AC7&8 – Intermediate Accounting
Activity 1A – Cash and cash Equivalents
The statement of financial position of Midland Company on December 31, 2019 shows Cash of
P330,820. The following items were found to comprise this total amount:
Checking account in Metrobank, (outstanding checks
as of year-end totaled P15,200) P105,200
Savings account at Far east bank 30,800
Petty cash fund (including expense receipts for P250) 1,500
Cash on hand (undeposited sales receipts0 4,200
Sinking fund cash 35,000
Cash in foreign band (in equivalent pesos) 65,000
Customers’ checks on Hand:
Traveler’s check 14,000
Manager’s check 23,120
Short-term treasury bills 52,000
Midland Company also has on hand a check payable to supplier amounting to P62,000, which has been
recorded in the cash disbursement journal in December.
Required: What is the correct amount of cash?
Source: Intermediate Accounting Part 1 – Robles and Empleo
Activity 1B - Cash and cash Equivalents
Red Company reported a Cash balance of P1,980,000 on December 31, 2019 which consisted of the
following:
Petty cash, including IOU from an employee of P10,000
P1,250
Cash on hand, including customer’s check of
P17,500, dated January 5, 2020 625,000
Cash in bank, general Account, net of P12,500 bank
overdraft in another bank’s account 525,000
Cash in bank, Payroll Account, net of P10,000 check
dated December 28, 2019 but unreleased as of
December 31 320,000
Savings deposit, restricted for the purchase and
intended for equipment acquisition 500,000
Required:
What is the correct amount of cash that should be shown in Red Company’s statement of financial
position at December 31, 2019?
Source: Intermediate Accounting Part 1 – Robles and Empleo
Activity 1C - Cash and cash Equivalents
Color Company’s checkbook balance at December 31, 2019 was P180,000. In addition, Color held the
following items in its safe on that date.
Check payable to Color amounting to P65,000 dated January 2, 2020 in payment of a sale made
in December 2019, was included in December 31 checkbook balance.
Check payable to Color was deposited on December 15, but returned by the bank on December
29, stamped “DAIF.” No entry has yet been made to record the return of this P20,000 check.
Check drawn on Color’s account, payable to a vendor, was dated and recorded on December 28.
This check amounting to P15,000, however, was not yet mailed to the payee as of December 31,
2029.
Required:
(a) What is the correct amount shown as cash on Color Company’s December 31, 2019 statement
of financial position?
(b) Prepare adjusting entries to bring the Cash account to its correct balance.
Source: Intermediate Accounting Part 1 – Robles and Empleo
Activity 1D - Cash and cash Equivalents
The chief accountant of Lilac company is determining the amount of Cash and Cash Equivalents to be
reported on its December 31, 2019 statement of financial position. She found out that the “Cash and
Cash Equivalents” balance in the general ledger was composed of the following items.
(a) Savings account of P900,000 and a commercial checking account with balance of P1,400,000
are held at Allied Bank.
(b) Petty cash fund of P15,000; composed of expense receipts of P5,000; and bills of P9,850 at
December 31.
(c) Cash fund in savings account with Metrobank, P1,500,000 held for retirement of bonds payable,
due December 31, 2022.
(d) Money market fund account held at BDO which permits Lilac Company to write checks on this
balance, P2,000,000.
(e) Three certificates of deposits with Metrobank, each totaling P1,000,000, two of which have
maturity of 120 days from date of placement (November 30, 2019); one has a maturity of
P90days (placed on December 29,2019).
(f) Payroll fund maintained with BDO, P6,000,000.
(g) A customer’s check on hand dated January 10, 2020 for P320,000. The check was recorded as
collected in December and was included in the P900,000 savings accounts with Allied Bank.
(h) A check for P300,000 was issued to a supplier on December 29, 2019 and drawn from Allied
Bank. The check was dated January 8, 2020 and was traced to have been entered in the
December check register.
(i) Lilac maintains aP5,000,000 cash balance at all times at BPI to ensure availability.
(j) A check for P50,000 for adjustment in salaries of an employee for the month of November was
still on hand at December 31, 2019. The check was verified to have been recorded in the cash
disbursement journal in December.
Required:
(a) Compute the amount of cash and cash equivalents to be reported on December 31,
2019 statement of financial position. It is the policy of the company to treat as cash
equivalents instruments with maturity date of 90 days or less.
(b) Indicate the proper reporting for items that are not reported as cash equivalents at
December 31, 2019.
Source: Intermediate Accounting Part 1 – Robles and Empleo
