Cash and Cash Equivalents

Learning Goal: I’m working on a accounting test / quiz prep and need support to help me learn.

On December 31, 2010, the cash and cash equivalents account of PRELIM Company, your audit client, has a debit balance of P18,366,000. An analysis of the account reveals the following composition:

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Undeposited collections P 515,000
Current account 100143 at Tim Bank 2,130,000
Current account 105254 at Tim Bank (15,000)
Checking account at Bradley Bank 2,135,000
Checking account at Pacquiao Bank 1,765,000
Treasury bills acquired 2 months before maturity 315,000
Treasury bills maturing December 31, 2011 600,000
Checking account with Manny Bank 2,000,000
Payroll account fund 390,000
Dividend fund 100,000
Postage stamps 50,000
Foreign bank account, 50% of which is restricted $ 40,000
Employee’s postdated check P 55,000
IOU from the vice president 88,000
Credit memo from a vendor 78,000
Money market placement 750,000
Traveler’s check and money orders 320,000
Plan expansion fund expected to be disbursed in 2011 1,500,000
Plant expansion fund expected to be disbursed in 2012 2,000,000
Sinking fund for payment of a liability maturing in 2011 1,250,000
Sinking fund for payment of a liability maturing in 2012 2,200,000
Petty cash fund (20% in coins and currency, 50% in expense receipts and 30% in IOUs) 100,000

Your examination disclosed the following relevant information regarding PRELIM’s cash and cash equivalents:

  1. The peso to dollar exchange rate is at P1.00 = $0.02 on December 31, 2010 and the average peso to dollar exchange rate for 2010 is at P1.00 = $0.019.
  2. A compensating balance amounting to P1,000,000 is maintained on the current account 143 with Tim Bank. Such arrangement was informal.
  3. A check withdrawn on the account with Bradley Bank amounting to P55,000 was still on the hands of PRELIM as of year-end. Also, a check written for P25,000 has been outstanding for more than a year already. The company’s policies dictate that a “stop order payment” shall be issued on a check that has been outstanding for six months. Said check was drawn on Pacquiao Bank.
  4. Undeposited collections reported above are based on the PRELIM’s summary of its cash receipts and disbursements. Cash count at December 31 disclosed only P498,000 in bills and coins. The difference cannot be reconciled.
  5. Manny Bank is currently in financial difficulty. The bank’s advisors determined that only 60% of the amounts deposited by each client will be realized by them.

Based on the above and the result of your audit, answer the following questions:

  1. What is the adjusted petty cash fund on December 31?
  2. How much cash was on hand by PRELIM on December 31?
  3. What is the adjusted balance of the checking account with Bradley Bank?
  4. What is the adjusted balance of the checking account with Pacquiao Bank?
  5. What is the adjusted balance of the checking account with Manny Bank?.
  6. What is PRELIM’s total cash as of December 31?
  7. What is PRELIM’s total cash and cash equivalents as of December 31?

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