PROBLEM A

Kurosaki Ichigo Inc. had the following account balances on December 31, 2015 before any
adjustments:

Cash on hand P300,000

BDO Unibank time deposit, 30 days until maturity P3,000,000
BDO Unibank savings account P375,000
Petty Cash Fund P30,000
Unionbank payroll fund P500,000
Unionbank current account (P250,000)
BPI current account P7,500,000
East West Bank current account P6,000,000

Other information:

A. Cash on hand included the following items:

1) A customers check amounting to P40,000 dated January 01, 2016.
2) A customers check amounting to P20,000 dated January 01, 2015.
3) A customers check amounting to P10,000 returned by the bank on December 10, 2015
and was marked NSF. The check was subsequently re-deposited to East West Bank on
January 01, 2016. Ichigo made the appropriate entry for its account in East West Bank for
the return.

B. A count of the petty cash fund was conducted on December 31, 2015. The following items
were found inside the box:
1) Currency and coins amounting to P7,500.
2) Petty cash vouchers amounting to P18,000.
3) An accommodation check dated January 01, 2016 amounting to P3,000.
4) An envelope with several employee names attached. Written in the face of the
envelope is the amount of P5,000. The contents were found to be intact.

C. Checks drawn by Ichigo against the BPI current account included the following items:
1) Check No. 100 was delivered to the payee amounting to P37,500. The check was dated
December 01, 2015. Per analysis of the bank statement of BPI, check no. 100 did not
appear.
2) Check No. 101 was delivered to the payee amounting to P67,500. The cash disbursement
journal showed that Ichigo recorded the check at P65,700. Per records of Ichigo, the
amount due to the payee was P67,500.

1. How much is the cash short and over? (Indicate whether shortage or overage).
2. How much is the correct cash and cash equivalents for December 31, 2015?

PROBLEM B
Tifa Lockhart maintains an account with HSBC. The accountant of Tifa was preparing its proof of
cash for November and December. The following information were gathered:

Outstanding checks, November P200,000

Outstanding checks, December P1,300,000
Deposit in-transit, November P1,200,000
Deposit in-transit, December P960,000
NSF checks, November P200,000
NSF checks, December P100,000
Note collected by the bank, November P400,000
Note collected by the bank, December P600,000
Balance per bank, November 30, 2015 ?
Balance per book, November 30, 2015 ?
Balance per book, December 31, 2015 P4,000,000
Balance per bank, December 31, 2015 P4,260,000
Receipts per bank P10,000,000
Receipts per book P8,800,000
Disbursements per bank P7,340,000
Disbursements per book P7,200,000

In addition to the reconciling items above, the accountant was also able to determine the
following errors:
 1. During December, Tifa erroneously recorded collections from customers as P40,000
instead of the correct amount of P400,000.
2. During December, Tifa erroneously recorded a check payment for P600,000 as P60,000.
3. During December, the bank erroneously credited the account of Tifa for P400,000. The
credit should have been to the account of Tita Lockhart.
4. During December, the bank erroneously charged the account of Tifa for P800,000. It
should have been charged to the account of Tiya Lockhart.

All items that were outstanding last month were cleared in the bank this month.

3. How much is the adjusted November 30 cash balance?

4. How much is the adjusted Receipts for December?
5. How much is the adjusted Disbursements for December?
6. How much is the adjusted December 31 cash balance?

PROBLEM C
Maester Seymour Inc. had the following account balances on January 01, 2015:

Accounts Receivable P1,011,000

Allowance for Bad Debts P36,000

The following transactions took place in 2015:

1. Sales on credit (3/10, 1/20, n/60) amounting to P4,500,000.

2. Cash collection from customers, P4,800,000 as follows:
From customers paying within the 10 day period. P2,619,000
From customers paying within the 20 day period P1,485,000
From customers paying beyond the discount period P687,000
From accounts previously written-off P9,000
3. Accounts written-off as worthless amounting to P33,000.
4. Credit memoranda for sales returns amounting to P12,000.
An aging of accounts receivable was prepared by the accountant of Maester Seymour:

Age of Receivables Amount Non-collectability

1 30 Days 10% of outstanding AR 2%
31 60 Days 15% of outstanding AR 4%
61 90 Days 20% of outstanding AR 8%
91 120 Days 30% of outstanding AR 15%
121 Days and above Remaining Balance of outstanding AR 30%

7. What is the Bad Debts Expense for the year 2015?

8. What is the adjusted balance of Allowance for Bad Debts on December 31, 2015?
9. What is the net realizable value of Accounts Receivable on December 31, 2015?

PROBLEM D
On January 01, 2015 Yhwach Inc. sold a piece of machinery acquired 5 years ago at a cost of
P750,000. Yhwach sold the machinery to Uryuu Ishida Company at which time, the accumulated
depreciation amounted to P200,000. Yhwach received from Uryuu an non-interest bearing note
for P450,000 with maturity date of December 31, 2018. The market value for the machinery is not
available but the market rate for similar obligations reflect a 12% interest.

