Far Eastern University

INSTITUTEOF ACCOUNTS, BUSINESS AND FINANCE

Department of Accountancy & Internal Auditing

INTERMEDIATE ACCOUNTING 1
MIDTERM GRADING PERIOD
LECTURE 3 – PROOF OF CASH

GUIDE IN YOUR LEARNING PROGRESS

Bloom's taxonomy is a set of three hierarchical models used to classify educational learning objectives
into levels of complexity and specificity. The three lists cover the learning objectives in cognitive, affective
and sensory domains.

https://en.wikipedia.org/wiki/Bloom%27s_taxonomy

In COGNITIVE DOMAIN, The six levels are: (1) knowledge, (2) comprehension, (3) application, (4)
analysis, (5) synthesis, and (6) evaluation (see Figure below). Bloom's taxonomy provides a systematic
way of describing how a learner's performance grows in complexity when mastering academic tasks.
https://www.researchgate.net/figure/Six-levels-in-Blooms-taxonomy_fig1_230877207

Bloom's Revised Taxonomy by Andreson and Krathwol. There are six levels of cognitive learning
according to the revised version of Bloom's Taxonomy. Each level is conceptually different. The six levels
are remembering, understanding, applying, analyzing, evaluating, and creating.

1
 Format 1
Bank Reconciliation Statement – Adjusted Balance Method

Format 2
Bank Reconciliation Statement – Book to Bank Method

2
 Format 3
Bank Reconciliation Statement – Bank to Book Method

STRAIGHT PROBLEMS
PROBLEM 1
Source: Problem 3-5 (ACP) Intermediate Accounting Volume 1 by Valix, Peralta, Val;ix
Efficient Company showed the following information:

Cash in bank balance, March 31 200,000

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 Book credits for April 720,000
Book debits for April 800,000

Bank statement balance, March 31 330,000

Bank debits 530,000
Bank credits 700,000

Note collected by bank:

March 60,000
April 100,000

Service Charge:
March 8,000
April 2,000

NSF Check:
March 20,000
April 30,000

Deposit in Transit:
March 31 80,000
April 30 220,000

Outstanding Checks:
March 31 178,000
April 30 372,000

Required:
A. Prepare a proof of cash for the month of April following the adjusted balance method.
B. Prepare a proof of cash for the month of April following the book to bank method.

PROBLEM 2
Source: Problem 3-6 (IAA) Intermediate Accounting Volume 1 by Valix, Peralta, Val;ix
Bigotry Company provided the following information:

Balance per book, August 31 2,000,000

Receipts per book for August 4,400,00
Disbursements per book for August 3,600,000

Balance per bank, August 31 1,860,000

Bank receipts for August 5,000,000
Bank disbursements for August 3,940,000

August collection of P 200,000 recorded by entity as 20,000

August check in payment of account payable for P 600,000 recorded by entity as 60,000

Deposit of Bigot Company erroneously credited by bank to Bigotry Company 200,000

August check of Bigot Company erroneously charged by bank to Bigotry Company 400,000

NSF Check:
July 100,000
August 50,000

Note collected by bank for Bigotry Company:

July 200,000
August 300,000

Deposit in transit:
July 31 600,000
August 31 480,000

Outstanding Checks
July 31 100,000
August 31 650,000

Required:
A. Prepare proof of cash for the month of August following the adjusted balance method.
B. Prepare proof of cash for the month of August following the book to bank method.

PROBLEM 3
Source: Problem 3-7 (IAA) Intermediate Accounting Volume 1 by Valix, Peralta, Val;ix
Bedlam Company provided the following data for the month of December:

4
 November 30 December 31
Cash in bank account balance 2,032,000 3,160,000
Bank statement balance 1,890,000 2,900,000
Bank debits 1,080,000
Bank credits ?
Book debits ?
Book credits 1,440,000
Outstanding checks 180,000 592,000
Deposit in transit 80,000 498,000
Check erroneously charged by bank against entity’s account
and corrected in subsequent month 40,000 50,000
Bank service charge 2,000 4,000
Note recorded as cash receipt by entity when placed with
bank for collection and note is actually collected by bank in
subsequent month and credited by bank to entity’s account
in same month 200,000 300,000

Required:
A. Prepare a four-column reconciliation showing adjusted balances.
B. Prepare one adjusting entry only December 31.

