1.

Suggested Solution:

Current account at Metrobank

P2,000,000

Payroll account

500,000

Travelers check

50,000

Money order

30,000

Petty cash fund (P4,000 in currency)

4,000

Treasury bills, due 3/31/07 (purchased 12/31/06)

200,000

Total

P2,784,000

Answer: A
2.
a.
b.
c.
d
e
f
g
h
i
j
k
l
m
n
o
p
q
r
s
t
u

Solution

Operating expenses
Cash
Investment
Cash
No adjustment
No adjustment
No adjustment
No adjustment
Short-term investment
Cash
Notes receivable
Cash
No adjustment
Accounts receivable
Cash
Cash restricted
Cash
No adjustment
Investment current
Cash
No adjustment
No adjustment
Operating expenses
Cash
Short-term investment
Cash
Short-term investment
Cash
No adjustment
No adjustment
Investment
Cash

Answer:
1. D
3.

2. D

5,100
5,100
500,000
500,000

120,000
120,000
20,000
20,000
15,000
15,000
210,000
210,000
150,000
150,000

80,000
80,000
600,000
600,000
100,000
100,000

150,000
150,000

3. C

4. A

5. A

Solution

Balance per book

Dec. 1
50,400

Receipts
425,550

Disburse.
405,735

Dec. 31
70,215

Overfooting of disburse.
Service charge
Cancellation of check
# 6518
Overstatement of
disbursement
Proceeds from sale of
stock
Unrecorded disbursement
Balance
Cash shortage
Adjusted balance

( 1,500)
15

Balance per bank

Deposit in transit
Dec. 1
Dec. 31
Outstanding checks
Dec. 1
Dec. 31
Error
Adjusted balance

_________
50,400
_________
50,400

23,250
_________
448,800
(
675)
448,125

Dec. 1
54,000

Receipts
444,225

3,300

_________
50,400

_________
448,125

2,400

( 2,025)

2,025

1,500
401,325
_________
401,325

23,250
( 1,500)
97,875
(
675)
97,200

Disburse.
397,125

Dec. 31
101,100
7,200

( 6,900)
12,000
(
900)
401,325

Adjusting entry:
Due to custodian
Cash

675
675

Service charge
Cash
Cash

15
15

2,025
Accounts payable

Accounts payable
Cash
Cash

Cash

Cash

1,500
1,500

1,500

2,400
Accounts payable

2,400

23,250
Stock investment
Gain on sale

18,000
5,250

Answer:
1. B

4.

2,205

1,500
Accounts payable

2. A

3. C

4. C

5. B

Suggested Solution:

Question No. 1
Sales

1,500
15)

( 2,400)

3,300)
7,200

( 6,900)

P1,615,040

( 12,000)
900
97,200

Less accounts receivable, 11/15

426,900

Collections from sales

P1,188,140

Question No. 2
Cost of sales (P1,615,040/1.4)
Add Merchandise inventory, 11/15

P1,153,600
469,600

Purchases
Less Accounts payable, 11/15

1,623,200
231,420

Payments for purchases

P1,391,780

P1,000,000
115,000
303,780
1,391,780
P2,810,560

Question No. 4
Proceeds from issuance of common stock

P1,600,000
400,000
160,000

Proceeds from mortgage note payable

Proceeds from notes payable - bank
(P4,200,000 x 11%)
Answers: 1) A; 2) B; 3) C; 4) D; 5) B
Collections from sales (see no. 1)

1,188,140

Total cash receipts

3,348,140

Less cash disbursements (see no. 3)

5.
Suggested Solution:
Unadjusted cash balance

2,810,560
P

537,580

Question
Question No.
No. 1
5
Cash
accountability
NR from
sale
of plant

P537,580

Less cash
accounted (Adjusted cash
Balance,
12/31/06
balance):
(P9,000,000
- P3,000,000)

P6,000,000
P131,640
3,000,000
25,700
(9,260)

Unadjusted
bank balance
Less inst.
due on 4/1/07
Deposit
in 12/31/08
transit
NR from officer,
due
Outstanding
checks
NR from sale
of equipment
Present
Cash shortage
value of note, 4/1/06

