University of Nueva Caceres

College of Business and Accountancy

Comprehensive Accounting (Batch 2019)
FINANCIAL ACCOUNTING AND REPORTING MSVEGA

PROBLEM I

The “cash account” of ABC Company on December 31, 2018 is composed of the following:
Cash on hand 24,350
PNB current account # 1 145,000
PNB current account # 2 (5,000)
BPI current account (100,000)
LBP current account 560,000
Metrobank saving deposit for construction of building 1,000,000
Payroll Account 50,000
Petty cash fund (inclusive of vouchers for expenses 5,000) 10,000
Postdated checks received from customers 16,550
Customers checks outstanding for one year 1,300
IOU from employees 3,100
Bond sinking fund 500,000
Pension fund 400,000
Cash in closed bank 18,000

a. A check of 15,000 drawn against LBP current account was recorded on December 26, 2018 but delivered to the payee on January
3, 2019.
b. A check of 28,000 dated January 10, 2019 was drawn against LBP and recorded on December 29, 2018.

Moreover, the “cash account” contained the following items:

30-day treasury bills 65,000
6-month treasury notes purchased Nov. 30, 2018 and due on
Feb. 28, 2019 30,000
Money market placements, 180 days 20,000
Temporary investment in listed stocks 40,000

REQUIRED:
1. Compute the total cash and cash equivalents on December 31, 2018
2. Prepare the necessary adjusting journal entries on December 31, 2018

PROBLEM II
The following data are applicable to DEF Company:
a. The July 31 bank statement balance of P748,750 included a bank service charge of P2,350 not previously reported to the company
but recorded on the company’s books in August.
b. The cash account balance in the general ledger on July 31 was P667,150.
c. Outstanding checks at July 31 totaled P134, 750. Deposits in transit on July 31 were P50,800.
d. The bank statement on August showed deposits of P1,053,600 and withdrawals of P1,019,700. The withdrawals included a service
charge for August of P2,700 not yet reported to DEF.
e. The cash account balance in the general ledger on August 31 was P804,350, recognizing receipts of P1,044,050 and
checks written during August of P904,500.
Required:
1. Prepare four-column bank reconciliation for the month of August using Adjusted Balance Method.
2. Give the necessary adjusting journal entries on August 31.

PROBLEM III
A financial institution granted a loan on January 1, 2018. Interest is 10% annually every December 31 and the loan matures in 3 years.
The principal is at P8,000,000. Origination fees charged against the borrower is P700,000. Direct origination cost is P504,500. Effective
interest rate is 11%.
Required: Prepare all the necessary journal entries from January 1, 2018 to maturity date.

PROBLEM IV
A bank loaned to a client P5,000,000 on January 1, 2008. The loan requires principal payment of P1,000,000 each year and interest at
8% starting December 31, 2008. Payments for 2008 and 2009 were made as scheduled. However, during 2010, the client began to
experience financial difficulties requiring the bank to reassess the collectability of the loan. On December 31, 2010, the bank
determined that the remaining principal will be collected but the interest is unlikely. The principal payments are expected to be
P500,000 on December 31, 2011, P1,000,000 on December 31, 2012, and P1,500,000 on 2013. On December 31, 2010, the market
rate is 12%. The only entry made by the bank on 2010 is the accrual of interest.
Required: Prepare the necessary journal entries from December 31, 2010 to December 31, 2013.
PROBLEM V
Consider the following transactions in the current year:
Jan 15 – Received a note from customer B for merchandise sold, P300,000. The note has 12% interest and due in 60 days.
Feb 1 – Received a 6 – month note from customer C for merchandise sold, P200,000 at 14%.
Feb 14 – Discounted the note for customer B to a local bank at 14%. The discounting is accounted for as conditional sale.
Mar 16 – Received notice from the bank that customer B dishonored the note. The protest and other charges amounted to
P15,000.
Apr 1 – Discounted the note of customer C at 15%. The discounting is accounted for as secured borrowing.
Apr 15 – Collected from B, including interest of 12% based on total amount due.
May 1 – Received a 30 – day note at 10% from customer A for merchandise sold at P700,000.
May 31 – Collected the total amount due from customer A.
Aug 1 – Received notice from bank that customer C paid his note.
Sept 1 – Sold merchandise to customer E on account totaling P400,000. Account of customer E is immediately factored at 5%
commission and 10% factor’s holdback.
Nov 1 – Sold merchandise on account for P800,000 to customer F. The entity immediately assigned his account for 80% cash advance
less service charge of P30,000. The assignor signed 12% promissory note.
Dec 1 – Collected half of the assigned accounts and remitted the total collection to the assignee.
Dec 31 –Collected P350,000 of the assigned accounts and he assignor made the final settlement of the loan.

Required: Prepare all the necessary journal entries to record the current year transactions.