n the audit of Pasig Company’s cash account, you obtained the following information: The company’s bookkeeper prepared the following bank reconciliation as of November 30, 2018: Bank balance – November 30, 2018 P90,800Undeposited collections 5,000Bank service charges 100Bank collection of customer’s note (8,000)Outstanding checks: NumberAmount 7159P3,000 77675,000 79152,000 (10,000)Book balance – November 30, 2018 P77,900 Additional data are given as follows: a. Company recordings for December:Total collections from customersP165,000Total checks drawn98,000 b. Bank statement totals for December :ChargesP123,800Credits169,000 c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a voucher for P30,000. Upon examination of the checks returned by the bank, the actual amount of the check was P30,000. d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check (no.7767), which was returned by the payee. Both checks were recorded in the amount drawn, P5,000, but no entry was made to cancel check no. 7767. e. The December bank statement included a check drawn by Sipag Company for P1,500. f. Undeposited collections on December 31, 2018 - P8,000. g. The service charge for December was P150 which was charged by the bank to another client. h. The bank collected a note receivable of P7,000 on December 28, 2018, but the collection was not received on time to be recorded by Pasig.i. The outstanding checks on December 31, 2018, were: Check No.AmountCheck No.Amount7767P5,0008910P2,30088561,30089254,100 Based on the above and the result of your audit, determine the adjusted cash balance as of November 30, 2018.Select one:a.P63,800b.P58,800c.P90,800d.P85,800
Question
n the audit of Pasig Company’s cash account, you obtained the following information: The company’s bookkeeper prepared the following bank reconciliation as of November 30, 2018: Bank balance – November 30, 2018 P90,800Undeposited collections 5,000Bank service charges 100Bank collection of customer’s note (8,000)Outstanding checks: NumberAmount 7159P3,000 77675,000 79152,000 (10,000)Book balance – November 30, 2018 P77,900 Additional data are given as follows: a. Company recordings for December:Total collections from customersP165,000Total checks drawn98,000 b. Bank statement totals for December :ChargesP123,800Credits169,000 c. Check no. 7159 dated November 25, 2018, was entered as P3,000 in payment of a voucher for P30,000. Upon examination of the checks returned by the bank, the actual amount of the check was P30,000. d. Check no. 8113 dated December 20, 2018 was issued to replace a mutilated check (no.7767), which was returned by the payee. Both checks were recorded in the amount drawn, P5,000, but no entry was made to cancel check no. 7767. e. The December bank statement included a check drawn by Sipag Company for P1,500. f. Undeposited collections on December 31, 2018 - P8,000. g. The service charge for December was P150 which was charged by the bank to another client. h. The bank collected a note receivable of P7,000 on December 28, 2018, but the collection was not received on time to be recorded by Pasig.i. The outstanding checks on December 31, 2018, were: Check No.AmountCheck No.Amount7767P5,0008910P2,30088561,30089254,100 Based on the above and the result of your audit, determine the adjusted cash balance as of November 30, 2018.Select one:a.P63,800b.P58,800c.P90,800d.P85,800
Solution
To determine the adjusted cash balance as of November 30, 2018, we need to adjust the book balance and bank balance for any errors or discrepancies.
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Start with the bank balance of P90,800.
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Add undeposited collections of P5,000. This is money that the company has received but has not yet deposited in the bank. The bank doesn't know about this money yet, so we add it to the bank balance.
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Subtract bank service charges of P100. This is a fee that the bank has charged the company, so we subtract it from the bank balance.
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Add bank collection of customer's note of P8,000. This is money that the bank has collected on behalf of the company, so we add it to the bank balance.
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Subtract outstanding checks of P10,000. These are checks that the company has written but have not yet been cashed or deposited by the recipients. The bank doesn't know about these checks yet, so we subtract them from the bank balance.
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The book balance is P77,900. However, there are some errors and discrepancies that need to be corrected:
a. Check no. 7159 was entered as P3,000 instead of P30,000. This is an error of P27,000 that needs to be subtracted from the book balance.
b. Check no. 8113 was issued to replace a mutilated check (no.7767), but no entry was made to cancel check no. 7767. This means that the book balance is overstated by P5,000, so we subtract this amount.
c. The December bank statement included a check drawn by Sipag Company for P1,500. This is not the company's check, so we add this amount to the book balance.
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After making these adjustments, the adjusted book balance is P77,900 - P27,000 - P5,000 + P1,500 = P47,400.
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The adjusted bank balance is P90,800 + P5,000 - P100 + P8,000 - P10,000 = P93,700.
The adjusted cash balance as of November 30, 2018, is the lesser of the adjusted book balance and the adjusted bank balance, which is P47,400. However, this option is not available in the choices given. There might be a mistake in the problem or in the choices.
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