CASH AND CASH EQUIVALENT

1. Campbell Company had the following account balances on December 31, 2016:

Petty cash fund 50,000

Cash in bank- current account 4,000,000
Cash in bank- payroll account 1,200,000
Cash in bank – sinking fund 2,000,000
Cash on hand 500,000
Cash in bank – restricted account for plant addition
And expected to be disbursed in 2017 1,500,000
Treasury bills 1,000,000

The petty cash fund included unreplenished December 2016 petty cash expense vouchers P
5,000 and employee IOU P 5,000.

The cash on hand included a P 100,000 customer check payable to Campbell dated January 15,
2017.

In exchange for a guaranteed line of credit, the entity has agreed to maintain a minimum
balance of P 200,000 in the unrestricted current bank account.

The sinking fund is set aside to settle a bond payable that is due on June 30, 2017.

What total amount should be reported as cash and cash equivalents on December 31, 2016?
a. 8,640,000
b. 7,440,000
c. 7,640,000
d. 5,640,000

2. Yasmin Company provided the following information on December 31, 2016:

Petty cash fund 50,000

Current account – First bank 4,000,000
Current account – Second bank ( overdraft) ( 250,000 )
Money market placement – Third Bank 1,000,000
Time deposit – Fourth Bank 2,000,000

 The petty cash fund included unreplenished December 2016 petty cash expense vouchers
for P 15,000 and an employee check for P 5,000 dated January 31, 2017.
 A check for P 100,000 was drawn against First Bank current account dated and recorded
December 29, 2016 but delivered to payee on January 15, 2017.
 The Fourth Bank time deposit is set aside for land acquisition in December 31, 2017.

What total amount should be reported as cash and cash equivalents on December 31, 2016?
 a. 5,130,000
b. 5,150,000
c. 4,130,000
d. 4,880,000

3. Carla Company provided the following information on December 31, 2016:

Cash on hand 500,000

Petty cash fund 20,000
Security Bank current account 1,000,000
PNB Current account No. 1 400,000
PNB Current account No. 2 ( overdraft ) ( 50,000 )
BSP treasury bill – 60 days 3,000,000

 The cash on hand included a customer postdated check of P 100,000 and postal money
order of P 40,000.
 A check for P 200,000 was drawn against Security Bank account, dated January 15,2016,
delivered to the payee and recorded December 31, 2016.

What total amount of cash and cash equivalents should be reported on December 31, 2016?

a. 4,970,000
b. 6,970,000
c. 4,770,000
d. 1,970,000
4. On December 31, 2016, Erika Company reported cash account balance per ledger of P 3,600,000
which included the following:

Cash in bank – demand deposit 1,500,000

Time deposit – 30 days 500,000
NSF check of customer 20,000
Money market placement due on June 30, 2017 1,000,000
Saving deposit 50,000
IOU from an employee 30,000
Pension fund 400,000
Petty cash fund 10,000
Customer check dated January 31, 2017 60,000
Customer check outstanding for 18 months 30,000
3,600,000
 Check of P 100,000 in payment of accounts payable was dated and recorded on December
31, 2016 but mailed to creditors on January 15, 2017.
 Check of P 50,000 dated January 31, 2017 in payment of accounts payable was recorded
and mailed December 31, 2016.
 The cash receipts journal was open until January 15, 2017, during which time P 200,000 was
collected and recorded on December 31, 2016.
 What total amount should be reported as cash and cash equivalents on December 31, 2016?

a. 2,010,000
b. 1,960,000
c. 1,860,000
d. 1,510,000

5. Celine Company provided the following information on December 31, 2016:

Cash on hand 200,000

Philippine Bank current account 5,000,000
Manila Bank current account 4,000,000
City Bank current account ( bank overdraft) ( 100,000 )
Asia Bank saving account for equipment acquisition 250,000
Asia Bank time deposit, 90 days 2,000,000

Included among the checks drawn by Celine against the Philippine Bank current account and
recorded in December 2016 are:

 Check written and dated December 23, 2016 and delivered to payee on January 3, 2017, P
100,000.
 Check written December 26, 2016, dated January 30, 2017, delivered to payee on December
28, 2016, P 150,000.

What total amount should be reported as cash and cash equivalents on December 31,2016?

a. 11,200,000
b. 11,450,000
c. 10,950,000
d. 11,700,000
6. On December 31, 2016, Roma Company reported cash of P 3,350,000 with the following details:

Undeposited collections 60,000

Cash in bank – BDO checking account 500,000

Cash in bank- PNB ( overdraft) ( 50,000)

Undeposited NSF check received from customer,

Dated December 1, 2016 15,000

Undeposited check from a customer, dated January 15, 2017 25,000

Cash in bank – BDO fund for payroll 150,000

Cash in bank – BDO saving deposit 100,000

Cash in bank – BDO money market instrument, 90 days 2,000,000

Cash in foreign bank restricted 100,000

Cash in bank – BDO value added tax account 450,000

Total 3,350,000

On December 31, 2016, what total amount should be reported as cash and cash equivalents?

a. 2,910,000
b. 2,810,000
c. 2,760,000
d. 3,260,000
7. Dove Company reported checkbook balance on December 31, 2016 at P 4,000,000.

 A customer check amounting to P 200,000 dated January 2, 2017 was included in the
December 31, 2016 checkbook balance.
 Another customer check for P 500,000 deposited on December 22, 2016 was included in the
checkbook balance but returned by the bank for insufficiency of fund. This check was
redeposited on December 30, 2016 and cleared two days later.
 A P 400,000 check payable to supplier dated and recorded on December 30, 2016 was
mailed on January 16, 2017.
 A petty cash fund of P 50,000 comprised the following on December 31, 2016:

Coins and currencies 5,000

Petty cash vouchers 43,000
Return value of 20 cases of soft drinks 2,000
50,000
 A check of P 43,000 was drawn on December 31, 2016 payable to Petty Cash.

