Cash and Cash Equivalent

Cash and Cash Equivalent
Theories:
1. Which of the following should be considered as cash?
a. Certificates of Deposits
b. Money Orders
c. Money Market Instruments
d. Treasury Bills
2. Bank Overdraft should be
a. Reported as deduction from the asset section
b. Reported as deduction from cash
c. Netted against cash and a net cash amount reported
d. Reported as current liability
3. What is compensating balance?
a. Saving account balance
b. Loan account with bank
c. Temporary investment serving as collateral for loan
d. Minimum deposit required to be maintained in connection with borrowing arrangement
4. Deposit held as compensating balance
a. Usually do no earn interest
b. If legally restricted and held against short term credit may be included in cash
c. If legally restricted and held against long term credit may be included among current assets.
d. None of these
5. A cash equivalent is a short term, highly liquid investment that is readily convertible into known
amount cash and
a. Is acceptable as a means to pay current liabilities.
b. Has a market value greater than original cost.
c. Bears an interest rate that is at least equal to the prime interest rate.
d. Is so near maturity that it presents insignificant risk of change in interest rate.
6. 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 the investments are acquired.
b. From the end of reporting period.
c. From the date of issue of the financial statements
d. From the date the investments are acquired or from the end of the reporting period.
7. Which of the following could not be reported as cash or cash equivalents?
a. Money market accounts
b. Demand deposits
c. BSP treasury bills with an original maturity of sixty days from the date of purchased
d. Legally restricted deposit held as compensating balance against borrowing arrangement.
8. All of the following can be classified as cash and cash equivalent, except
a. Redeemable preference shares acquired and due in 60 days
b. Commercial papers held and due for repayment in 90 days.
c. Equity investments
d. A bank overdraft
9. What is the major purpose of an imprest petty cash fund?
a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors
c. To determine the honesty of the employees
d. To effectively control cash disbursements
10. Which statement in relation to petty cash fund is incorrect?
a. Each disbursement from petty cash should be supported by a petty cash voucher.
b. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund out of
the general cash account.
c. At any time, the sum of the cash in the petty cash fund and the total of petty cash vouchers
should equal the amount for which the imprest petty cash fund was established.
d. With the establishment of an imprest petty cash fund, one person is given the authority and
responsibility for issuing checks to cover minor disbursements.
11. Which statement is true when an imprest petty cash fund is used?
a. The balance of the petty cash fund should be reported in the balance sheet as a long-term
investment.
b. The petty cashier’s summary of petty cash payments serves a journal entry that is posted as a
long term investment
c. The reimbursement of the petty cash fund should be credited to the cash account.
d. Entries that include a credit to the cash account should be recorded at the time the payments
from the petty cash fund are made.
PROBLEM:
1. An entity provided the following data on December 31, 2019:
Checkbook balance 5,000,000
Bank statement balance 4,000,000
Check drawn on entity’s account, payable to supplier, dated
and recorded on Dec. 31, 2019 but not mailed until Jan. 31, 2020 1,000,000
Cash in sinking fund 1,500,000
Treasury bills, purchased Nov. 1, 2019 and maturing Jan. 31, 2019 2,500,000
Time Deposit, purchased Oct. 1, 2019 and maturing Jan. 31, 2019 2,000,000
What amount should be reported as cash?

What amount should be reported as cash equivalents?
2. An entity had the following cash balances on Dec. 31, 2019:

Cash in bank 5,000,000
Petty cash fund (all funds were reimbursed on Dec. 31, 2019) 50,000
Money market placement or commercial papers 1,500,000
Saving Deposits 800,000
Cash in bank included 500,000 of compensating balance against short-term borrowing

arrangement on Dec. 31, 2018. A check of 1,000,000 dated January 31, 2020 in payment of
accounts payable was recorded and mailed on Dec. 31, 2019.
Assuming compensating balance has legal restriction as to withdrawal, How much is cash and
cash equivalent?
Assuming compensating balance has no legal restriction as to withdrawal, How much is cash and
cash equivalent?
3. An entity had the following account balances on Dec. 31, 2019:

Cash on hand, including a customer check P100,000 dated Jan. 31, 2020 500,000
Cash in bank- current account 4,000,000
Cash in bank- payroll account 1,000,000
Cash in bank- restricted account for plant addition expected
To be disbursed in 2020 500,000
Cash in sinking fund set aside for bond payable due on Dec. 31, 2020 1,500,000
Three-month time deposit 2,000,000
Traveler’s check 200,000
Manager’s check 300,000
Money order 100,000
How much is cash?

How much is cash and cash equivalents?

Cash and Cash Equivalent

Uploaded by

Copyright:

Available Formats

Cash and Cash Equivalent

Uploaded by

Document Information

Original Description:

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Cash and Cash Equivalent

Uploaded by

Copyright:

Available Formats

Cash and Cash Equivalent

What amount should be reported as cash?

2. An entity had the following cash balances on Dec. 31, 2019:

Cash in bank included 500,000 of compensating balance against short-term borrowing

3. An entity had the following account balances on Dec. 31, 2019:

How much is cash?

You might also like