Dustin Earth B.

Montebon
BSA-3A

PROBLEM NO. 1

1. A. 282, 000
Unadjusted Cash on Hand 372,000
Customer's NSF Check -60,000
Customer's Postdated Check -30,000
ADJUSTED CASH ON HAND 282,000

2. A. 6, 700
Currency and Coins 2,100
Check Drawn by Peso Corporation 4,600
PETTY CASH FUND 6,700

3. A. 1,086,000
Unadjusted BPI Account 950,000
Undelivered Check 50,000
Postdated Check issued 86,000
ADJUSTED BPI ACCOUNT 1,086,000

4. A. 2,914,700
Adjusted Cash on Hand 282,000
Petty Cash Fund 6,700
Adjusted BPI Account 1,086,000
Security Bank Current Account no. 01 1,280,000
Security Bank Current Account no. 02 -40,000
PNB Time Deposit 300,000
CASH AND CASH EQUIVALENTS 2,914,700

5. Which of the following balance-related

audit objectives
typically is assessed as having high
inherent risk for
cash?
a. Existence
EXPLANATION: Cash is highly susceptible to
theft and misappropriation, making the
existence of recorded cash a significant concern
for auditors.
6. The general cash account is
considered a significant
account in almost all audits:

b. Even when the ending balance is immaterial.

EXPLANATION: Cash is a high-volume account,
even if the ending balance is small, and it's
crucial to ensure all transactions are properly
recorded and reconciled.

PROBLEM NO. 2

1. Computation of shortage or overage, if any

CASH AND CASH ITEMS:

Bills&Coins 7,528
Checks 85,960
Unreplenished vouchers 19,140 112,000
Cash Accountability(Cash on Hand):
Petty Cash Fund 20,000
Collection per O.R 86,600
Collection without O.R 28,000
Undeposited collection- excess cash advanc 3,360
Unclaimed Salaries 15,000 152,960
SHORTAGE P 40,332

2. Adjusting entries as of December 31, 2020

a. unreplenished PC vouchers 14,000

Advance to officer and employee 3,240
Postage Expense 300
Transportation expense 1,600
Repairs and Maintenance 19,140
Petty Cash Fund

b. unused postage
Unused postage 730
Postage Expense 730

c. Liquidation of Cash advance

Travel Expense 10,160
Petty Cash Fund 3,360
Advances to Officer and Employee 13,520

d. Collection without O.R

Cash 28,000
Accounts Receivable 28,000

e. Unclaimed Salaries
Cash 15,000
Salaries Payable 15,000
f. Shortage
Receivable from Custodian 40,332
Cash 40,332

g.unreleased check
Cash 54,000
Accounts Payable 54,000

3. Who is responsible, at all times, for

the amount of the
petty cash fund?
a. General cashier
b. President of the company
c. Petty cash custodian
d. Chairman of the Board of Directors
EXPLANTION: The petty cash custodian is
directly responsible for managing the petty cash
fund and ensuring its balance is accurate.

4. What is the effect of not replenishing

the petty cash
fund at year-end and not making the
appropriate
adjusting entry?
a. A detailed audit is necessary.
b. The petty cash custodian should turn
over the
petty cash to the general cashier.
c. Cash will be overstated and expenses
understated.
d. Expenses will be overstated and cash will
be
understated.
EXPLANATION: If the petty cash fund isn't
replenished and adjusted, the cash balance on
the books will be higher than the actual
amount, and the expenses paid from the fund
won't be recorded.
5. An imprest petty cash fund would
least likely be used
to pay for which of the following items?
a. Minor office supplies
b. Monthly interest expense
c. Stamps for small mailings
d. Small contributions to a local charity
EXPLANATION: Petty cash funds are designed
for small, miscellaneous expenses. Monthly
interest expense is typically a larger, recurring
expense that would be paid through regular
accounting procedures, not petty cash.