What total amount should be reported as “cash” on December 31, 2016?

a. 4,248,000
b. 4,200,000
c. 4,205,000
d. 3,748,000

BANK RECONCILIATION

1. In preparing the bank reconciliation for the month of August, Apex Company provided the
following information:

Balance per bank statement 1,805,000

Deposit in transit 325,000
Return of customer’s check for insufficient fund 60,000
Outstanding checks 275,000
 Bank service charge for August 10,000

a. 1,855,000
b. 1,795,000
c. 1,785,000
d. 1,755,000

2. In preparing the bank reconciliation for the month of December, Case Company provided the
following data:

Balance per bank statement 3,800,000

Deposit in transit 520,000
Amount erroneously credited by bank to Case’s account 40,000
Bank service charge for December 5,000
NSF check 50,000
Outstanding checks 675,000

1. What is the adjusted cash in bank?

a. 3,685,00
b. 3,645,000
c. 3,600,000
d. 3,605,000

2. What is the unadjusted cash in bank balance per book?

a. 3,550,000
b. 3,660,000
c. 3,610,000
d. 3,655,000
3. Mindanao Company provided the following data for the month of December:

Balance per book 1,000,000

Bank service charges 3,000
Outstanding checks 235,000
Deposit in transit 300,000
Customer note collected by bank 375,000
Interest on customer note 15,000
Customer check returned NSF 62,000
Depositor’s payment of note payable charged to account 250,000

1. What is the adjusted cash in bank?

a. 1,575,000
b. 1,065,000
c. 1,075,000
 d. 1,325,000
2. What is the unadjusted cash in bank per bank statement?
a. 1,310,000
b. 1,010,000
c. 775,000
d. 945,000
3. Core Company provided the following data for the purpose of reconciling the cash
balance per book with the balance per bank statement on December 31, 2016:

Balance per book 850,000

Balance per bank statement 2,000,000

Outstanding checks, including certified check of P 100,000 500,000

Deposit in transit 200,000

December NSF checks ( of which P 50,000 had been

Redeposited and cleared on December 27) 150,000

Erroneous credit to Core’s account, representing

Proceeds of loan granted to another company 300,000

Proceeds of note collected by bank for Core, net of

Service charge of P 20,000 750,000

What amount should be reported as cash in bank on December 31, 2016?

a. 1,500,000
b. 1,400,000
c. 1,800,000
d. 1,450,000

4. Aries Company kept all cash in a checking account. An examination of the accounting
records and bank statement for the month of June revealed the following information:

 The cash balance per book on June 30 is P 8,500,000.

 A deposit of P 1,000,000 that was placed in the bank’s night depository on June 30 does not
appear on the bank statement.
 The bank statement shows on June 30, the bank collected note for Aries and credited the
proceeds of P 950,000 to the entity’s account.
 Checks outstanding on June 30 amount to P 300,000
 Aries discovered that a check written in June for P 200,000 in payment of an account
payable, had been recorded in the entity’s records as P 20,000.
 Included with the June bank statement was NSF check for P 250,000 that Aries had received
from a customer on June 26.
 The bank statement shows a P 20,000 service charge for June 30.

What amount should be reported as cash in bank on June 30?

a. 9,000,000
b. 8,300,000
c. 9,360,000
d. 9,180,000
5. Able Company received the bank statement for the month of March. However, the
closing balance of the account was unreadable.

Attempts to contact the bank after hours did not secure the desired information.

February 28 book balance 1,460,000

Note collected by bank 100,000
Interest earned on note 10,000
NSF check of customer 130,000
Bank service charge on NSF check 2,000
Other bank service charges 3,000
Outstanding checks 202,000
Deposit of February 28 placed in night depository 85,000
Check issued by Axle Company charged to Able’s account 20,000

What is the cash balance per bank statement?

a. 1,435,000
b. 1,532,000
c. 1,338,000
d. 1,557,000
6. Stellar Company provided the bank statement for the month of December which
included the following information:

Ending balance, December 31 2,800,000

Bank service charge for December 12,000
Interest paid by bank to Stellar Company for December 10,000

In comparing the bank statement to its own cash records, the entity found the
following:

Deposits made but not yet recorded by the bank 350,000

Checks written and mailed but not yet recorded by the bank 650,000
 In addition, the entity discovered that it had drawn and erroneously recorded a check
for P 46,000 that should have been recorded for P 64,000.

What is the cash balance per ledger on December 31?

a. 2,500,000
b. 2,520,000
c. 2,540,000
d. 2,800,000

7. Letty Company provided the bank statement for the month of April which included the
following information:

Bank service charge for April 15,000

Check deposited by Letty during April was not collectible
And been marked “NSF” by the bank and returned 40,000

In comparing the bank statement to its own records, the entity found the following:

Deposits made but not yet recorded by bank 130,000

Checks written and mailed but not yet by bank 100,000

All deposits in transit and outstanding checks have been properly recorded in the
entity’s books.

A customer check for P 35,000 payable to Letty Company had not yet been deposited
and had not been recorded by the entity.

The cash in bank account balance per ledger is P 920,000.

What is the adjusted cash in bank on April 30?

a. 900,000
b. 865,000
c. 930,000
d. 965,000

8. Gallant Company showed a cash account balance of P 4,500,000 at the month-end.

The bank statement did not include a deposit of P 230,000 made on the last day of the
month.

