Reference no: EM132543733

On January 10, 2007 you started the audit of the financial records of the Villegas Company for the year December 31, 2006. From your investigation, you discovered the following:

Point 1) The bookkeeper acts also as the cashier. Her December 31, 2006, year-end cash reconciliation contained the following items:

Cash per ledger, 12-31-06 ........................................ .... 61,400

Cash per bank, 12-31-06 .............................................. 64,850

Checks outstanding .................................................. 5,220

Villamin Co. check charged by bank in error 12-20-06;

corrected by bank on 1-5-07 ................................ 150

Cash in transit, credited by bank on 1-2-07 ......................... 720

Point 2) The cash account balances per ledger as of 12-31-06 were:

Cash - P61,400, petty cash - P150.

Point 3) On July 5, 2006, cash of P 400 was received on account from a customer; the Allowance for Doubtful Accounts was charged and Accounts Receivable credited.

Point 4) On December 5, 2006, cash of P300 was received on account from a customer, Inventory was charged and Accounts was charged and Accounts Receivable credited.

Point 5) Cash of P730 received during 2006 was not recorded.

Point 6) On July 1, 2006, the bank refunded interest of P20 because a note of the Villegas Company was paid before maturity. No entry had been made for the refund.

Point 7) In the outstanding checks; there is one for P50 made payable to a trade creditor; investigation shows that this check had been returned by the credited on June 14, 2006 and a new check for P100 was issued in its place; the originals check for P50 was made in error as to amount.

Point 8) From January 2, 2007 to January 10, 2007, the date of your cash count, total cash receipts appearing in the cash records were P8,600. According to the bank statement for the period from January 2, 2007 to January 10, 2007, total deposits were P7,600.

Point 9) Checks received from customers from January 2, 2007 to January 10, 2007, totaling P420, were not recorded but were deposited in the bank.

Point 10) In the cashier's petty cash, there were receipts for collections from customers on January 9, 2007, totaling P 850; these were unrecorded and undeposited.

Point 11) The count of the cash on hand at the close of business on January 10, 2007, including the petty cash, was as follows:

Currency and coin .................................................... 385

Expense vouchers                                                     20

Employees' IOU's dated 1-5-07 25

Customers' checks in payment of acct................ 290

                                                                   P 750

Required:

Question 1. Compute the correct bank balance as of December 31, 2006.

Question 2. Compute the cash shortage as of December 31, 2006.

Question 3. Compute the cash shortage for the period January 1, 2007 to January 10, 2007.