10. What is the gain/loss from the sale of machinery?

11. What is the interest income recognized on 2016?
12. What is the amortized cost of the notes receivable on July 31, 2017?

PROBLEM E
Tidus Inc. conducted a physical count of its inventories on December 31, 2015. The entity
reported the inventories at P4,000,000. After re-inspection of its warehouse and available
records, Tidus determined that the following items have been overlooked and not included in
the inventory report:

Inventories held on consignment from Yuna Company at selling price of P300,000. Goods
from Yuna are marked-up to reflect a 50% gross profit.
Goods costing P800,000 were sold by Tidus to a customer. The goods were shipped on
December 31, 2015 with terms FOB Shipping point.
 Goods costing P400,000 were sold by Tidus to a customer and was delivered to the port
for pick-up by the common carrier. The goods were in-transit on January 01, 2016 with
terms FOB Shipping point.
Goods costing P600,000 purchased by Tidus from a supplier. The goods were already in-
transit on December 31, 2015 with terms FOB Destination.

13. What amount of Inventory should Tidus report on December 31, 2015?

PROBLEM F
Sunshine Textile maintains savings and current account with East West Bank and Banco de Oro
and prepares reconciliation of the bank and book balances on a monthly basis. The June 30,
2015 reconciliation statement provided to you by the Chief Accountant revealed the following
information:

The Cash in Bank account as of June 30, 2015 indicated a balance of

P510,000.
A debit memo dated June 29, 2015 for P412,500 was included in the bank
statement for the month of June. This represents payment of a short-term loan
granted by East West Bank inclusive of interest of P12,500. This was not
recorded as of year-end.
Banco de Oro returned a customers check for P11,550 on June 28 for
insufficiency of funds. This was subsequently redeposited and cleared by the
bank on July 4, 2015.
A transfer of funds from Banco de Oro to East West Bank amounting to
P120,000 on June 30, was not recorded.
A stale check of P6,830 which has been outstanding for more than six (6)
months was included in the list of outstanding checks. This was in payment of
accounts payable.
Several deposits made in June 2015 covered by bank validated deposit slips
totaling P33,400 were not recorded. These represent collections from
customers whose accounts are current.
Unreleased checks totaling P28,950 payable to suppliers were included
among outstanding checks. These were delivered on July 6, 2015.
Interest collection from a maturing T-bill placement amounting to P13,260
which was delivered in the afternoon of June 30 was not deposited on the
same day and neither recorded.

14. What is the amount of cash to be reported on June 30, 2015 Statement of Financial Position?

PROBLEM G
Woods, Inc. holds an overdue notes receivable of P1,500,000 plus recorded interest of P150,000,
based on interest rate of 10%. As a result of a court-imposed settlement on December 31, 2015,
Woods agreed to the following restructuring arrangement:

Reduce the principal obligation to P1,200,000.

Forgive the P150,000 accrued interest
Extend the maturity date to December 31, 2017.
Annual interest of P120,000 is to be paid to Woods on December 31, 2016 and 2017.

15. How much impairment loss should Woods record on December 31, 2014?

PROBLEM H
Two Company was incorporated on January 01, 2014. It was engaged in reselling of Apple
products and gadgets such as iPhone, iPad, Macbook among others.

For the year 2014, the company used 2% of its sales to assess uncollectible accounts at year-
end.

For the year 2015, the management of Two Company decided to change estimation of
uncollectible accounts from percentage of sales to aging of accounts receivable as follows:

Days Past Due Collectability

Not yet due 100%
1 30 DPD 98%
31 60 DPD 90%
61 90 DPD 85%
91 180 DPD 80%
 181 360 DPD 70%
More than 360 DPD 30%

In 2014, Two recorded sales amounting to P4,200,000 and collected P3,600,000. No write-off of
accounts was made.

In 2015, Two recorded sales amounting to P4,500,000 and collected P4,372,500. During 2015, Two
wrote-off accounts determined to be worthless amounting to P40,500. Recovery of accounts
written-off amounted to P10,500.

The chief accountant prepared an aging of AR as follows:

Days Past Due Amount of AR

Not yet due P205,750
1 30 DPD P68,750
31 60 DPD P137,500
61 90 DPD P103,125
91 180 DPD P34,375
181 360 DPD P123,750
More than 360 DPD P13,750

16. What is the Uncollectible Accounts Expense for 2015?

17. What is the adjusted balance of the Allowance for Uncollectible Accounts in 2015?
18. What is the amortized cost of Accounts Receivable in 2015?

