unadjusted BANK balance 870,000
balances
BANK BOOK
UNADJUSTED balances 870,000 920,000
Unrecorded Check 35,000
Customer’s NSF Check (40,000)
Bank service charge (15,000)
------------------ ------------------
ADJUSTED balances 900,000 900,000
9. The journal entry for the reconciling items will show a Debit (Credit) to Cash of
a. 20,000
b. (30,000)
c. 30,000
d. (20,000)
Cash 35,000
To record check received by Liberty
(Assuming this is customer’s payment of previous sale on account)

Cash 40,000
To record NSF checks returned by the bank
(Assuming these are customers’ payment of previous sale on account)
Bank Charges 15,000

Cash 15,000
To record bank charges
Total CREDITS to Cash of P55,000 minus Total DEBITS to Cash of P35,000 will result in
P20,000 Credit
10. A cash equivalent is a short-term highly liquid investment readily convertible into known amount
of cash and
a. is acceptable as a means to pay current liability
b. has a greater current fair value
c. bears a prime interest rate
d. is so near maturity that it presents insignificant risk of change in value because of changes in
interest rate

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ADAMSON UNIVERSITY

Prepare a reconciliation using the BANK TO BOOK method

Unadjusted BANK balance 2,800,000

2. What is the adjusted balance per bank on December 31?

Bank Charges 12,000

Accounts Payable 18,000

USE THE FOLLOWING INFORMATION FOR NOS. 4 TO 6

 The bank erroneously credited Timothy for P21,000 in June 22

Prepare a reconciliation using the BANK TO BOOK method

Unadjusted BANK balance 3,735,000

5. What is the adjusted balance per book on December 31?

Accounts Receivable 15,000

Bank Charges 5,000

USE THE FOLLOWING INFORMATION FOR NOS. 7 TO 9

Bank service charge for April – 15,000

Deposit made but not yet recorded by the bank – 130,000

7. What is the adjusted cash in bank on April 30?

Prepare a reconciliation showing ADJUSTED BOOK balance

Unadjusted BOOK balance 920,000

8. What is the unadjusted balance per bank statement on April 30?

Prepare a reconciliation using the BOOK TO BANK method

Unadjusted BOOK balance 920,000

Accounts Receivable 40,000

Bank Charges 15,000

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