Problem 1

In connection with the general examination of the accounts of Nelson Trading Company at
December 31, 2006, you obtained the information and data as shown below relative to your
verification of Cash.

The record kept by the accountant showed the following:

(a) Balances at the end of the month:

December 1, 2006 December 31, 2006

Per Bank Statement P 54,000 P101,775

Per Books 50,400 70,215

Undeposited collections 3,300 7,200

Outstanding checks 6,900 * 12,000 *

* Composed of the following #6515 510 #6552 P 1,800

6517 2,250 6553 5,700

6518 2,400 6554 2,550

6519 1,740 6555 1,950

(b) Totals for the month of December, 2006:

Cash Book:

Receipts P 425,550

Disbursement 405,735

Bank Statement

Receipts P 444,900

Disbursement 397,125

After application of the necessary auditing procedures, the following were noted:

a. Footing of disbursement should be P 404,235, instead of P 405,735.

b. Bank service charge of P15 for December has not been booked.
 c. Cancelled checks (returned together with the December bank statement) include the
following which were charged in the statement:
1. Check #6530 dated December 15, 2006 for P2,400 - this was issued as
replacement of check # 6518 which was returned by the payee because of
certain erasures. No entry has been made to record the cancellation of check
#6518.
2. Check #6517 for P225 - this was erroneously recorded on the books as
P2,250.
3. Check of Neil Trading for P400 - this was charged by bank in error.
d. Proceeds from sale of stocks amounting to P23,250 (cost is P18,000) transmitted
directly by the broker to the bank and credited on December 31, 2006. No entry has
been made on the books to record this sale of stock investment.
e. The company failed to record disbursement for payment of accounts payable at
December 31, 2006 for P1,500.

Questions

1. The adjusted cash receipts per ledger of NELSON TRADING COMPANY at December 31,
2006 is:
a. P 448,800 b. P 448,125 c. P 444,225 d. P 425,550

2. The adjusted cash disbursement per bank of NELSON TRADING COMPANY at December
31, 2006 is:
a. P 401,325 b. P 402,000 c. P 405,735 d. P 401,825

3. The adjusted cash ledger balance of NELSON TRADING COMPANY at December 31,
2006 is:
a. P 91,350 b. P 95,400 c. P 97,200 d. P 97,375

4. The adjusted cash in bank balance of NELSON TRADING COMPANY at December 31,
2006 is:
a. P 91,350 b. P 95,400 c. P 97,200 d. P 97,375

5. The cash shortage of NELSON TRADING COMPANY at December 31, 2006 is:
a. P 765 b. P 675 c. P 500 d. P 390

Problem 2

The senior auditor instructed you to prepare a four column proof of cash receipts and disbursements
for the month of August 2008.

The bank reconciliation prepared by Albarando Company at July 31 is reproduced below (All book
disbursements were recorded in August)

Bank Balance 52,000 Book Balance 40,000

 Add: Proceeds of note receivable

Add: Deposit in transit, July 31 900 by bank in July 8,000

Deposit made in bank
on

July 31 not recorded on

books until August 1,000

Total 52,900 Total 49,000

Less: Outstanding checks Less: Service Charge 100

No. 436 200

No. 450 1,800

No. 451 1,400

No. 454 600 4,000 ______

Adjusted balance 48,900 Adjusted balance 48,900

Upon inquiry about the client’s August 31 bank reconciliation, you were informed hat it has been lost
and that no client is too busy at this time to prepare another. Your senior auditor told you to get the
August bank statement and paid checks and to prepare the August 31 reconciliation so that you may
complete the August proof of cash.

The August bank statement is reproduced below:

Davao Bank

Account name: Albarando Company

Date Debits Credits

July 31

August 1 1,800 900

August 8 1,400

August 9 600 10,000

August 12 240 EC 240 EC

August 15 1,000

August 20 700 14,000

August 27 1,440

August 29 200 EC 200 EC

August 31 440 SV

August 31 300 DM
 August 31 1,820

SV – Service Charges; DM – Debit Memos; EC – Error Corrected; CM – Credit Memo

The paid checks accompanying this bank statement (all clearing in August) were: (checks listed in
order of payment by bank)

No. 450 1,800 No. 455 1,000 No. 458 1,440

451 1,400 456 700 459 1,820

454 600

The checks register revealed that the last check issued on August was no. 460 for P1,000 and that
check no. 457 was for P2,400.

Cash received for the period August 21 through 31 of P9,400 was deposited in the bank on September
1.

The debit memo on August 12 and August 31 were customer DAIF checks returned by the bank. The
check on August 12 was immediately redeposited without entry. The check returned on August 31
was redeposited by the client in the bank on September 1 without entry.

Questions: Based on the application of the necessary audit procedures and appropriation of the above
daa, you are to provide the answer to the following:

6. How much is the unadjusted book receipts for August?

a. P 25,140 b. 42,600 c. P 35,540 d. P 42,200

7. How much is the unadjusted book disbursements for August?

a. P 8,460 b. P 9,740 c. P 8,760 d. P 8,660

8. How much is the adjusted book receipts for August?

a. P 33, 200 b. P 33,250 c. P 34,400 d. P 33,400

9. How much is the adjusted book disbursement for August?

a. P 9,100 b. P 8,900 c. P 8,700 d. P 9,140

10. How much is the adjusted cash balance as of August 31, 2004?
a. P 73,940 b. P 73,060 c. P 73,400 d. P 73,200
Problem 3

Proof of Cash: Book to Bank Balances Format

The following information was obtained in connection with the
audit of PINKY COMPANY’s cash account as of December 31, 2010.
Outstanding checks, 11/30/10 P16,250
Outstanding checks, 12/31/10 12,500
Deposit in transit, 11/30/10 10,000
Cash balance per general ledger 12/31/10 37,500
Actual company collections from its customers
during December 152,500
Company checks paid by bank in December 130,000
Bank service charges recorded on company
books in December 2,500
Bank service charges per December bank statement 3,250
Deposits credited by bank during December 145,000
November bank service charges recorded on
company books in December 1,000
The cash receipts book of December is underfooted by P2,500.
The bank erroneously charged the company’s account for a P3,150
check of another depositor. This bank error was corrected in
January 2011.

11. How much is the deposit in transit on December 31,

2010?
A. P5,000 C. P22,500
B. P20,000 D. P17,500

12. The total unrecorded bank service charges as of

December 31, 2010 is
A. P750 C. P1,750
B. P2,250 D. P4,250

13.What is the total book receipts in December?

A. P150,000 C. P155,000
 B. P152,500 D. P147,500

14.What is the total amount of company checks issued in

December?
A. P130,000 C. P133,750
B. P123,000 D. P126,250

15.What is the total book disbursements in December?

A. P123,750 C. P133,750
B. P128,750 D. P126,750

16.What is the book balance on November 30, 2010?

A. P16,250 C. P37,500
B. P21,250 D. P35,000

17.What is the bank balance on November 30, 2010?

A. P21,000 C. P43,500
B. P18,500 D. P18,750

18.What is the total bank receipts in December?

A. P142,500 C. P145,000
B. P140,000 D. P147,500

19.What is the total bank disbursements in December?

A. P154,500 C. P135,900
B. P132,500 D. P136,900

20.What is the bank balance on December 31, 2010?

A. P21,500 C. P29,900
B. P26,500 D. P27,600