PROBLEM 4
Source: Problem 3-8 (IAA) Intermediate Accounting Volume 1 by Valix, Peralta, Val;ix
Jargon Company provided the following data concerning the cash records for the months of September and October.

September 30 October 31
Book balance 1,900,000 ?
Total cash receipts per book 1,400,000
Total cash disbursements per book 2,400,000

Bank balance 2,100,000

Total charges in bank statement 2,500,000
Total credits in bank statement 1,200,000

NSF Check 60,000 40,000

Collections of accounts receivable not recorded by entity and
corrected in subsequent month 30,000 50,000
Overstatement of check in payment of salaries corrected in
subsequent month 90,000 120,000
Deposit in transit 130,000 260,000
Outstanding checks 270,000 30,000

Required:
A. Prepare a four-column reconciliation showing adjusted balances.
B. Prepare adjusting entries on October 31.

SUPPLEMENTARY STRAIGHT PROBLEMS (with answers expect P3-4)

PROBLEM 3-1 (ACP)
Intermediate Accounting Volume 1 by Valix, Peralta, Val;ix
Sassy company provided the following data for the month of July:
Cash in Bank
Balance June 30 1,000,000
Book debits for July including June CM for note collected, P 300,000 (Receipts) 4,000,000
Book credits for July including June NSF of P 100,000 and service charge of
P 4,000 (Disbursements) 3,600,000

Bank statement for July

Balance June 30 1,650,000
Bank debits for July including service charge of P 1,000 and
June outstanding checks of P 854,000 (Disbursements) 2,500,000
Bank credits for July including CM for bank loan of P 500,000 and
June deposit in transit of P 400,000 (Receipts) 3,500,000

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Required: Prepare bank reconciliation on June 30 and July 3, and adjusting entries on July 31.

SOLUTION:
Requirement 1: Bank Reconciliation Statement – Adjusted Balance Method

SASSY COMPANY
Proof of Cash
For the month ended July 31, 2019

JULY
June 30 Receipts Disburse. July 31
Unadjusted bank balances 1,650,000 3,500,000 2,500,000 2,650,000
Deposit in transit - June 30 400,000 (400,000)
Deposit in transit – July 31 1,100,000 1,100,000
Outstanding checks – June 30 (854,000) (854,000)
Outstanding checks – July 31 1,851,000 (1,851,000
)
Adjusted bank balances 1,196,000 4,200,000 3,497,000 1,899,000

Unadjusted book balances 1,000,000 4,000,000 3,600,000 1,400,000

Credit memo – June 300,000 (300,000)
Credit memo - July 500,000 500,000 AJE 1
Service Charge – June (4,000) (4,000)
Service Charge - July 1,000 (1,000) AJE 2
NSF Check - June (100,000) (100,000)
Adjusted book balances 1,196,000 4,200,000 3,497,000 1,899,000

Supporting computation – Deposit in Transit at July 31

Book debits/ receipts during July 4,000,000
June credit memo collected by bank (300,000)
Total cash receipts during July other than Credit Memo 3,700,000
Bank deposits related to book cash receipts during July:
Bank credits during July 3,500,00
0
Credit memo for bank loan during July (500,000)
Deposit in transit on June 30 received in July (400,000) (2,600,000)
Deposit in transit, July 31 1,100,000

Supporting computation – Outstanding checks at July 31

Book credits/ disbursements during July 3,600,000
Customer’s NSF Check during June (100,000)
Bank service charge during June (4,000)
Total check disbursements during July 3,496,000
Bank debits/disbursements related to check issued and paid in July:
Bank debits during July 2,500,00
0
Service charge for July (1,000)
Outstanding checks on June 30 paid in July (854,000) (1,645,000)
Outstanding Checks- July 31 1,851,000

Requirement 2: Adjusting Journal Entries

Date Account Names Debit Credit
2019 (AJE NO. 1)
July 3 Cash in Bank 500,000
1
Loan Payable 500,000