The bank statement showed a collection by the bank of P 94,000 for the depositor and a
customer check for P 32,000 returned because it was NSF.
A customer check for P 45,000 was recorded by the depositor as P 54,000, and a check
written for P 79,000.

What amount should be reported as cash in bank?

a. 4,765,000
b. 4,571,000
c. 4,819,000
d. 4,801,000

BANK RECONCILIATION COMPREHENSIVE PROBLEM

1. Divine Company prepared the following bank reconciliation on December 31, 2016:

Balance per bank statement 2,800,000

Add: Deposit in transit 195,000
Checkbook printing charge 5,000
Error made by Divine in recording
Check issued in December 35,000
NSF check 110,000 345,000
Total 3,145,000

Less: outstanding check 100,000

Note collected by the bank
Including P 15,000 interest 215,000 315,000
Balance per book 2,830,000

The entity had cash on hand P 500,000 and petty cash fund P 50,000 on December
31, 2016.

1. What amount should be reported as cash in bank on December 31, 2016?

a. 2,930,000
b. 3,095,000
c. 2,895,000
d. 3,130,000

2. What total amount of cash should be reported on December 31, 2016?

A. 3,395,000
B. 3,350,000
C. 3,445,000
D. 3,380,000
3. Margar Company kept all cash in a checking account. An examination of the
accounting records and bank statement for the month of December revealed a
bank statement balance of P 8,470,000 and a book balance of P 8,525,000.

A deposit of P 950,000 placed in the bank’s night depository on December 29

does not appear on the bank statement.

Checks outstanding on December 31 amount to P 270,000.

The bank statement showed that on December 25 the bank collected a note for
Margar Company and credited the proceeds of P 935,000 to the entity’s account
which included P 35,000 interest.

Margar Company discovered that a check written in December for P 183,000 in

payment of an account had been recorded as P 138,000.

Included with the December 31 bank statement was an NSF check for P 250,000
that Margar Company had received from a customer on December 20.

The bank statement showed a P 15,000 service charge for December.

What is the adjusted cash in bank on December 31?

a. 9,150,000
b. 9,240,000
c. 9,195,000
d. 9,215,000

4. Ron Company provided the following data for the month of January:

Balance per book, January 31 3,130,000

Balance per bank statement, January 31 3,500,000
Collection on January 31 but undeposited 550,000
NSF check received from a customer returned by the
Bank on February 5 with the January bank statement 50,000
Checks outstanding on January 31 650,000
Bank debit memo for safety deposit box rental not
Recorded by depositor 5,000
A creditor check for P 30,000 was incorrectly
Recorded in the depositor’s book as 300,000
A customer check for P 200,000 was recorded by the
Depositor as 20,000
The depositor neglected to make an entry in its books
For a check drawn in payment of an account payable 125,000

What is the adjusted cash in bank on January 31?

 a. 3,130,000
b. 3,500,000
c. 3,400,000
d. 2,950,000
5. In reconciling the cash balance on December 31 with that shown in the bank
statement, Sam Company provided the following information:

Balance per bank statement 4,000,000

Balance per book 2,700,000
Outstanding checks 600,000
Deposit in transit 475,000
Service charge 10,000
Proceeds of bank loan, December 1, discounted for 6
Months at 12%, not recorded on Sam Company’s books 940,000
Customer check charged back by bank as absence
Of counter signature 50,000
Deposit of P 100,000 incorrectly recorded by bank as 10,000
Check of Sim Company charged by bank against Sam account 150,000

Customer’s note collected by bank in favour of Sam Company.

Face 400,000
Interest 40,000
Total 440,000
Collection fee 5,000 435,000

Erroneous debit memo of December 28, to charge

Sam account with settlement of bank loan 200,000
Deposited of Sim Company credited to Sam account 300,000

What is the adjusted cash in bank on December 31?

a. 4,315,000
b. 3,925,000
c. 3,075,000
d. 4,015,000

6. Susan Company showed the following information on August 31:

Balance of cash in bank account 1,300,000

Balance of bank statement 1,200,000
Outstanding checks, August 31 :
Number 555 10,000
761 55,000
 762 40,000
763 25,000
764 65,000
765 70,000
Receipts of August 31, deposited September 1 275,000
Service charge for August 5,000
NSF check received from customer 85,000

The cashier – bookkeeper had misappropriated P 30,000 and an additional P

10,000 by charging sales discounts and crediting accounts receivable.

The stub for check number 765 and the invoice relating thereto showed that it
was for P 50,000. It was recorded incorrectly in the cash disbursements journal
as P 70,000.

This check was drawn in payment of an account payable.

Payment has been stopped on check number 555 which was drawn in payment
of an account payable. The payee cannot be located.

What is the adjusted cash in bank on August 31?

a. 1,240,000
b. 1,230,000
c. 1,210,000
d. 1,200,000

7. Mcbride Company provided the following data pertaining to the cash

transactions and bank account for the month of May:

Cash balance per accounting record 1,719,000

Cash balance per bank statement 3,195,000
Bank service charge 10,000
Debit memo for the cost of printed checks delivered by the
Bank; the charge has not been recorded in the accounting
Record 12,000
Outstanding checks 685,000
Deposit of May 30 not recorded by bank until June 1 500,000
Proceeds of a bank loan on May 30, not recorded in the
Accounting record, net of interest of P 30,000 570,000
Proceeds from a customer promissory note, principal amount
P 800,000 collected by the bank not taken up in the
Accounting record with interest 810,000
Check No. 1086 issued to a supplier entered in the
 Accounting record as P 210,000 but deducted in the bank
Statement at an erroneous amount of 120,000
Stolen check lacking an authorized signature deducted
From Mcbride’s account by the bank in error 80,000
Customer check returned by the bank marked NSF,
Indicating that the customer balance was not
Adequate to cover the check; no entry has been made
In the accounting record to record the returned check 77,000

