Far Eastern University

Institute of Accounts. Business and Finance

Department of Accountancy and Internal Auditing

INTERMEDIATE ACCOUNTING 1
DO-IT-YOURSELF MULTIPLE CHOICE QUESTIONS

Name Date
(Family Name) (First Name) (Middle Name) Day/Time
Professo
r Score
Section Rating
Stud. No. Remarks

MCQ 2.1-1
THEORY (15 Points)

Instructions:
Select the best answer among the given choices. Write your answer on the space provided before each number. Use
only CAPITAL LETTERS.

D 1. Which of the following is not considered cash for financial reporting purposes?
A. Petty cash funds and change funds
B. Money orders, certified checks, and personal checks
C. Coin, currency, and available funds
D. Postdated checks and I.O.U.'s

B 2. Which of the following is considered cash?

A. Certificates of deposit (CDs)
B. Money orders
C. Money market savings certificates
D. Postdated checks

D 3. Which of the following items should not be included in the Cash caption on the statement of
financial position?
A. Coins and currency in the cash register
B. Checks from other parties presently in the cash register
C. Amounts on deposit in checking account at the bank
D. Postage stamps on hand

B 4. All of the following may be included under the heading of "cash" except
A. currency.
B. money market funds.
C. checking account balance.
D. savings account balance.

D 5. What is a compensating balance?

A. Savings account balances.
B. Margin accounts held with brokers.
C. Temporary investments serving as collateral for outstanding loans.
D. Minimum deposits required to be maintained in connection with a borrowing arrangement.

B 6. Under which section of the statement of financial position is "cash restricted for plant expansion"
reported?
A. Current assets.
B. Non-current assets.
C. Current liabilities.
D. Equity.

D 7. Bank overdrafts generally should be

A. reported as a deduction from the current asset section.
B. reported as a deduction from cash.
C. netted against cash and a net cash amount reported.
D. reported as a current liability.

B 8. Which of the following is an appropriate reconciling item to the balance per bank in a bank
reconciliation?
A. Bank service charge.
B. Deposit in transit.
C. Bank interest.
D. Chargeback for NSF check.

1|Page
 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

C 9. Which of the following is not true?

A. The imprest petty cash system in effect adheres to the rule of disbursement by check.
B. Entries are made to the Petty Cash account only to increase or decrease the size of the
fund or to adjust the balance if not replenished at year-end.
C. The Petty Cash account is debited when the fund is replenished.
D. All of these are not true.

B 10. The journal entries for a bank reconciliation

A. are taken from the "balance per bank" section only.
B. may include a debit to Office Expense for bank service charges.
C. may include a credit to Accounts Receivable for an NSF check.
D. may include a debit to Accounts Payable for an NSF check.

C 11. When preparing a bank reconciliation, bank credits are

A. added to the bank statement balance.
B. deducted from the bank statement balance.
C. added to the balance per books.
D. deducted from the balance per books.

A 12. Highly liquid investments that are readily convertible into cash can be shown as cash
equivalents if the investments have a maturity of 90 days or less
A. From the date of investments are acquired.
B. From the end of the reporting period.
C. From the date of issue of financial statements.
D. From the date the investments are acquired or from the end of the reporting period.

D 13. In reimbursing the imprest petty cash fund, which of the following statements is tru?
A. Cash is debited
B. Petty cash is debited
C. Petty cash is credited
D. Expense accounts are debited

C 14. Which does not require an adjusting entry on the depositor’s books?
A. Collection from customer deposited in the amount of P 100,000 but recorded by the
depositor as P 10,000.
B. Check in payment of accounts payable amounting to P 50,000 is recorded by the depositor
at P 5,000.
C. Deposit of another company s credited to the account of our enterprise
D. None of the above

A 15. Which method of bank reconciliation is preferable?