(AJE NO. 2)
3 Service Charge 1,000
1
Cash in Bank 1,000

PROBLEM 3-2 (ACP)

Intermediate Accounting Volume 1 by Valix, Peralta, Val;ix
Beehive Company provided the following information:

Balance per book October 31 600,000

Receipts per book for November

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 (collection from customer, P 1,000 recorded as P 10,000) 2,200,000
Disbursements per book for November
(check for P 300,000 in payment of account recorded as P 30,000) 1,800,000
Balance per bank statement November 30 930,000
Deposit in transit October 31 300,000
Outstanding checks November 30 400,000
Bank receipts for November including an erroneous credit of P 100,000 which should have
been credited to Beeline Company 2,500,000
Bank disbursements for November including check of Beeline Company, P 200,000 1,970,000

Required: Bank reconciliation on October 31 and November 30, and adjusting entries on November 30.

SOLUTION:
Bank Reconciliation on October 31 and November 30

BEEHIVE COMPANY
Proof of Cash
For the month ended November, 2019

NOVEMBER
October 31 Receipts Disburse. November 30
Unadjusted bank balances 400,000 2,500,000 1,970,000 930,000
Deposit in transit – October 31(given) 300,000 (300,000)
Deposit in transit – November 30 190,000 190,000
Outstanding checks – October 31 (100,000) (100,000)
Outstanding checks – November 30 (given) 400,000 (400,000)
Erroneous credit during November (100,000) (100,000)
Erroneous debit during November (200,000) 200,000
Adjusted bank balances 600,000 2,290,000 2,070,000 820,000

Unadjusted book balances 600,000 2,200,000 1,800,000 1,000,000

Erroneous debit – customer’s collection
(P 100,000 – P 10,000) 90,000 90,000 AJE1
Erroneous credit – check payment
(P 300,000 – P 30,000) 270,000 (270,000) AJE2
Adjusted book balances 600,000 2,290,000 2,070,000 820,000
Supporting computation – Deposit in Transit at November 30
Book debits/ receipts during November, unadjusted 2,200,00
0
Erroneous debit – customer’s collection 90,000
Book debits/ receipts during November, adjusted 2,290,00
0
Bank receipts/deposits related to book cash receipts during November:
Bank credits during November 2,500,00
0
Deposit in transit – October 31 (300,000)
Erroneous credit during December (100,000) 2,100,00
0
Deposit in transit, November 30 190,000

ALTERNATIVE SOLUTION:
Deposit in transit, beginning, October 31 300,000
Add: Cash receipts deposited during November:
Book receipts 2,200,000
Understatement of collection from customer 90,000 2,290,00
0
Total 2,590,00
0
Less: Deposits credited by bank during November:
Bank receipts 2,500,000
Deposits of Susan Co. erroneously credited (100,000) 2,400,00
0
Deposit in Transit, November 30 190,000

NOTES – BASIC FORMULA

Deposit in transit, beginning of the month xxx
Add: Book receipts/debits deposited to bank during the month:
Unadjusted balance/amount xxx
Adjustments for any error xxx xxx
Total book receipts deposited to and to be acknowledged by the bank xxx
Less: Bank receipts/deposits deposited to and acknowledged by the bank
Unadjusted balance/amount xxx
Adjustments for any error xxx xxx
Deposit in transit, end of the month xxx
Supporting computation – Outstanding checks at November 30

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Book credits/ disbursements during November, unadjusted 1,800,00
0
Outstanding checks – November 30 (400,000)
Erroneous credit – check payment 270,000
Book credits/ disbursements during November, adjusted 1,670,00
0
Bank debits/disbursements related to check issued and paid in November:
Bank debits/disbursements during November 1,970,00
0
Erroneous debit during November (200,000) 1,770,00
0
Outstanding Checks- October 31 (100,000)

ALTERNATIVE SOLUTION:
Outstanding Checks, beginning, October 31 (SQUEEZE) 100,000
Add: Checks issued by the depositor:
Book disbursements 1,800,000
Understatement of checks paid 270,000 2,070,00
0
Total 2,170,00
0
Less: Checks paid by bank 1,970,000
Check of Susan Company charged in error (200,000) 1,770,00
0
Outstanding checks, ending, November 30 400,000

