Problem 1 – Review of Cash

The following are the cash balances of LEONOR, INC. at December 31, 2020:

Undeposited collections (in currency and coins) P 40, 200

Current account – unrestricted 620,000
Disbursement checks written and recorded in
December 2020 but are to be released to the
Payees in January 2021 130,000
Restricted time deposits (expected use in June 2021) 2,000,000

Leonor, Inc. has agreed to maintain a P200, 000 compensating balance in its unrestricted
current account in accordance with the loan covenant.

How much should Leonor, Inc. report as ash on its December 31, 2020, statement of financial
position?
A. 590, 200 C. 790, 200
B. 2, 790,200 D. 750, 000

Problem 2 – Review of Cash and Cash Equivalents

The accountant of SANTIAGO COMPANY is in the process of preparing the company’s

financial statements for the year ended December 31, 2020. He is trying to determine the
correct balance of cash and cash equivalents to be reported as a current asset on the statement
of financial position. The following items are being considered:
 Balances in the company’s accounts at the Metropolitan Bank:
 Current account P 81,000
 Savings account P132,600
 Undeposited customer checks of P22, 200 (including a customer check dated January 2, 2021
or P3, 000).
 Currency and coins on hand of P 3, 480
 Savings account at the Northern Philippines Bank with a balance of P2, 400,000. This account
is being used to accumulate cash for future plant expansion (in 2021).
 Petty cash of P4, 000 (currency of P1, 200 and unreplenished vouches for P2, 800).
 P120, 000 in a current account at the Northern Philippines Bank. This represents a 20%
compensating balance for P600, 000 loans with the bank. Santiago Company is legally
restricted to withdraw the funds until the loan is due in 2023.
 Treasury bills:
 Two-month maturity bills P90, 000
 Seven-month bills 120,000
 Time Deposit P100, 000

What is the correct balance of cash and cash equivalents to be reported in the current assets
section of the statement of financial position?
A. P547, 480 C. P430, 280
B. P427, 480 D. P327, 480
Problem 3

Which of the following items should be included in the cash balance at December 31, 2020?
I. A check payable to the company, dated January 3, 2021 in payment of a sale made in
December 2020.
II. A check payable to a vendor dated and recorded in the company’s books on December
31, 2020, but not released until January 4, 2021.
A. I only C. Both I and II
B. II only D. Neither I nor II

Problem 4

Cash and Cash equivalents on the Statement of Financial Position

Your audit of the December 31, 2020, financial statements of DIONISIO CORP. reveals the
following:
Current account at Prime Bank (30,000)
Current account at Prudent Bank 135,000
Treasury bills (acquired 3 months before maturity) 300,000
Treasury bills (maturity date is Dec. 31, 2021) 1,500,000
Payroll account 390,000
Foreign bank account – restricted (translated using the
December 31, 2020, exchange rate) 2,000,000
Postage stamps 1,250
Employees post-dated check 4,500
IOU from the vice-president 8,000
Credit memo from a supplier for a purchase return 8,100
Traveller’s check 21,000
Money order 12,900
Petty cash fund (3,000 in currency and expense receipts for P12, 000) 15,000

What amount would be reported as “cash and cash equivalents” on the statement of financial
position on December 31, 2020?
A. P840, 050 C.P849, 400
B. P873, 900 D.P861, 900