What is the adjusted cash in bank?

a. 3,000,000
b. 2,910,000
c. 3,080,000
d. 2,990,000

8. Grass Company provided the following information:

Balance per bank statement July 31 1,240,000

Balance per ledger, July 31 750,000
Deposit of July 30 not recorded by bank 280,000
Debit memo – service charges 10,000
Credit memo – collection of note by bank for Grass 300,000
Outstanding checks 550,000

An analysis of the canceled checks returned with the bank statement revealed
the following:
 Check for purchase of supplies was drawn for P 60,000 but was recorded as P 90,000.
 The manager wrote a check for travelling expenses of P 100,000 while out of town. The
check was not recorded.

What amount of cash in bank should be reported on July 31?

a. 970,000
b. 270,000
c. 550,000
d. 610,000
9. Carefree Company prepared the following bank reconciliation on March 31:

Book balance 1,405,000

Add: Deposit in transit 750,000
Collection of note 2,500,000
Interest on note 150,000 3,400,000
Total 4,805,000
Less: Careless Company deposited credited
To our account 1,100,000
Bank service charge 45,000 1,145,000
Adjusted book balance 3,660,000

Bank balance 5,630,000

Add: Error by depositor on recording check 45,000
Total 5,675,000
Less: Preauthorized payments for water bills 205,000
NSF customer check 220,000
Outstanding checks 1,650,000 2,075,000
Adjusted bank balance 3,600,000

The check erroneously recorded by the depositor was made for the proper
amount of P 249,000 in payment of account. However it was entered in the cash
payments journal as P 294,000.

The entity authorized the bank to automatically pay its water bills as submitted
directly to the bank .

What amount should be reported as cash in bank on March 31?

a. 3,660,000
b. 3,600,000
c. 3,630,000
d. 2,880,000

PROOF OF CASH
1. Lazer Company had the following bank reconciliation on June 30:

Balance per bank statement, June 30 3,000,000

Deposit in transit 400,000
Total 3,400,000
Outstanding checks ( 900,000)
Balance per book, June 30 2,500,000

The bank statement for the month of July showed the following:

Deposits, including P 200,000 note collected for Lazer 9,000,000

Disbursements, including P 140,000 NSF customer check
And P 10,000 service charge 7,000,000

All reconciling items on June 30 cleared through the bank in July. The
outstanding checks totalled P 600,000 and the deposit in transit amounted
to P 1,000,000 on July 31.
 1. What is the adjusted cash in bank on July 31?
a. 2,500,000
b. 5,400,000
c. 2,900,000
d. 5,000,000
2. What is the cash balance per book on July 31?
a. 5,400,000
b. 5,350,000
c. 5,550,000
d. 4,500,000
3. What is the amount of cash receipts per book in July?
a. 9,400,000
b. 9,600,000
c. 8,600,000
d. 9,800,000
4. What is the amount of cash disbursements per book in July?
a. 6,550,000
b. 6,700,000
c. 7,300,000
d. 6,850,000

2. Chris Company presented the following bank reconciliation for the month of
November:

Balance per bank statement, November 30 3,600,000

Add: deposit in transit 800,000
4,400,000
Less: Outstanding checks 1,200,000
Bank credit recorded in error 200,000 1,400,000
Balance per book, November 30 3,000,000

Data per bank statement for the of December follow:

December deposits, including note collected of

P 1,000,000 for Chris 5,500,000
December disbursements, including NSF customer check
P 350,000 and service charge P 50,000 4,400,000

All items that were outstanding on November 30 cleared through the bank
in December, including the bank credit.

In addition, checks amounting to P 500,000 were outstanding and deposits

of P 700,000 were in transit on December 31.
 1. What is the adjusted cash in bank on December 31?
a. 4,700,000
b. 4,900,000
c. 4,500,000
d. 3,200,000
2. What is the cash balance per ledger on December 31?
a. 4,100,000
b. 4,900,000
c. 4,700,000
d. 4,300,000
3. What is the amount of cash receipts per book in December?
a. 5,400,000
b. 4,400,000
c. 5,500,000
d. 6,400,000
4. What is the amount of cash disbursements per book in December
a. 3,700,000
b. 3,300,000
c. 3,100,000
d. 3,500,000
3. Lira Company prepared the following bank reconciliation on June 30:

Balance per bank 9,800,000

Deposits in transit 400,000
Outstanding checks ( 1,400,000 )
Balance per book 8,800,000

There were total deposits of P 6,500,000 and charges for disbursements of P

9,000,000 for July per bank statement. All reconciliation items on June 30
cleared the bank on July 31.

Checks outstanding amounted to P 1,000,000 and deposits in transit

totalled P 1,200,000 on July 31.

1. What is the amount of cash disbursements per book in July?

a. 8,600,000
b. 7,600,000
c. 9,400,000
d. 8,400,000
2. What is the adjusted cash in bank on July 31?
a. 7,300,000
b. 6,300,000
c. 7,500,000
d. 6,500,000
4. Oro Company had the following bank reconciliation on March 31:

Balance per bank statement, March 31 4,650,000

Add: Deposit in transit 1,030,000

Total 5,680,000

Less: outstanding checks 1,260,000

Balance per book, March 31 4,420,000

Data per bank statement for the Month of April:

Deposits 5,840,000

Disbursements 4,970,000

All reconciliation items on March 31 cleared through the bank in April. Outstanding checks on April 30
totaled P 700,000 and there were no deposits in transit on April 30.

