c. Reduce the amount of paperwork.

d. Automate the cash management process.

47.22. 19. Which of the following is not a fundamental control element the auditor would expect to find in place
for all cash processing systems?
a. Restrictive endorsement of checks.
b. Independent reconciliation.
c. Walkthrough.
d. Prenumbered cash receipt documents.

48.20. Which of the following is not a normal edit test as part of computerized control for checks?
a. Field checks.
b. Self-checking digits.
c. Cross-references.
d. Reasonableness tests.

MULTIPLE CHOICE QUESTIONS

PRACTICAL

Problem 1
In connection with your audit of Miko Corporation for the year ended December 31, 2020, you gathered
the following:
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 3/31/21 (purchased 12/31/20) 200,000
Treasury bills, due 1/31/21 (purchased 1/1/20) 300,000

Based on the above information and the result of your audit, compute for the cash and cash equivalent that
would be reported on the December 31, 2020.
a. P2,784,000 c. P2,790,000
b. P3,084,000 d. P2,704,000

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Problem 2
You noted the following composition of Jowell Company’s “cash account” as of December 31, 2020 in
connection with your audit:

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, 2021) 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’s check dated January 1, 2021 50,000
Customer’s 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, 2020 but mailed
to suppliers on January 5, 2021.
b) Check of P100,000 dated January 15, 2021 in payment of accounts payable was recorded and
mailed on December 31, 2020.
c) The company uses the calendar year. The cash receipts journal was held open until January 15,
2021, during which time P400,000 was collected and recorded on December 31, 2020.

The cash and cash equivalents to be shown on the December 31, 2020 statement of financial position.
a. P3,310,000 c. P2,910,000
b. P1,910,000 d. P4,410,000

Problem 3
You were able to gather the following from the December 31, 2020 trial balance of National Notebook
store Corporation in connection with your audit of the company:

Cash on hand 372,000

Petty cash fund 10,000
BPI current account 950,000
Security Bank current account No. 01 1,280,000
Security Bank current account No. 02 (40,000)
PNB savings account 500,000
PNB time deposit 300,000

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Cash on hand includes the following items:

a. Customer’s check for P60,000 returned by bank on December 26, 2020 due to insufficient fund but
subsequently redeposited and cleared by the bank on January 8, 2021.
b. Customer’s check for P30,000 dated January 2, 2021, received on December 29, 2020.
c. Postal money orders received from customers, P36,000.

The petty cash fund consisted of the following items as of December 31, 2020.

Currency and coins P 2,100

Employees’ vales 1,600
Currency in an envelope marked “collections for charity” with names attached
1,200
Unreplenished petty cash vouchers 800
Check drawn by National Notebook store Corporation, payable to the petty cashier 4,600
P10,300

Included among the checks drawn by National Notebook store Corporation against the BPI current account
and recorded in December 2020 are the following:

a. Check written and dated December 29, 2020 and delivered to payee on January 2, 2021, P50,000.
b. Check written on December 27, 2020, dated January 2, 2021, delivered to payee on December 29,
2020, P86,000.

The credit balance in the Security Bank current account No. 2 represents checks drawn in excess of the
deposit balance. These checks were still outstanding at December 31, 2020.

The savings account deposit in PNB has been set aside by the board of directors for acquisition of new
equipment. This account is expected to be disbursed in the next 3 months from the balance sheet date.

Based on the above and the result of your audit, compute for the adjusted balances of following:

1. Cash on hand
a. P210,000 c. P282,000
b. P230,000 d. P340,000

2. Petty cash fund

a. P6,700 c. P2,000
b. P7,200 d. P4,900

3. BPI current account

a. P1,000,000 c. P1,086,000
b. P1,120,000 d. P1,040,000

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