Auditing and Assurance Concepts and Applications 1

Assignment No. 2

Problem No. 1
You are conducting an audit of the Lisa Corporation for the year ended December 31, 2021. The internal
control procedures surrounding cash transactions were not adequate. Jenny, the bookkeeper-cashier
handles cash receipts, maintains accounting records and prepares the monthly reconciliations of the bank
account. She prepared the following reconciliation at the end of the year:

Balance per bank statement P 315,000

Add : Deposit in transit P 157,725
Note collected by bank 13,500 171,225
Balance P 486,225
Less : Outstanding checks 222,075
Balance per general ledger P 264,150

In the process of your audit, you gathered the following:

a. At December 31, 2021, the bank statement and the general ledger showed balances of P315,000
and P264,150 respectively.
b. The cut off bank statement showed a bank charge on January 02, 2022 for P35,250 representing a
correction of an erroneous bank credit.
c. Included in the list of outstanding checks were the following:
i. A check payable to a supplier, dated December 29, 2021, in the amount of P13,275,
released on January 05, 2022.
ii. A check representing advance payment to a supplier in the amount of P33,489, the date of
which is January 04, 2022, and released in December 2021.
d. On December 31, 2021, the company received and recorded customer’s postdated check
amounting to P45,000.

Requirement:
1. Compute the adjusted deposit in transit as of December 31, 2021.
2. Compute the adjusted outstanding checks as of December 31, 2021.
3. Compute the adjusted cash to be presented in the balance sheet as at Dec. 31, 2021.

Problem No. 2
You are auditing general cash for the Carmela Company for the fiscal year ended July 31, 2021. The client
has not prepared the July 31 bank reconciliation. After a brief discussion with the owner you agree to
prepare the reconciliation, with assistance from one of Carmela Company’s clerks. You obtain the following
information:
General Ledger Bank Statement
Beginning Balance P 46,110 P 57,530
Deposits 250,560
Cash Receipts Journal 254,560
Checks Cleared (236,150)
Cash Disbursements Journal (218,110)
July Bank service charge (870)
Note paid directly (61,000)
NSF check (3,110)
Ending Balance P82,560 P6,960
June 30 Bank Reconciliation
Information in General Ledger and Bank Statement
Balance per bank P 57,530
Deposits in transit 6,000
Outstanding checks 17,420
Balance per books 46,110

Additional information obtained is:

1. Checks clearing that were outstanding on June 30 totaled P16, 920
2. Checks clearing that were recorded in the July disbursements journal totaled P204, 670
3. A check for P10, 600 cleared the bank, but had not been recorded in the cash disbursements
journal. It was for an acquisition of inventory. Carmela uses the periodic inventory method.
4. A check for P3, 960 was charged to Carmela Company but had been written on a different
company’s bank account.
5. Deposits included P6,000 from June and P244,560 for July.
6. The bank charged Carmela Company’s account for a nonsufficient check totaling P3,110. The credit
manager concluded that the customer intentionally closed its account and the owner left the city.
The check was turned over to a collection agency.
7. A note for P58, 000, plus interest, was paid directly to the bank under an agreement signed four
months ago. The note payable was recorded at P58,000 on Carmela Company’s book.

Based on facts given, determine the following:

4. Outstanding checks on July 31
5. Deposits in transit on July 31
6. Adjusted cash balance on July 31

Problem No. 3
Your client, a successful small business, has never given much attention to a sound internal control. In its
employ is JR Cooper, the company’s cashier-bookkeeper. JR handles cash receipts, make small
disbursements from the cash receipts, maintains accounting records, and prepares the monthly bank
reconciliation.

The bank statement for the month ended of March 31,2021, shows a cash balance of P590,000.
The following checks are outstanding on March 31:
No. 7613 P8,623
No. 7284 7,320
No. 7285 10,612
No. 8722 6,322
No. 8724 12,280
No. 8733 6,200

The company’s general ledger shows a cash balance of P696,499 on March 31, 2021. Realizing that being
a cashier-accountant of the company he can easily misappropriate collections and conceal it, JR removed
all the cash on hand in excess of P127,301, and then prepared the following reconciliation in an effort to
conceal this theft.
BANK RECONCILIATION
Balance per accounting records P696,499
Add: Outstanding Checks
No. 8722 P6,322
No. 8724 12,280
No. 8733 6,200 20,802
Total 717,301
Deduct: Cash on hand 127,301
Balance per bank statement, March 31 P590,000

Requirement:
7. How much was taken by the cashier-accountant?
8. What is the amount of cash that should be on hand at March 31,2021?

Problem No. 4
Your Audit instructed you to prepare a four-column proof of cash receipts and disbursements for the month
of December 2021.

The bank reconciliation prepared by BAHT COMPANY at November 30 is reproduced below:

Unadjusted bank balance P96, 800 Unadjusted book balance P58, 640
Add: Deposit in transit 18,000 Add: CM-Note collected 40,320
Total P 114,800 Total 98,960
Less: Outstanding checks: Less: DM- Bank Charges 160
No. 276 P2,400
282 7,200
284 4,800
285 1,600 16,000
Adjusted bank balance P98,800 Adjusted book balance P98,800

The December bank statement, which shows a beginning balance of P96, 800, is reproduced below:

May Bank
Account Name: BAHT COMPANY

Date Debits Credits

December 1 P18,000
2 P7,200 40,000
4 24,000
6 48,000
8 400,000 CM 83
10 40,000 DM 97
11 56,000
16 20,000
18 64,000
21 72,400
28 36,000 80,000
31 4,000 DM 98 64,000 CM 84
Totals P131,200 P842,400

DM 97- Customer’s DAIF check CM 83-Note collected by the bank

DM 98- Service Charges CM 84- Account collected by the bank
The Company’s cash receipts and cash disbursement journals for the month of December 2021 are
provided below:

Cash Receipts Journal Cash Disbursement Journal

Date OR No. Amount Date Check No. Amount
Dec.1 415 P40,000 Dec.1 286 16,000
5 416 48,000 3 287 24,000
10 417 56,000 10 288 32,000
17 418 64,000 14 289 20,000
20 419 72,000 20 290 28,000
30 420 80,000 23 291 36,000
31 421 88,800 26 292 40,000
28 293 44,000
31 294 48,000
Total P440,800 Total P304,000

The company’s Cash in Bank ledger appears below:

Cash in Bank

Balance P58,640 12/31/2021 CDJ P304,000

12/01/2021 GJ 40,320
12/10/2021 GJ (CM 83) 400,000
12/31/2021 CRJ 440,800

Requirement:
9. How much is the outstanding checks as of December 31, 2021?
10. How much is the adjusted book receipts for December 2021?
11. How much is the adjusted book disbursements for December 2021?
12. How much is the adjusted cash balance as of December 31, 2021?

Problem No. 5
Henry Company had the following bank reconciliation at March 31:
Balance per bank statement, March 31 P 93,000
Add deposit in transit 20,600
P 113,600
Less outstanding checks 25,200
Balance per books, March 31 P 88,400

Data per bank statement for the month of April follow:

Deposits P 116,800
Disbursements P 99,400

All reconciliation items at March 31 cleared through the bank in April. Outstanding checks at April 30 totaled
P15,000.

13. What is the amount of cash disbursements per books in April?

14. What is the amount of cash receipts per books in April?
15. How much is the adjusted cash balance as of April 30?