What is the cash balance per book on April 30?

a. 4,820,000
b. 5,290,000
c. 5,520,000
d. 5,850,000
4. Queen Company reported the following bank reconciliation for the month
of November:

Balance per bank statement November 30 1,804,000

Deposit in transit 415,000
Outstanding checks ( 630,000 )
Bank credit recorded in error ( 2,000 )
Balance per book, November 30 1,587,000

Data per bank for the month of December:

December deposits 2,610,000
December disbursements 2,242,000

All items that were outstanding on November 30 cleared through the bank
in December, including the bank credit.

In addition, checks of P 250,000 were outstanding on December 31.

What is the balance of cash per book on December 31?

a. 1,922,000
b. 1,924,000
c. 2,172,000
 d. 2,422,000

5. Jam Company provided the following bank reconciliation on May 31:

Balance per bank statement 2,100,000

Deposits outstanding 300,000
Checks outstanding ( 30,000 )
Correct cash balance 2,370,000
Balance per book 2,372,000
Bank service charge ( 2,000 )
Correct cash balance 2,370,000
Data for the month of June:
Bank Book
Checks recorded 2,300,000 2,360,000
Deposits recorded 1,620,000 1,800,000
Collection by bank ( P 400,000
Note plus interest) 420,000 _
NSF check returned with June 30
Statement 10,000
Balances 1,830,000 1,810,000

1. What is the amount of checks outstanding on June 30?

a. 30,000
b. 90,000
c. 60,000
d. 0
2. What is the amount of deposits in transit on June 30?
a. 480,000
b. 120,000
c. 180,000
d. 680,000
3. What is the adjusted cash in bank on June 30?
a. 1,810,000
b. 2,220,000
c. 2,240,000
d. 2,780,000

ACCOUNTS RECEIVABLE

1. Roxy Company provided the following information relating to accounts receivable for the
current year:

Accounts receivable on January 1 1,300,000

Credit sales 5,400,000
 Collections from customers, excluding recovery 4,750,000
Accounts written off 125,000
Collection of accounts written off in prior year
( customer credit was not re-established ) 25,000
Estimated uncollectible receivables per aging
Of receivables at December 31 165,000

What is the balance of accounts receivable, before allowance for doubtful accounts on
December 31?

a. 1,825,000
b. 1,850,000
c. 1,950,000
d. 1,990,000

2. Jay Company provided the following data relating to accounts receivable for the current year:

Accounts receivable, January 1 650,000

Credit sales 2,700,000
Sales returns 75,000
Accounts written off 40,000
Collections from customers 2,150,000
Estimated future sales returns at December 31 50,000
Estimated uncollectible accounts at 12/31 per aging 110,000

What amount should be reported as net realizable value of accounts receivable on December
31?

a. 1,200,000
b. 1,125,000
c. 1,085,000
d. 925,000
3. Infra provided the following data for the current year:

Sales on account 3,600,000

Notes received to settle accounts 400,000
Provision for doubtful accounts 90,000
Accounts receivable written off 25,000
Purchases on account 3,900,000
Payments to creditors 3,200,000
Discounts allowed by creditors 260,000
Merchandise returned by customer 15,000
Collections received to settle accounts 2,450,000
Notes given to creditors in settlement of accounts 250,000
 Merchandise returned to suppliers 70,000
Payments on notes receivable 100,000
Discounts taken by customers 40,000
Collections received in settlement of notes 180,000

What is the net realizable value of accounts receivable at year – end?

a. 605,000
b. 890,000
c. 825,000
d. 670,000

4. When examining the accounts of Brute Company, it is ascertained that balances relating to both
receivables and payables are included in a single controlling account called “ receivables
control” with a debit balance of P 4,850,000. An analysis of the make- up of this account
revealed the following:

Debit Credit

Accounts receivable – customers 7,800,000

Trade accounts receivable – officers 500,000

Debit balances – creditors 300,000

Postdated checks from customers 400,000

Subscriptions receivable 800,000

Accounts payable for merchandise 4,500,000

Credit balances in customers’ accounts 200,000

Cash received in advance from customers 100,000

Expected bad debts 150,000

After further analysis of the aged accounts receivable, it is determined that the allowance for
doubtful accounts should be P 200,000.

1. What is the net realizable value of accounts receivable?

a. 8,000,000
b. 8,500,000
c. 8,300,000
d. 8,550,000
2. What is the balance of accounts payable?

a. 4,200,000
 b. 4,700,000
c. 4,500,000
d. 4,800,000

5. On December 31, 2016, Miami Company reported that the current receivables consisted of the
following:

Trade accounts receivable 930,000

Allowance for uncollectible accounts ( 20,000 )
Claim against shipper for goods lost in transit
In November 30,000
Selling price of unsold goods sent by Miami on consignment at
130% of cost and not included in Miami’s ending inventory 260,000
Security deposit on lease of warehouse used for
Storing some inventories 300,000
Total 1,500,000

On December 31, 2016, what total amount should be reported as trade reported as trade and
other receivables under current assets?

a. 940,000
b. 1,200,000
c. 1,240,000
d. 1,500,000

6. Faith Company provided the following information relating to current operations:

Accounts receivable, January 1 4,000,000

Accounts receivable collected 8,400,000
Cash sales 2,000,000
Inventory, January 1 4,800,000
Inventory, December 31 4,400,000
Purchases 8,000,000
Gross margin on sales 4,200,000

What is the balance of accounts received on December 31?

a. 8,200,000
b. 6,200,000
c. 2,000,000
d. 4,200,000
7. Honduras Company revealed a balance of P 8,200,000 in the accounts receivable control
account at year – end.