PROBLEM NO. 3

1. D. 125,000
Deposit in transit, beginning 175,250
Less: Postdated checks -50,000
ADJUSTED DEPOSIT IN TRANSIT 125,000

2. D. 194, 790
Unadjusted Outstanding Check 246,750
Unreleased Check -14,750
Postdated Check delivered -37,210
ADJUSTED OUTSTANDING CHECK 194,790

3. B. 250,460
4. C. 60,000
Bank Balance 350,000
Add: deposit in transit 125,250
TOTAL 475,250
Less: Adjusted Outstanding Check -194,790
Erroneous Bank, credit -30,000
ADJUSTED BANK BALANCE 250,460

Book Balance 293,500

ADD:
Unreleased check 14,750
Postdated check 37,210
Credit memo 15,000
TOTAL 360,460
LESS:
Postdated check received -50,000
CASH SHORTAGE(Squeeze) -60,000
ADJUSTED BOOK BALANCE 250,460

5. The starting point for the verification

of the balance in
the general bank account is to obtain:
a. A bank reconciliation from the client.
b. The client's cash account from the
general ledger.
c. A cutoff bank statement directly from the
bank.
d. The client's year-end bank statement.
EXPLANATION: The bank reconciliation provides
a starting point for verifying the bank balance
because it reconciles the client's book balance
with the bank statement balance, highlighting
any discrepancies and reconciling items.

6. Which of the following substantive

audit procedures is
most likely to be performed by the
auditor to gather
evidence in support of the balance per
bank?
a. Confirm directly with bank
b. Compare to general ledger.
c. Trace to cash receipts journal.
d. Trace items on the cutoff bank statement
to bank
reconciliation.
EXPLANATION: Confirming directly with the
bank provides the most reliable evidence to
support the balance per bank, as it verifies the
bank's records directly.

7. Which of the following substantive

audit procedures is
least likely to be performed by the
auditor to gather
evidence in support of the deposits in
transit?
a. Inspect supporting documents for
reconciling item
not appearing on cutoff bank statement.
b. Trace items on the bank reconciliation to
cutoff
bank statement.
c. Trace to cash receipts journal.
d. Inspect bank credit memo.
EXPLANATION: Bank credit memos relate to
additions to the bank balance, not deposits in
transit. Deposits in transit are deposits made by
the client but not yet recorded by the bank.

8. Which of the following substantive

audit procedures is
least likely to be performed by the
auditor to gather
evidence in support of the outstanding
checks?
a. Confirm directly with bank.
b. Trace to cash disbursements journal.
c. Ascertain reason for unusual delay.
d. Trace items on the bank reconciliation to
cutoff
bank statement.
EXPLANATION: While confirming directly with
the bank can be useful, it's not the most likely
procedure for verifying outstanding checks.
Outstanding checks are checks issued by the
client but not yet cashed by the payee. The
auditor would more likely trace these checks to
the cash disbursements journal and the cutoff
bank statement.

9. A partial-period bank statement and

the related
canceled checks, duplicate deposit slips,
and other
documents included in bank statements,
mailed by the
bank directly to the CPA firm's office, is
called:
a. A four-column proof of cash.
b. A year-end bank statement.
c. A cutoff bank statement.
d. A short-period bank statement.
EXPLANATION: A cutoff bank statement is a
specific bank statement covering a short period,
usually a few days before and after the year-
end, that's sent directly to the auditor to verify
transactions around the cutoff date.

10. An auditor who is engaged to

examine the financial
statements of a business enterprise will
request cutoff
bank statement primarily in order to
a. Verify the cash balance reported on the
bank
confirmation inquiry form.
b. Verify reconciling items on the client’s
bank
reconciliation.
c. Detect lapping.
d. Detect kiting.
EXPLANATION: The cutoff bank statement helps
the auditor verify the accuracy of items like
deposits in transit and outstanding checks on
the bank reconciliation, ensuring they are
properly accounted for.
 PROBLEM NO. 4

1. A. 414,000
2. D. 122,000
3. C. 30,000
SOLUTIONS:
CASH RECEIPT:
Owner's Investment 150,000
Proceeds from loan 98,000
Collections form Customers (squeeze) 414,000
TOTAL 662,000
CASH DISBURSEMENT:
Purchases(250,000-15,000) 235,000
Store fixtures (50,000-5,000) 45,000
Loan Payment 80,000
Expenses Paid 180,000 540,000
CASH BALANCE PER BOOKS, DECEMBER 31 122,000

Unadjusted Balance per bank, Dec. 31 91,500

Outstanding Check -4,500
Deposit in Transit 5,000
Adjusted balance per bank 92,000
Cash Balance per books, dec. 31 122,000
Cash Shortage -30,000

