Accounting 21 Intermediate Accounting 1
Cash and Related Items
PROBLEM No. 1 – Adjustment to Cash
Your audit of the cash account of Albano Corporation reveals the following information:
1) Saving accounts of P1,500,000 and commercial checking account of P800,000 with Metropolitan
Bank and Trust Company. Balances were taken from Albano’s general ledger.
2) Three certificates of deposit with Metrobank, each totaling P1,000,000, with maturity dates of 90
days and less.
3) Money market placements with Axa Group of Companies, not intended to be terminated until 2016,
P3,000,000 face amount. Last value date was December 29, 2014; on which date, cumulative
income earned on the instrument is P200,000.
4) Checking account with Allied Bank for payroll fund, P1,200,00 and another checking account for tax
fund, P500,000.
5) A check for P35,000 for salaries of an employee on leave was recorded as disbursement on
December 15; the employee has not claimed the check as of December 31.
6) Savings account with Allied Bank, P900,000 as equipment acquisition fund, P480,000 of which was
earmarked for an equipment to be delivered in March 2015. You were able to verify that this
amount was actually disbursed in March 2015.
7) Petty cash fund with imprest balance of P20,000. Your count of the fund on January 4, 2015
revealed the following fund composition: Bills and coins, P12,000; paid petty cash vouchers, all
dated December 2014, P6,800; IOUs from employees, with no supporting petty cash vouchers,
P1,200; and a check drawn against Metrobank checking account in the amount of P5,300 covering
Meralco bill for the period November 29 to December 30, 2014.
8) Checks from customers in settlement of account, both on sales invoices for the month of December
2014, totaling P85,000. The checks were verified to have been recorded in the December cash
receipts journal, although one check for P25,000 was dated January 8 ,2015.
9) All the checks proved to be good when subsequently deposited.
1. Prepare all the necessary audit adjusting entries as a result of the foregoing.
2. Determine the amount that will be reported as Cash and Cash Equivalents on the December 31, 2014 Statement of
Financial Position.