An analysis of the accounts receivable showed the following:

Accounts known to be worthless 100,000

Advance payments to creditors on purchase orders 400,000
Advances to affiliated entities 1,000,000
Customers’ accounts reporting credit balances arising
From sales returns ( 600,000 )
Interest receivable on banks 400,000
Trade accounts receivable – unassigned 2,000,000
Subscription receivable due in 30 days 2,200,000
Trade accounts receivable - assigned ( Finance Company’s equity in
Assigned accounts is P 500,000) 1,500,000
Trade instalments receivable due 1- 18 months, including unearned
Finance charge of P 50,000 850,000
Trade accounts receivable from officers, due currently 150,000
Trade accounts on which postdated checks are held and no entries
Were made on receipt of checks 200,000
Total 8,200,000

What amount should be reported as trade accounts receivable at year- end.

a. 4,650,000
b. 4,700,000
c. 4,150,000
d. 4,050,000
8. Von Company provided the following data for the current year in relation to accounts
receivable:

Debits

January 1 balance after deducting credit balance of P 30,000 530,000

Charge sales 5,250,000
Charge of goods out on consignment 50,000
Shareholders’ subscriptions 200,000
Accounts written off but recovered 10,000
Cash paid to customer for January 1 credit 25,000
Goods shipped to cover January 1 credit balance 5,000
Deposit on contract 120,000
Claim against common carrier 15,000
Advances to supplier 155,000
 Credits

Collections from customers, including over payment of P 50,000 5,200,000

Write off 35,000
Merchandise returns 25,000
Allowances to customers for shipping damages 15,000
Collection on carrier claim 10,000
Collection on subscription 50,000

What is the balance of accounts receivable on December 31?

a. 565,000
b. 595,000
c. 545,000
d. 495,000
9. Wonder Company provided the following transactions affecting accounts receivable during the
current year:

Sales ( cash and credit ) 5,900,000

Cash received from credit customers, all of whom took advantage
Of the discount feature of the credit terms 4/30, n/30 3,024,000
Cash received from cash customers 2,100,000
Accounts receivable written off as worthless 50,000
Credit memorandum issued to credit customers for sales
Returns and allowances 250,000
Cash refunds given to cash customers for returns and allowances 20,000
Recoveries on accounts receivable written off as uncollectible in prior
Periods not included in cash received from customers stated above 80,000

The balance on January 1 were as follows:

Accounts receivable 950,000

Allowances for doubtful accounts 100,000

The entity provided for uncollectible account losses by crediting allowance for doubtful accounts
in the amount of P 70,000 for the current year.

1. What is the balance of accounts receivable on December 31?

a. 1,300,000
b. 1,426,000
c. 1,280,000
d. 1,220,000
2. What is the balance of allowance for doubtful accounts on December 31?
 a. 120,000
b. 200,000
c. 250,000
d. 170,000

ESTIMATION OF DOUBTFUL ACCOUNTS

1. Orr Company prepared an aging of accounts receivable on December 31, 2016 and determined
that the net realizable value of the accounts receivable was P 2,500,000.

Allowance for doubtful accounts on January 1 280,000

Accounts written off as uncollectible 230,000
Accounts receivable on December 31 2,700,000
Uncollectible accounts recovery 50,000

What amount should be recognized as doubtful accounts expense for the current year?

a. 230,000
b. 200,000
c. 150,000
d. 100,000

2. Seiko Company reported the following balances after adjustment at year- end:

2016 2015
Accounts receivable 5,250,000 4,800,000
Net realizable value 5,100,000 4,725,000

During 2016, the entity wrote off accounts totalling P 160,000 and collected P 40,000 on
accounts written off in previous year.

What amount should be recognized as doubtful accounts expense for the year ended December
31, 2016?

a. 195,000
b. 150,000
c. 120,000
d. 150,000
3. Roanne Company used the allowance method of accounting for uncollectible accounts. During
the current year, the entity had charged P 800,000 to bad debt expense, and wrote off accounts
receivable of P 900,000 as uncollectible.

What was the decrease in working capital?

 a. 900,000
b. 800,000
c. 100,000
d. 0
4. Tara Company provided the following information pertaining to accounts receivable on
December 31, 2016:

Days estimated Estimated

Outstanding Amount uncollectible
0- 60 1,200,000 1%

61 – 120 900,000 2%

Over 120 1,000,000 60,000

3,100,000

During the current year, the entity wrote off P 70,000 in accounts receivable and recovered P
40,000 that had been written off in prior years.

On January 1, 2016, the allowance for uncollectible accounts was P 100,000.

Under the aging method, what amount of allowance for uncollectible accounts should be
reported on December 31, 2016?

a. 190,000
b. 100,000
c. 130,000
d. 90,000
5. Mill Company’s allowance for doubtful accounts was P 1,000,000 at the end of 2016 and P
900,000 at the end of 2015.

For the year ended December 31, 2016, the entity reported doubtful accounts expense of P
160,000 in the income statement.

What amount was debited to the appropriate account to write off uncollectible accounts in
2016?

a. 60,000
b. 100,000
c. 160,000
d. 260,000
6. At the end of first year of operations, Wonder Company had a net realizable value of accounts
receivable of P 5,000,000.

During the year, the entity recorded charges to bad debt expense of P 800,000 and wrote off as
uncollectible accounts receivable of P 200,000.
 What is the year – end accounts receivable balance before the allowance for doubtful accounts?

a. 5,600,000
b. 5,200,000
c. 5,000,000
d. 6,000,000
7. Marian Company used the allowance method of accounting for bad debts.

