1. Cash in bank includes demand deposits, checking accounts or b.

Money market placement with maturity of 3 months,

savings accounts which are unrestricted as to withdrawal. P7,500,000
2. PAS 1 is the standard governing the recognition of cash. c. Currency and coins on hand amounted to P11,550
3. A Philippine Treasury Bill that was purchased a year ago is d. Travel advances of P270,000 for the first quarter of next
classified as a cash equivalent if it becomes due within a period year (employee reimbursement will be through salary
of three months or less. deduction).
4. All equity securities cannot qualify as cash equivalents because e. Oto Company has purchased P3,150,000 of commercial
shares do not have maturity dates. paper of Mendez Corp. which is due in 60 days.
5. Time deposits are generally included as part of cash and cash f. A separate cash fund amounting to P2,250,000 is restricted
equivalents. for the retirement of log-term debt
6. Cash is measured at face value at all times. g. Petty cash fund of P1,500
7. Deposits in foreign banks subject to foreign exchange restriction h. An IOU from an employee of Oto Company in the amount
are included in cash. of P2,000
8. Interest fund, dividend fund and tax fund are classified as i. Two certificates of deposit, each totaling P500,000. These
current assets but should be excluded from being a component CDs have a maturity of 120 days.
of cash and cash equivalents. j. Oto Company has received a check from a customer in the
9. Generally, an insurance fund is classified as a long-term amount of P187,500 dated January 15, 2017
investment. k. On January 1, 2016, Oto Company purchased marketable
10. A cash fund set aside for the acquisition of land is classified as a equity securities to be held as “trading” for P300,000. On
current asset when the estimated date of acquisition is due December 31, 2016, its market value is P4,300,000
within one year after the end of the reporting period. What amount should be reported as cash and cash
11. At all times, a bank overdraft is classified as a current liability equivalents on December 31, 2016? (4 points)
and should not be offset against other bank accounts with debit
balances. 4. An entity reported the following data on December 31, 2018:
12. A compensating balance generally takes the form of minimum Cash in Bank, net of bank overdraft of P100,000 P1,200,000
checking, demand or time deposit account balance that must be Petty Cash, including unreplenished petty cash
maintained in connection with a borrowing arrangement with a Expenses P10,000 P50,000
bank. Notes Receivable P700,000
13. If an entity borrows P10,000,000 from a bank and agrees to Accounts Receivable, net of customers’ accounts
maintain a 10% compensating balance, the entity may treat the with credit balances of P200,000 P2,000,000
balance as payment of advance interest. Merchandise Inventory, excluding unrecorded
14. If there is a formal compensating balance agreement, the purchase of P300,000 on account in transit on
compensating balance is part of cash if its related loan is short- Dec. 31, 2018 and shipped FOB Shipping Point
term. on Dec. 31, 2018 P2,500,000
15. The Negotiable Instruments Law provides that where the Deferred Charges P150,000
instrument is payable on demand, presentment must be made Accounts Payable, net of suppliers’ accounts with
within 6 months after its issue. debit balances of P400,000 P3,000,000
I. Problem-Solving. Note Payable, with annual installment of
1. The controller of the LYRIC CO. is trying to determine the P500,000 payable every Dec. 31 P2,000,000
amount of cash and cash equivalents to be reported on its Accrued expenses P300,000
December 31, 2016, statement of financial position. The
following information is provided: (1) What should be reported as total current assets on December 31,
a. Balances in the company’s accounts at the Monte 2018? (4 points)
Bank: (2) What should be reported as total current liabilities on December
- Checking account: P540,000 31, 2018? (4 points)
- Savings account: P884,000
b. Undeposited customer checks of P208,000 II. Identification.
c. Currency and coins on hand of P23,200 1. It is a settled rule that bank overdrafts are not permitted
d. Savings account at the Naic Bank with a balance of in the Philippines as this would constitute a violation of
P350,000. This account is being used to accumulate
what law or statute? _____________ (3 points)
cash for future plant expansion (in 2018)
e. P800,000 balance in a checking account at the Naic 2. It is defined as a bill of exchange drawn on a bank,
Bank payable on demand. ___________ (3 points)
f. Treasury bills; 30-day maturity bills totaling 3. It is one that is merely drawn and recorded but not given
P600,000, and 180-day bills totaling P800,000. to the payee before the end of the reporting period. (2
(1) What total amount of “cash and cash equivalents” should be points)
reported in the current asset selection of the 2016 statement 4. These are checks deposited but returned by the bank
of financial position? (4 points) because the fund in the account of the payor is not
sufficient to satisfy the amount on the face of the check.
2. An entity had the following account balances on December 31,
2018: (2 points)
a. Cash on hand, including a customer check P100,000 5. It is a check drawn, recorded and already given to the
dated January 31, 2019: 500,000 payee but it bears a date subsequent to the end of the
b. Cash in bank- current account: 4,000,000 reporting period. (2points)
c. Cash in bank- payroll account: 1,000,000 6. This is a check where the bank has stamped on its face
d. Cash in bank- restricted account for plant addition the word “accepted” indicating a sufficiency of fund. (2
expected to be disbursed in 2019: 500,000 points)
e. Cash in sinking fund set aside for bond payable due
7. It is a system of control of cash which requires that all
December 31, 2019: 1,500,000
f. Three-month time deposit: 2,000,000 cash receipts should be deposited intact and all cash
g. Traveler’s check: 200,000 disbursements should be made by means of check. (2
h. Manager’s check: 300,000 points)
i. Money order: 100,000 8. This constitutes money set aside to pay small expenses
which cannot be paid conveniently by means of checks.
(1) What total amount should be reported as cash under (2 points)
current assets? (3 points)
(2) What total amount should be reported as cash
equivalents? (3 points)

3. The following facts apply to OTO COMPANY during 2016:

a. Savings account of P900,000 and a checking account
balance of P1,200,000 are held at Manila Bank.