86,076

NR from sale of land

Balance, 12/31/06

Less interest

2,400,000
148,080

956,400

Add interest earned for 2006

(P956,400 x 12% x 9/12)

Less principal installment due

on 7/1/07
Total amount to be received

P3,000,000

1,042,476

891,750

3,308,250
P9,750,726

Question No. 2
Note receivable from sale of plant due, 4/1/07
Note receivable from sale of land (see no. 1)

P3,000,000
891,750

Current portion of long-term notes receivable

P3,891,750

Question No. 3
NR from sale of plant (P6,000,000 x 12% x 9/12)

P389,500

(P1,200,000 x 0.797)

462,000

Total

NR from sale of land (P4,200,000 x 11% x 6/12)

Accrued interest receivable, 12/31/06

P540,000
231,000
P771,000

Question No. 4
NR from sale of plant:
1/1 to 3/31 - P9,000,000 x 12% x 3/12
4/1 to 12/31 - P6,000,000 x 12% x 9/12

P 270,000
540,000
810,000

4,200,000

P1,353,750

NR from officer (P2,400,000 x 10%)

240,000

NR from sale of equipment (P956,400 x 12% x 9/12)

NR from sale of land (P4,200,000 x 11% x 6/12)

86,076
231,000

Interest income for 2006

P1,367,076

Answers: 1) D; 2) A; 3) A; 4) C

6.

Suggested Solution:

Question No. 1
Principal
Add accrued interest in 2005 (P3,000,000 x 11%)

P3,000,000
330,000

Carrying amount, 12/31/06

3,330,000

Less PV of projected cash flows (see below)

2,117,620

Loan impairment (bad debt expense)

P1,212,380

Date

Collection

Period

PVF at 11%

Dec. 31, 2007

P 200,000

1 year

0.9009

P 180,180

Dec. 31, 2008

400,000

2 years

0.8116

324,640

Dec. 31, 2009

800,000

3 years

0.7312

584,960

Dec. 31, 2010

Dec. 31, 2011

1,200,000
400,000

4 years
5 years

0.6587
0.5935

790,440
237,400

P3,000,000

Present value

P2,117,620
16

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Cebu CPAR Center, Inc.

Journal entry to record the loan impairment:
Bad debt expense

P1,212,380

Interest receivable

P 330,000

Allowance for loan impairment

882,380

Note: PAS 39 par. 63 states that the carrying amount of the asset shall be reduced either directly or through the use of an allowance account. The use of allowance account is preferable since this will inform the users of the gross amount of the impaired
loan receivable.
Question No. 2
Interest income for 2007 (P2,117,620 x 11%)

P232,938

Incidentally, the following are the journal entries to record the collection:
Cash

P200,000
Loan receivable

P200,000

Allowance for loan impairment

P232,938

Interest income

P232,938

Question No. 3
Principal, 12/31/07 (P3,000,000 - P200,000)

P2,800,000

Less PV of projected cash flows (see below)

2,245,660

Allowance for loan impairment, 12/31/07

Date

Collection

Period

Dec. 31, 2008

P 600,000

1 year

0.9009

Dec. 31, 2009

Dec. 31, 2010

1,200,000
1,000,000

2 years
3 years

0.8116
0.7312

554,340

PVF at 11%

Present value
P

540,540
973,920
731,200

P2,800,000

P2,245,660

Journal entry to adjust net loan receivable to present value of new cash flow projections.
Allowance for loan impairment
(P882,380 - P232,938 - P554,340)

P95,102

Bad debt expense

P95,102

Question No. 4
Interest income for 2008 (P2,245,660 x 11%)

P247,023

Question No. 5
Principal, 12/31/08 (P2,800,000 - P600,000)
Less allowance for loan impairment, 12/31/08
(P554,340 - P247,023)
Carrying value, 12/31/08
Answers: 1) C; 2) B; 3) A; 4) B, 5) D

7.

P2,200,000
307,317
P1,892,683