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Cash and Cash Equivalents Problems
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Problems regarding cash and cash equivalents, what's included and not, as well as adjusting entries for NSF, une
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Intermediate Accounting Volume 1 01VALIX 2019 edition
Cash and Cash Equivalents Exercises - adjusting entries, long problems, presentation
of excluded items
On December 31, 2019, Bob Company provided the following data:
Cash in bank 3,000,000
Time deposit - 30 days 1,000,000
Money market placement due on June 30, 2020 2,000,000
Saving deposit in closed bank 100,000
Sinking fund for bond payable due on June 30, 2021 1,500,000
Petty cash fund 20,000
* The cash in bank included a customer check of ₱200,000 outstanding for 18
months.
* Check of ₱250,000 in payment of accounts payable was dated and recorded on
December 31, 2019 but mailed to creditors on January 15, 2020.
* Check of ₱100,000 dated January 21, 2020 in payment of accounts payable was
recorded and mailed December 31, 2019.
* The reporting period is the calendar year
The cash receipts journal was held open until January 15, 2020 during which
time, an amount of ₱450,000 was collected and recorded on December 31, 2019.
Required:
1. Prepare adjusting entries on December 31, 2019.
2. Compute the total amount of cash and cash equivalents that should have been
reported on December 31, 2019.
3. Explain the presentation of the items excluded from cash and cash equivalents.
, Solution:
1. Prepare adjusting entries on December 31, 2019.
a. A/R 200,000
Cash in bank 200,000
b. Cash in bank 250,000
A/P 250,000
c. Cash in bank 100,000
A/P 100,000
d. A/R 450,000
Cash 450,000
2. Compute the total amount of cash and cash equivalents that should have been
reported on December 31, 2019.
Cash in bank 3,000,000
Adjustments:
Customer Check Outstanding ( 200,000)
Undelivered/Unreleased Check 250,000
Postdated Check 100,000
Recorded collection on Jan 15, 2020 ( 450,000) 2,700,000
Time deposit - 30 days 1,000,000
Petty cash fund 20,000
TOTAL CASH & CASH EQUIVALENTS - 12/31/2019 3,720,000
3. Explain the presentation of the items excluded from cash and cash equivalents.
a. Money market placement due on June 30, 2020
> cannot qualify as a cash equivalent because the maturity date is more
than 3 months from the date of acquisition (Dec 31, 2019 to June 30,
2020). Thus, it should be separately shown as a short-term investment
under Current Assets.
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