The following summary schedule was prepared from an aging of accounts receivable
outstanding on December 31:

Number of days Probability

Outstanding Amount of collection
0 – 30 days 5,000,000 .98
31 – 60 days 2,000,000 .90
Over 60 days 1,000,000 .80

The following additional information is available for the current year:

Net credit sales for the year 40,000,000

Allowance for doubtful accounts:
Balance, January 1 450,000 ( cr )
Balance before adjustment, December 31 20,000 ( dr )

The entity based the estimated of doubtful accounts on the aging of accounts receivable.

What amount should be recognized as doubtful accounts expense for the current year?

a. 470,000
b. 480,000
c. 500,000
d. 520,000

8. Delta Company sold goods to wholesalers on terms 2/15, net 30. The entity had no cash sales
but 50% of the customers took advantage of the discount.

The entity used the gross method of recording sales and accounts receivable.

An analysis of the trade accounts receivable at year- end revealed the following:

Age Amount Collectible

0 – 15 days 2,000,000 100%
16 – 30 days 1,400,000 95%
31 – 60 days 400,000 90%
 Over 60 days 200,000 50%
4,000,000

1. What amount should be reported as allowance for sales discount at year – end?
a. 20,000
b. 32,400
c. 33,500
d. 40,000

2. What amount should be reported as allowance for doubtful accounts at year- end?
a. 230,000
b. 210,000
c. 190,000
d. 200,000

3. What is the net realizable value of accounts receivable?

a. 4,000,000
b. 3,750,000
c. 3,770,000
d. 3,790,000

ESTIMATION OF DOUBTFUL ACCOUNTS

1. From inception of operations, Axis Company carried no allowance for doubtful accounts.

Uncollectible accounts were expense as written off and recoveries were credited to income as
collected.

During 2016, management recognized that the accounting policy with respect to doubtful
accounts was not correct and determined that an allowance for doubtful accounts was
necessary,

A policy was established to maintain an allowance for doubtful accounts based on historical bad
debt loss percentage applied to year – end accounts receivable.

The historical bad debt loss percentage is to be recomputed each year based on all available
past years up to a maximum of five years.

Year Credit sales Write offs Recoveries

2012 1,500,000 15,000 0
2013 2,250,000 38,000 2,700
2014 2,950,000 52,000 2,500
2015 3,300,000 65,000 4,800
2016 4,000,000 83,000 5,000
 The entity reported accounts receivable of P 1,250,000 on December 31, 2015 and P 2,000,000
on December 31, 2016.

1. What is the bad debt rate in 2015?

a. 1.6 percent
b. 1.7 percent
c. 1.8 percent
d. 2.0 percent

2. What is the bad debt rate in2016?

a. 1.6 percent
b. 1.7 percent
c. 1.8 percent
d. 2.0 percent
3. What is the allowance for doubtful accounts on December 31, 2015?
a. 20,000
b. 21,250
c. 22,500
d. 25,000

4. What is the allowance for doubtful accounts on December 31, 2016?

a. 32,000
b. 34,000
c. 36,000
d. 40,000

5. What is the doubtful accounts expense for 2016?

a. 97,000
b. 78,000
c. 83,000
d. 92,000

2. From inception of operation, Murr Company provided for uncollectible accounts expense under
the allowance method.

Provisions were made monthly at 2% of credit sales, bad debts written off were charged to the
allowance account and recoveries of bad debts previously written off were credited to the
allowance account.

No year – end adjustments to the allowance account were made.

The allowance for doubtful accounts was P 120,000 on January 1, 2016.

During the current year, credit sales totalled P 9,000,000, interim provisions for doubtful
accounts were made at 2% of credit sales, P 90,000 of bad debts were written off, and
recoveries of accounts previously written off amounted to P 15,000.

The entity prepared an aging of accounts receivable for the first time on December 31, 2016

Classification Balance Uncollectible

November – December 2,000,000 2%
July – October 600,000 10%
January – June 400,000 25%
Prior to January 1, 2016 200,000 75%
3,200,000

Based on the review of collectability of the account balances in the “prior to January 1, 2016 “
aging category, additional accounts totalling P 60,000 are to be written off on December 31,
2016.

Effective with the year ended December 31, 2016, the entity adopted a new accounting method
for estimating the allowance for doubtful accounts at the amount indicated by the year- end
aging analysis of account receivable.

1. What is the required allowance for doubtful accounts on December 31, 2016?
a. 350,000
b. 470,000
c. 425,000
d. 305,000

2. What amount was recorded as doubtful accounts expense for 2016?

a. 180,000
b. 270,000
c. 300,000
d. 90,000
3. What amount should be reported as doubtful accounts expense in the income statement for
2016?
a. 320,000
b. 180,000
c. 260,000
d. 185,000
4. What is the year- end adjustment to the allowance for doubtful accounts on December 31,
2016?
a. 305,000
b. 180,000
c. 320,000
d. 140,000
3. On January 1, 2016, Easy Company reported accounts receivable P 2,070,000 and allowance for
doubtful accounts P 80,000. The entity provided the following data:

Credit sales Write offs Recoveries

2013 11,100,000 260,000 22,000

2014 12,250,000 295,000 37,000

2015 14,650,000 300,000 36,000

2016 15,000,000 310,000 40,000

The collections from the customers during 2016 totaled P 14,000,000, excluding recoveries.

Doubtful accounts are provided for as a percentage of credits sales.

The entity calculated the percentage annually by using the experience of three years prior to the
current year.