4. The primary purpose of sending a

standard
confirmation request to financial
institutions with which
the client has done business during the
year is to
a. Detect kiting activities that may otherwise
not be
discovered.
b. Corroborate information regarding
deposit and loan
balances.
c. Provide the data necessary to prepare a
proof of
cash.
d. Request information about contingent
liabilities and
secured transactions.
EXPLANATION: Bank confirmations are
primarily used to verify the client's reported
balances with the bank, ensuring they are
accurate and complete.
5. The auditor should ordinarily mail
confirmation
requests to all banks with which the
client has
conducted any business during the year,
regardless of
the year-end balance, since
a. The confirmation form also seeks
information
about indebtedness to the bank.
b. This procedure will detect kiting activities
which
otherwise not be detected.
c. The mailing of confirmation forms to all
such banks
is required by GAAS.
d. This procedure relieves the auditor of any
responsibility with respect to non-detection
of
forged checks.

EXPLANATION: Auditors send confirmations to

all banks, regardless of the year-end balance,
because the confirmation form can also gather
information about any outstanding loans or
other liabilities the client may have with the
bank. This helps the auditor gain a complete
picture of the client's financial position.

PROBLEM NO. 5
BANK
Beginning, 11/30 Receipt, Dec.
Unadjusted bank balances 230,000 420,000
DIT-11/30 200,000 -200,000
-12/31 120,000
OC-11/30 -80,000
-12/31
Error, Dr.- 11/30 10,000 -10,000
-12/31
Error, Cr.- 11/30 -40,000
-12/31 -30,000
NSF Check Redeposited -10,000
ADJUSTED BANK BALANCES 320,000 290,000

BOOK
Beginning, 11/30 Receipt, Dec.
Unadjusted Book balances 227,000 270,000
Note Collection -11/30 100,000 -100,000
-12/31 120,000
BSC-11/30 -2,000
 -12/30
NSF Checks-11/30 -5,000
-12/31
ADJUSTED BOOK BALANCES 320,000 290,000

2. Adjusting entries as of December 31.

a.
Cash in Bank 120,000
Note receivable 120,000

b.
Bank service charge 3,000
Cash in Bank 3,000

c.
Accounts Receivable 7,000
Cash in Bank 7,000

PROBLEM NO. 6

1. A. 13,290
2. C. 279,540
3. D. 274,635
4. A. 18,195
SOLUTIONS for Questions 1 to 4
Beginning, 11/30 Receipt, Dec.
Unadjusted Bank Balances 14,010 281,070
Deposit in Transit-11/30 2,740 -2,740
-12/31 3,110
OC-11/30 -4,260
-12/31
CM-coll.-11/30
-12/31
DM-BSC-11/30 950
-12/31
DAIF Checks: h 1,050 -1,050
i -900
j
Bank error, Dr.-11/30 -1,200 1,200
-12/31 -1,600
Receipts used for payments 750
Book errors: m -300
n
Unadjusted Book Balances 13,290 279,540
5. Auditors are likely to prepare a proof
of cash when the
client has:
a. Material control weaknesses in cash
receipts and
cash disbursements.
b. Material control weaknesses in accounts
receivable
and revenue.
c. Material control weaknesses in accounts
payable
and inventory.
d. Material control weaknesses in payroll.
EXPLANATION: A proof of cash is specifically
designed to verify the accuracy of cash
transactions, making it a crucial tool when
internal controls over cash are weak.

6. A proof of cash represents:

a. A test of controls and substantive test of
transactions.
b. A substantive test of transactions.
c. A substantive test of transactions and
test of
details of balances.
d. A test of details of balances.
EXPLANATION: A proof of cash reconciles both
the bank statement and the company's cash
records, verifying the accuracy of transactions
and the ending cash balance.
Disbursement, Dec. Ending, 12/31
500,000 150,000

120,000
-80,000
60,000 -60,000

-20,000 -20,000
-40,000
-30,000
-10,000
410,000 200,000

Disbursement, Dec. Ending, 12/31

407,000 90,000

120,000
-2,000
 3,000 -3,000
-5,000
7,000 -7,000
410,000 200,000

Disbursement, Dec. Ending, 12/31

275,450 19,630

3,110
-4,260
3,870 -3,870
-700 700
-2010 2,010
950
-640 640

-900
-800 800

-1,600
750
-300
2,925 -2,925
274,635 18,195