A. Adjusted balance method
B. Book to bank method
C. Bank to book method
D. All of the above

2|Page
 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

MCQ 2.1-2
PROBLEMS (20 Points)

Instructions:
Select the best answer among the given choices. Write your answer on the space provided before each number. Use
only CAPITAL LETTERS.

B 1. Consider the following: Cash in Bank – checking account of P13,500, Cash on hand of P 500, Post-
dated checks received totaling P 3,500, and Certificates of deposit totaling P 124,000. How much
should be reported as cash in the statement of financial position?
A. P 13,500.
B. P 14,000.
C. P 17,500.
D. P 131,500.

SOLUTION:
Cash in bank – checking account 13,500
Cash on hand 500
Post-dated checks received - This is Accounts Receivable
Certificates of Deposit - This is Temporary Investment
Cash in the Statement of Financial Position 14,000 Letter B

B 2. Hendrix Company has cash in bank of P10,000, restricted cash in a separate account of P 3,000,
and a bank overdraft in an account at another bank of P1,000. Hendrix should report cash of
A. P 9,000.
B. P 10,000.
C. P 12,000.
D. P 13,000

SOLUTION:
Cain in bank 10,000
Restricted cash in a separate account - Noncurrent asset
Bank overdraft - Current liability
Cash to be reported 10,000 Letter B

C 3. Casper Company has the following items at year-end: Cash in bank, P 200,000; Petty cash fund, P
3,000; Commercial paper with maturity of 2 months, P 55,000; Postdated checks, P 14,000.
Casper should report cash and cash equivalents of
A. P 200,000.
B. P 203,000.
C. P 258,000.
D. P 272,000

SOLUTION:
Cash in bank 200,000
Petty Cash Fund 3,000
Commercial paper with maturity of 2 months 55,000 Qualified as Cash Equivalents
Post-dated checks (assumed of customers) - Accounts receivable
Total cash and cash equivalents 258,000 Letter C

D 4. If a petty cash fund is established in the amount of P 2,500, and contains P 1,500 in cash and P 950
in receipts for disbursements when it is replenished, the journal entry to record replenishment should
include credits to the following accounts
A. Petty Cash, P 750.
B. Petty Cash, P 1,000.
C. Cash, P 950; Cash Over and Short, P 50.
D. Cash, P 1,000.

SOLUTION:
Expenses 950
Cash Over and Short (P 2,500 – P 1,500 – P 950) 50
Cash in Bank 1,000

B 5. If the month-end bank statement shows a balance of P 36,000, outstanding checks are P 12,000, a
deposit of P 4,000 was in transit at month end, and a check for P 500 was erroneously charged by
the bank against the account, the correct balance in the bank account at month end is
A. P 27,500.
B. P 28,500.
C. P 20,500.
D. P 43,500.

3|Page
 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

SOLUTION:
Unadjusted bank balance at month-end 36,000
Deposit in transit at month-end 4,000
Outstanding checks (12,000)
Erroneous charging by bank (disbursement is overstated) 500 Bank balance is understated
Correct bank balance at month-end 28,500 Letter B

B 6. In preparing its bank reconciliation for the month of April 2020, Henke, Inc. has available the
following information:

Balance per bank statement, 4/30/2020 39,140

NSF check returned with 4/30/2020 bank statement 450
Deposits in transit, 4/30/2020 5,000
Outstanding checks, 4/30/2020 5,200
Bank service charges for April 20

What should be the correct balance of cash at April 30, 2020?

A. P 39,370
B. P 38,940
C. P 38,490
D. P 38,470

SOLUTION:
Balance per bank statement, 4/30/2020, unadjusted 39,140
NSF check returned with 4/30/2020 bank statement - Book reconciling item
Deposits in transit, 4/30/2020 5,000
Outstanding checks, 4/30/2020 (5,200)
Bank service charges for April - Book reconciling item
Correct balance of cash at April 30, 2020 38,940 Letter B

C 7. Finley, Inc.’s checkbook balance on December 31, 2020 was P 21,200. In addition, Finley held the
following items in its safe on December 31.

