Problem 1 The senior auditor instructed you to prepare a four column proof of cash receipts and disbursements for the month of August 2008. The bank reconciliation prepared by Albarando Company at July 31 is reproduced below (All book disbursements were recorded in August) Bank Balance
52,000
Add: Deposit in transit, July 31
900
Book Balance 40,000 Add: Proceeds of note receivable by bank in July 8,000 Deposit made in bank
on Total Less: Outstanding checks No. 436 No. 450 No. 451 No. 454 Adjusted balance
52,900 200 1,800 1,400 600
4,000 48,900
July 31 not recorded on books until August
Total Less: Service Charge
1,000 49,000 100
Adjusted balance
______ 48,900
Upon inquiry about the client’s August 31 bank reconciliation, you were informed hat it has been lost and that no client is too busy at this time to prepare another. Your senior auditor told you to get the August bank statement and paid checks and to prepare the August 31 reconciliation so that you may complete the August proof of cash. The August bank statement is reproduced below: Davao Bank Account name: Albarando Company Date Debits Credits July 31 August 1 1,800 900 August 8 1,400 August 9 600 10,000 August 12 140 EC 140 EC August 15 1,000 August 20 700 14,000 August 27 1,440 August 29 100 EC 100 EC August 31 440 SV August 31 300 DM August 31 1,820 SV – Service Charges; DM – Debit Memos; EC – Error Corrected; CM – Credit Memo The paid checks accompanying this bank statement (all clearing in August) were: (checks listed in order of payment by bank) No. 450 451 454
1,800 1,400 600
No. 455 456
1,000 700
No. 458 459
1,440 1,820
The checks register revealed that the last check issued on August was no. 460 for P1,000 and that check no. 457 was for P2,400. Cash received for the period August 21 through 31 of P9,400 was deposited in the bank on September 1.
The debit memo on August 12 and August 31 were customer DAIF checks returned by the bank. The check on August 12 was immediately redeposited without entry. The check returned on August 31 was redeposited by the client in the bank on September 1 without entry. Questions: Based on the application of the necessary audit procedures and appropriation of the above daa, you are to provide the answer to the following: 1. How much is the unadjusted book receipts for August? a. P 25,140 b. 42,400 c. P 35,540 2. How much is the unadjusted book disbursements for August? a. P 8,460 b. P 9,740 c. P 8,760
d. P 43,360 d. P 8,360
3. How much is the adjusted book receipts for August? a. P 33,640 b. P 33,450 c. P 34,400
d. P 33,400
4. How much is the adjusted book disbursement for August? a. P 9,100 b. P 8,900 c. P 9,200
d. P 9,340
5. How much is the adjusted cash balance as of August 31, 2004? a. P 73,940 b. P 73,060 c. P 73,400
d. P 73,200