NOTES – BASIC FORMULA

Outstanding checks, beginning of the month xxx
Add: Book disbursements/credits/checks drawn during the month:
Unadjusted balance/amount xxx
Adjustments for any error xxx xxx
Total checks drawn to be paid by the bank xxx
Less: Bank disbursements/paid by the bank
Unadjusted balance/amount xxx
Adjustments for any error xxx xxx
Outstanding checks end of the month xxx

Adjusting Journal Entries

Date Account Names Debit Credit
2019 (AJE NO. 1)
Nov. 3 Cash in Bank 90,000
0
Accounts Receivable 90,000

(AJE NO. 2)
3 Accounts Payable 1,000
0
Cash in Bank 1,000

PROBLEM 3-3 (IAA)

Intermediate Accounting Volume 1 by Valix, Peralta, Val;ix
Fabulous Company provided the following data concerning cash on July 31:

Check Drawn Bank Statement

No. 101 600,000 Balance, July 31 2,700,000
No. 102 700,000 Charges:
No. 103 300,000 Checks paid 4,000,000
No. 104 400,000 Service Charge 20,000
No. 105 450,000 Credits:
No. 106 600,000 Deposits 3,500,000
No. 107 650,000 Note collected 1,500,000
No. 108 500,000

Balance of cash per book on July 1, P 1,270,000. Cash receipts per cash book for the month of July P3,400,000.

Check paid by bank include all checks issued during the month of July except No. 107 and No. 108.

On July 31 cash received but not deposited in bank, P 400,000.

Required:
A. Prepare bank reconciliation on July 1 and July 31.
B. Prepare adjusting entries on July 31.

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SOLUTION:
Requirement A - Bank Reconciliation on October 31 and November 30

FABULOUS COMPANY
Proof of Cash
For the month ended July 31, 2019

JULY
July 1 Receipts Disburse. July 31
Unadjusted bank balances 1,720,000 5,000,000 4,020,000 2,700,000
Deposit in Transit – July 1 (See below) 500,000 (500,000)
Deposit in Transit – July 31 (given) 400,000 400,000
Outstanding checks – July 1 (950,000) (950,000)
Outstanding checks – July 31 (see below) 1,150,000 (1,150,000)
Adjusted bank balances 1,270,000 4,900,000 4,220,000 1,950,000

Unadjusted book balances 1,270,000 3,400,000 4,200,000 470,000

Service Charge during July 20,000 (20,000) AJE 1
Notes collected by bank during July 1,500,000 1,500,000 AJE2
Adjusted book balances 1,270,00 4,900,000 4,220 1,950,000

Supporting computation – Outstanding Checks at July 31

JULY
Check Drawn Paid Unpaid
No. 101 600,000 600,000
No. 102 700,000 700,000
No. 103 300,000 300,000
No. 104 400,000 400,000
No. 105 450,000 450,000
No. 106 600,000 600,000
No. 107 650,000 650,000
No. 108 500,000 500,000
Total 4,200,000 1,150,000
Book Outstanding
Disbursements Checks, 7/31

Supporting computation – Deposit in Transit at July 1

Book debits/ receipts during July, unadjusted 3,400,00
0
Deposit in transit – July 31 (400,000)
Book debits/receipts during July, adjusted 3,000,00
0
Bank receipts/deposits related to book cash receipts during July:
Bank credits during November 5,000,000
Notes collected during July (1,500,000) 3,500,00
0
Deposit in transit, July 1 (500,000)

ALTERNATIVE SOLUTION:
Deposit in transit, beginning, July 1 (SQUEEZE) 500,000
Add: Cash receipts deposited during July:
Book receipts (given) 3,400,000
Total 3,900,00
0
Less: Deposits credited by bank during July:
Bank receipts (given) 5,000,000
Notes Collected during July (given) (1,500,000) 3,500,000
Deposit in Transit, July 31 (given) 400,000