PROBLEM I
AAA Company provided the following account balances as of December 31, 2015:

Accounts Receivable 900,000

Allowance for Uncollectible Accounts 100,000
Subscriptions Receivables (due 6 months) 150,000
Claims against common carrier for loss of inventory 50,000
IOUs 10,000
Cash advances to BBB Company a sister company 250,000
Advances to Supplier 40,000
Trade Notes Receivable 50,000
Interest Receivable 10,000
Dividend Receivable 60,000
Loans Receivable Mr. A, President of the Company 100,000

19. How much shall be presented as Trade and Other Receivables Current on the Statement of
Financial Position for the year ended December 31, 2015?

PROBLEM J
On December 01, 2016, C Company assigned specific accounts receivable totaling P5,000,000
as collateral on a P4,000,000, 12% note from a certain bank. The entity will continue to collect
the assigned accounts receivable. In addition to the interest on the note, the bank also charged
a 5% finance fee deducted in advance on the assigned accounts. The December collections of
assigned accounts receivable amounted to P2,000,000 less cash discounts of P200,000. On
December 31, 2016, the entity remitted the collections to the bank in payment for the interest
accrued on December 31, 2015 and the note payable. The entity accepted sales returns
P100,000 on the assigned accounts and wrote off assigned accounts of P300,000.

20. What amount of cash was received from the assignment of accounts receivable?
21. What is the carrying amount of the notes payable on December 31, 2016?
22. What should be disclosed as the equity in the assigned accounts on December 31, 2016?.

PROBLEM K
B Company sold accounts receivable with face amount of P6,000,000. The factor charged 15%
commission on all accounts receivable factored and withheld 10% of the accounts factored as
protection against customer returns and other adjustments.

The entity had previously established an allowance for doubtful accounts of P200,000 for these
accounts. By year-end, the entity had collected the factors holdback there being no customer
returns and other adjustments.

23. How much is the proceeds from the factored account?

24. How much is the loss from factoring?

PROBLEM L
C Company provided the following information:

On June 01, 2016, the company received from A Company a P5,000,000, 12%, 90-day note
for merchandise sold.
On July 01, 2016, the company received from B Company a P6,000,000, 10%, 60-day note in
full payment of an account. On this date, the company also discounted the note from A
company to a local bank at a discount rate of 12%
On July 16, 2016, the company discounted the note of B Company to the local bank at a
discount rate of 12%.
On August 30, 2016, the bank notified C Company that B Company note was paid. The bank
also notified the company that A defaulted on the note and charged the amount of the
principal, interest and a fee of P20,000 against Cs bank account.
On December 30, 2016, received full payment from A Company for the dishonored note plus
12% annual interest on the total amount due for 4 months.

Assuming the notes was discounted with recourse:

25. How much is the cash proceeds from discounting of As note?
26. How much is the cash proceeds from discounting of Bs note?
27. How much was paid to the bank for the dishonored note of A?

Assuming the notes was discounted without recourse:

28. How much is the loss from discounting of As note?
29. How much is the loss from discounting of Bs note?
30. If both notes were dishonored, how much will C pay to the bank?

PROBLEM M
E Company established a petty cash fund amounting to P45,000. The following were determined
during the count of the petty cash fund on December 31, 2016:

Coins and currencies 19,800

PCF Vouchers:
Gasoline 2,700
Medical Supplies 900
Repairs 1,350
IOUs 3,150
Check drawn payable to the order of the PCF custodian, representing her salary 13,500
Check of the president marked NSF 1,350
A sheet of paper with the names of several employees together with a contribution for 4,500
a birthday party and attached to the sheet of paper is a currency of

31. What is the correct PCF balance as of December 31, 2016?

32. What is the amount of cash shortage/overage if any?

PROBLEM N
The petty cash fund of Aguilar Company showed the following for the year ended December
31, 2016:

Bills and Coins 2,325

Certified Check of an employee, dated December 15, 2016 2,000
PCF Vouchers:
Postage Stamps 780
Office Supplies 1,150
IOUs 1,000
Replenishment check of PCF 5,650
Unused postage stamps 620
Envelop containing contributions of employees for birthday of a fellow employee, 3,500
contents intact.

The imprest balance of the PCF was determined to be P15,000.

33. What is the correct amount of PCF as of December 31, 2016?

34. What is the amount of cash shortage/overage if any?
SUGGESTED ANSWERS:

1. 1,500 short
2. 17,610,700
3. 2,600,000
4. 9,360,000
5. 7,640,000
6. 4,320,000
7. 71,376
8. 83,376
9. 495,624
10. 264,016
11. 38,436
12. 383,850
13. 4,400,00
14. 134,990
15. 449,995
16. 30,219
17. 84,219
18. 602,781
19. 1,160,000
20. 3,800,00
21. 2,240,000
22. 360,000
23. 5,100,00
24. 900,000
25. 5,047,000
26. 6,008,500
27. 5,170,000
28. 3,000
29. 16,500
30. 0
31. 33,300
32. 2,250 short
33. 9,975
34. 2,095 short