1) A check for P 450 from Peters, Inc. received December 30, 2020, which was not included in the
checkbook balance.
2) An NSF check from Garner Company in the amount of $900 that had been deposited at the
bank but was returned for lack of sufficient funds on December 29. The check was to be
redeposited on January 3, 2021. The original deposit has been included in the December 31
checkbook balance.
3) Coin and currency on hand amounted to P 1,450.

The proper amount to be reported on Finley's statement of financial position for cash at December
31, 2020 is
A. P 21,300.
B. P 20,400.
C. P 22,200.
D. P 21,750.

SOLUTION:
Checkbook balance at December 31, 2020, unadjusted 21,200
Check received from Peters, Inc 450 Not yet included in checkbook
NSF Check from Garner Company (900) A/R; included in checkbook
Checkbook balance at December 31, 2020, adjusted 20,750 This is CASH IN BANK
Coins and currency on hand 1,450 This is CASH ON HAND
Proper Cash amount to be reported in SFP at 12/31/2020 22,200 Letter C

B 8. The cash account shows a balance of P 450,000 before reconciliation. The bank statement does not
include a deposit of P 23,000 made on the last day of the month. The bank statement shows a
collection by the bank of P 9,400 and a customer's check for P 3,200 was returned because it was
NSF. A customer's check for P 4,500 was recorded on the books as P 5,400, and a check written for
P 790 was recorded as P 970. The correct balance in the cash account was
A. P 455,120.
B. P 455,480.
C. P 457,280.
D. P 478,480.

SOLUTION:
Unadjusted book balance 450,000
Collection by bank for the company 9,400
Customer’s NSF Check (3,200)
Overstated receipt – cash balance overstated (900) (P 5,400 error – P 4,500 correct)
Overstated disbursement – cash balance understated 180 (P 970 error – P 790 correct)
Correct cash account balance 455,480 Letter B

4|Page
 Far Eastern University
Institute of Accounts. Business and Finance
Department of Accountancy and Internal Auditing

C 9. In preparing its May 31, 2020 bank reconciliation, Catt Co. has the following information available:

Balance per bank statement, 5/31/2020 30,000

Deposit in transit, 5/31/2020 5,400
Outstanding checks, 5/31/20202 4,900
Note collected by bank in May 1,250

The correct balance of cash at May 31, 2020 is

A. P 35,400.
B. P 29,250.
C. P 30,500.
D. P 31,750.

SOLUTION:
Balance per bank statement, 5/31/2020 30,000
Deposit in transit, 5/31/2020 5,400
Outstanding checks, 5/31/20202 (4,900)
Note collected by bank in May - Book reconciling item
Correct cash balance at May 31, 2020 30,500 Letter C

A 10 Tresh, Inc. had the following bank reconciliation at March 31, 2020:
.

Balance per bank statement, March 31, 2020 372,000

Add: Deposit in transit 103,000
Total 475,000
Less: Outstanding checks 126,000
Balance per books, March 31, 2020 349,000

Data per bank for the month of April 2020 follow:

Deposit 467,000
Disbursements 497,000

All reconciling items at March 31, 2020 cleared the bank in April. Outstanding checks at April 30,
2020 totaled P 60,000. There were no deposits in transit at April 30, 2020. What is the cash balance
per books at April 30, 2020?
A. P 282,000
B. P 319,000
C. P 342,000
D. P 385,000

SOLUTION: Bank Book

Unadjusted balances, March 31, 2020 372,000 349,000
Bank deposits during April, 2020 467,000
Bank disbursements during April, 2020 (497,000
)
Unadjusted balances, April 30, 2020 342,000
Deposit in transit -
Outstanding checks at April 30, 2020 (60,000)
Cash balance, adjusted, April 30, 2020 282,000 Letter A

5|Page