Supporting computation – Outstanding checks at July 31

Outstanding Checks, beginning, July 1 (SQUEEZE) 950,000
Add: Checks issued by the depositor:
Book disbursements 4,200,00
0
Total 5,150,00
0
Less: Checks paid by bank (given) 4,000,00

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 0
Outstanding checks, ending, July 31 1,150,00
0

Requirement B - Adjusting Journal Entries

Date Account Names Debit Credit
2019 (AJE NO. 1)
Nov. 3 Service Charges 20,000
0
Cash in Bank 20,000

(AJE NO. 2)
3 Cash in Bank 1,500,000
0
Notes Receivable 1,500,00
0

PROBLEM 3-4 (ACP)

Intermediate Accounting Volume 1 by Valix, Peralta, Val;ix
Flamboyant Company prepared the following bank reconciliation on October 31.

Cash account balance 990,000

Less: Bank service charge 5,000
Deposit outstanding 45,000
Check erroneously charged by bank
against entity’s account 10,000 60,000
Balance 930,000
Add: Checks outstanding 125,000
Unrecorded collections 45,000 170,000
Bank statement balance 1,100,000

October 31 balance per book 990,000

Book credits 1,200,000
Book debits 710,000

October 31 balance per bank statement 1,100,000

Bank credits 500,000
Bank debits 1,000,000

Debit memo for service charge in November 10,000

Debit memo for a customer’s NSF check in November 50,000

During the month of November, the bank corrected the P 10,000 error committed in prior month.

The entity recorded as cash receipt a customer note receivable of P 100,000 placed with the bank for collection on
November 30. The note was not collected until the subsequent month.

Required:
A. Prepare bank reconciliation statement on November 30 showing adjusted balances.
B. Prepare one adjusting entry only on November 30.

MULTIPLE CHOICE QUESTIONS

PROBLEM 3-9 (PHILCPA Adapted)
Intermediate Accounting Volume 1 by Valix, Peralta, Valix (2019 Edition)
Humanizer Company provided the following information:

Balance per bank statement – May 31 2,600,000

Deposits outstanding 300,000
Checks outstanding (100,000)
Correct bank balance – May 31 2,800,000

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 Balance per book – May 31 2,810,000
Bank Service Charge (10,000)
Correct book balance – May 31 2,800,000

June data are as follows:

Bank Book
Checks recorded 2,200,000 2,500,000
Deposits recorded 1,600,000 1,800,000
Service charges recorded 50,000
Note collected by bank, P 500,000 plus interest 550,000
NSF Check returned with June 30 statement 100,000
Balances 2,400,000 2,100,000

1. What is the amount of outstanding checks on June 30?

A. P 300,000
B. P 400,000
C. P 200,000
D. P 100,000

2. What is the amount of deposit in transit on June 30?

A. P 300,000
B. P 100,000
C. P 200,000
D. P 500,000

3. What is the adjusted cash in bank on June 30?

A. P 2,500,000
B. P 2,400,000
C. P 2,100,000
D. P 2,800,000

PROBLEM 3-10 (AICPA Adapted)

Intermediate Accounting Volume 1 by Valix, Peralta, Valix (2019 Edition)
Cool company prepared the following bank reconciliation for the month of November:

Balance per bank statement, November 30 3,600,000

Add: Deposit in transit 800,000
4,400,000
Less: Outstanding checks 1,200,000
Bank credit recorded in error 200,000 1,400,000
Balance per book, November 30 3,000,000

Data per bank statement for the month of December:

December deposits, including notes receivable of P 1,000,000 for Cool

Company 5,500,000
December disbursements, including NSF check P 350,000 and service
charge P 50,000 4,400,000

All items that were outstanding on November 30 cleared through the bank in December, including the bank
credit.

In addition, checks of P 500,000 were outstanding and deposits of P 700,000 were in transit on December 31.

