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7313 - Cash and Cash Equivalents

The document presents various scenarios regarding cash and cash equivalents for an entity as of December 31, 2024, including specific balances and conditions for classification. It poses multiple-choice questions evaluating the truth of statements related to cash reporting and classifications. The scenarios cover aspects such as compensating balances, restricted cash, and undelivered checks.

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21 views2 pages

7313 - Cash and Cash Equivalents

The document presents various scenarios regarding cash and cash equivalents for an entity as of December 31, 2024, including specific balances and conditions for classification. It poses multiple-choice questions evaluating the truth of statements related to cash reporting and classifications. The scenarios cover aspects such as compensating balances, restricted cash, and undelivered checks.

Uploaded by

blushdanik
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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CPA REVIEW SCHOOL OF THE PHILIPPINES

Manila

FINANCIAL ACCOUNTING AND REPORTING VALIX/VALIX/SANTOS


BATCH 96 OCTOBER 2024 LECPA
CASH AND CASH EQUIVALENTS
1. An entity reported the following information at year-end:
• Share investments of P1,000,000 that are very actively traded in the stock market.
• Government treasury bills of P2,000,000 with a 10-year term but purchased on December 31 at
which time the bills had two months to go until maturity.
• Cash of P4,000,000 in the form of coin, currency, saving account and checking account.
• Commercial papers of P1,500,000 with term of nine months but purchased on December 31 at
which time the papers had three months to go until maturity.

I. Only highly liquid investments acquired three months or less before maturity can qualify as cash
equivalents.
II. The cash equivalents should be reported at P4,500,000
A. Statements I and II are true
B. Statements I and II are not true
C. Only statement I is true
D. Only statement II is true

2. An entity had the following cash balances on December 31, 2024:


Cash in bank 5,000,000
Petty cash fund, all funds were reimbursed on December 31, 2024 50,000
Money market placement or commercial papers 1,500,000
Saving deposit 800,000
Cash in bank included P500,000 of compensating balance against short-term borrowing arrangement on
December 31, 2024. The compensating balance is legally restricted as to withdrawal.
I. A compensating balance is classified separately as cash held as compensating balance under current
assets if the related loan is short-term.
II. The cash and cash equivalents should be reported at P6,850,000
A. Statements I and II are true
B. Statements I and II are not true
C. Only statement I is true
D. Only statement II is true

3. An entity had the following account balances on December 31, 2024:


Cash on hand, including a customer check P100,000 dated January 31, 2025 500,000
Cash in bank – current account 4,000,000
Cash in bank – payroll account 1,000,000
Cash in bank – value added tax account 600,000
Foreign bank account unrestricted and in equivalent pesos 1,400,000
Cash in bank – restricted for plant addition expected to be disbursed in 2025 500,000
I. A cash fund set aside for acquisition of a noncurrent asset should be excluded from cash but
reported as noncurrent investment regardless of the year of disbursement.
II. The cash and cash equivalents should be reported at P7,900,000 on December 31, 2024.
A. Statements I and II are true
B. Statements I and II are not true
C. Only statement I is true
D. Only statement II is true

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4. An entity reported the checkbook balance on December 31, 2024 at P8,000,000. In addition, the entity
held following items in the safe on that date:
Check payable to the entity, dated January 2, 2025 in payment of a sale,
included in December 31 check book balance 400,000
Check payable to the entity, deposited December 15 and included in
December 31 checkbook balance, but returned by bank on
December 30 stamped “NSF’. The check was redeposited on
January 2, 2025 and cleared on January 5, 2025 3,000,000
Check drawn on the entity’s account dated and recorded on
December 31, 2024 but not mailed until January 15, 2025 2,500,000
Coins and currencies on hand 800,000
Postage stamps unused 200,000

I. Any undelivered check is adjusted by restoring the cash account and recognizing the corresponding
liability.
II. The cash account should be reported at P7,500,000 on December 31, 2024.
A. Statements I and II are true
B. Statements I and II are not true
C. Only statement I is true
D. Only statement II is true

5. An entity provided the following information on December 31, 2024:


Cash on hand 200,000
Philippine Bank current account 5,000,000
Manila Bank current account 4,000,000
Asia Bank current account (overdraft) ( 500,000)
BDO account set aside for bond payable due December 31, 2025 3,000,000
Treasury bonds 2,000,000
Treasury bills 1,000,000
Included among the checks drawn by the entity against the Philippine Bank current account and recorded
on December 31, 2024 are:
* Check recorded and dated December 23, 2024 and delivered to payee on January 31, 2025,
P100,000.
* Check recorded December 26, 2024, dated January 30, 2025 and delivered to payee on
December 31, 2024, P150,000.
I. A bank overdraft is generally reported as a current liability.
II. A cash fund set aside for the payment of a liability is included in cash if the liability is already due in
one year after the end of reporting period.
III. The cash and cash equivalents should be reported at P13,450,000 on December 31, 2024.
A. Statements I, II and III are true
B. Statements I, II and III are not true
C. Only statements I and II are true
D. Only statements I and III are true

End

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