1. What is the adjusted cash in bank on December 31?

A. P 4,700,000
B. P 4,900,000
C. P 4,500,000
D. P 3.200,000

2. What is the balance of cash per ledger on December 31?

A. P 4,100,000
B. P 4,900,000
C. P 4,700,000
D. P 4,300,000

3. What is the amount of cash receipts per book in December?

A. P 5,400,000
B. P 4,400,000
C. P 5,500,000

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 D. P 6,400,000

4. What is the amount of cash disbursements per book in December?

A. P 3,700,000
B. P 3,300,000
C. P 3,100,000
D. P 3,500,000

PROBLEM 3-11 (AICPA Adapted)

Intermediate Accounting Volume 1 by Valix, Peralta, Valix (2019 Edition)
Lovable Company prepared the following bank reconciliation on June 30:

Balance per bank statement, June 30 3,000,000

Deposit in transit 400,000
Total 3,400,000
Outstanding checks (900,000)
Balance per book, June 30 2,500,000

The bank statement for the month of July showed the following:

Deposits, including P 200,000 note collected for Lovable 9,000,000

Disbursements, including P 140,000 NSF check and P 10,000 service
charge 7,000,000

All reconciling items on June 30 cleared through the bank in July.

The outstanding checks totaled P 600,000 and the deposit in transit amounted to P 1,000,000 on July 31.

1. What is the adjusted cash in bank on July 31?

A. P 5,000,000
B. P 5,200,000
C. P 5,550,000
D. P 5,400,000

2. What is the cash balance per book on July 31?

A. P 5,400,000
B. P 5,350,000
C. P 5,550,000
D. P 4,500,000

3. What is the amount of cash receipts per book in July?

A. P 9,400,000
B. P 9.600,000
C. P 8,600,000
D. P 9,800,000

4. What is the amount of cash disbursements per book in July?

A. P 6,550,000
B. P 6,700,000
C. P 7,300,000
D. P 6,850,000

PROBLEM 3-12 (AICPA Adapted)

Intermediate Accounting Volume 1 by Valix, Peralta, Valix (2019 Edition)
Loquacious Company prepared the following bank reconciliation on June 30:
Balance per bank statement, June 30 9,800,000
Deposit in transit 400,000
Outstanding checks (1,400,000)
Balance per book, June 30 8,800,000

There were total deposits of P 6,500,000 and charges for disbursements of P 9,000,000 for July per bank
statement.

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All reconciliation items on June 30 cleared the bank on July 31. Deposit in transit totaled P 600,000 and the
checks outstanding amounted to P 1,000,000 on July 31.

1. What is the adjusted cash in bank on July 31?

A. P 7,300,000
B. P 7,900,000
C. P 6,900,000
D. P 6,300,000

2. What is the cash balance per book on July 31?

A. P 6,900,000
B. P 7,300,000
C. P 6,300,000
D. P 8,800,000

3. What is the amount of cash receipts per book in July?

A. P 6,700,000
B. P 6,500,000
C. P 6,300,000
D. P 7,100,000

4. What is the amount of cash disbursements per book in July?

A. P 8,600,000
B. P 7,600,000
C. P 9,400,000
D. P 8,400,000

PROBLEM 3-13 (AICPA Adapted)

Intermediate Accounting Volume 1 by Valix, Peralta, Valix (2019 Edition)
Opaque Company prepared the following bank reconciliation on March 31:

Balance per bank statement, March 31 4,650,000

Deposit in transit 1,000,000
Total 5,650,000
Outstanding checks (1,250,000)
Balance per book, March 31 4,400,000

Data per bank statement for the month of April follow:

Deposits 6,000,000
Disbursements 5,000,000

All reconciliation items on March 31 cleared through the bank in April.

Outstanding checks on April 30 totaled P 750,000 and deposits in transit amounted to P 1,500,000.

1. What is the adjusted cash in bank on April 30?

A. P 5,650,000
B. P 7,150,000
C. P 4,650,000
D. P 6,400,000

2. What is the cash balance per ledger on April 30?

A. P 6,400,000
B. P 5,650,000
C. P 4,900,000
D. P 4,650,000

3. What is the amount of cash receipts per book in April?

A. P 5,000,000
B. P 6,500,000
C. P 7,500,000
D. P 5,500,000

4. What is the amount of cash disbursements per book in April?

A. P 5,000,000
B. P 5,500,000
C. P 4,500,000
D. P 5,750,000

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