1. What amount should be reported as doubtful accounts expense for 2016?

a. 310,000
b. 300,000
c. 222,000
d. 378,000

2. What amount should be reported as allowance for doubtful accounts on December 31,
2016?
a. 110,000
b. 378,000
c. 300,000
d. 478,000

3. What is the net realizable value of accounts receivable on December 31, 2016?
a. 2,650,000
b. 2,690,000
c. 2,760,000
d. 2,800,000

4. Sigma Company began operations on January 1, 2015. On December 31, 2015, the entity
provided for doubtful accounts based on 1 % of annual credit sales.

On January 1, 2016, the entity changed the method of determining the allowance for
doubtful accounts by aging of accounts receivable.

Days past invoice date Percentage uncollectible

0 – 30 1
31 – 90 5
 91 – 180 20
Over 180 80

In addition, the entity wrote off all accounts receivable that were over 1 year old.

The following additional information related to the years ended December 31, 2016 and
2015:

2016 2015
Credit sales 3,000,000 2,800,000
Collections, including recovery 2,915,000 2,400,000
Accounts written off 27,000 none
Recovery of accounts previously
Written off 7,000 none

Days past invoice date at December 31

0 – 30 300,000 250,000
31 –90 80,000 90,000
91- 180 60,000 45,000
Over 180 25,000 15,000

1. What is the allowance for doubtful accounts on December 31, 2015?

a. 28,000
b. 24,000
c. 26,000
d. 0

2. What is the allowance for doubtful accounts on December 31, 2016?

a. 30,000
b. 39,000
c. 29,150
d. 27,000

3. What amount should be reported as doubtful accounts expense for 2016?

a. 39,000
b. 31,000
c. 38,000
d. 11,000

ASSIGNMENT AND FACTORING

1. Moon Company assigned P 3,000,000 of accounts receivable as collateral for a P 2,000,000 loan
with bank. The bank assessed a 4% finance fee and charged 6% interest on the note at maturity.
 What would be the journal entry to record the transaction?

a. Debit cash P 1,920,000, debit finance charge P 80,000, and credit note payable P 2,000,000.
b. Debit cash P 1,920,000, debit finance charge P 80,000, and credit accounts receivable P
2,000,000.
c. Debit cash P 1,920,000, debit finance charge P 80,000, debit due from bank P 1,000,000, and
credit accounts receivable P 3,000,000.
d. Debit cash P 1,880,000, debit finance charge P 120,000, and credit note payable P
2,000,000.

2. Star Company assigned P 4,000,000 of accounts receivable as collateral for a P 2,000,000 6%

loan with bank. The entity also paid a finance fee of 5% on the transaction upfront.

What amount should be recorded as a gain or loss on the transfer of accounts receivable?
a. 200,000 loss
b. 100,000 loss
c. 240,000 gain
d. 0

3. On December 1, 2016, Bamboo Company assigned specific accounts receivable totalling P

4,000,000 as collateral on a P 3,000,000, 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 P 3,000,000 value of the note. The
December collections of assigned accounts receivable amounted to P 2,000,000 less cash
discounts of P 100,000. On December 31, 2016, the entity remitted the collections to the bank in
payment for the interest accrued on December 31, 2016 and the note payable. The entity
accepted sales returns of P 150,000 on the assigned accounts and wrote off assigned accounts
of P 200,000.

1. What amount of cash was received from the assignment of accounts receivable on
December 1, 2016?
a. 4,000,000
b. 3,000,000
c. 3,800,000
d. 2,850,000

2. What is the carrying amount of note payable on December 31, 2016?

a. 1,000,000
b. 1,100,000
c. 1,130,000
d. 1,460,000

3. What is the balance of accounts receivable – assigned on December 31, 2016?

 a. 2,100,000
b. 2,000,000
c. 1,650,000
d. 1,850,000

4. What amount should be disclosed as the equity of Bamboo Company in assigned accounts
on December 31, 2016?
a. 550,000
b. 870,000
c. 520,000
d. 970,000

5. Zeus Company factored P 6,000,000 of accounts receivable to a finance entity at the end of
current year. Control was surrendered by Zeus Company.

The factor assessed a fee of 3% and retained a hold back equal to 5% of the accounts
receivable.

In addition, the factor charged 15% interest computed on a weighted average time to
maturity of the accounts receivable of 54 days.

1. What is the amount of cash initially received from the factoring?

a. 5,296,850
b. 5,386,850
c. 5,476,850
d. 5,556,850

2. If all accounts are collected, what is the cost of factoring the accounts receivable?
a. 313,150
b. 180,000
c. 433,150
d. 613,150

6. Cynthia Company factored P 750,000 of accounts receivable at year – end. Control was
surrendered. The factor accepted the accounts receivable subject to recourse for non-
payment.

The factor assessed a fee of 2% and retained a hold back equal to 4% of the accounts
receivable.

In addition, the factor charged 12% interest computed on a weighted – average time to
maturity of fifty- one days. The fair value of the recourse obligation is P 15,000.
 1. What is the amount of cash initially received from the factoring?
a. 692,425
b. 720,000
c. 722,425
d. 705,000

2. Assuming all accounts receivable are collected, what is the cost of factoring the
accounts receivable?
a. 12,575
b. 15,000
c. 27,575
d. 42,575

7. Carter Company factored without recourse P 2,000,000 of accounts receivable with bank.
The finance charge is 3%, and 5% was retained to cover sales discounts, sales returns and
sales allowances.

1. What amount of cash was received on the sale of accounts receivable?

a. 1,940,000
b. 1,900,000
c. 1,840,000
d. 2,000,000

2. What amount should be recognized as loss on factoring?

a. 100,000
b. 160,000
c. 60,000
d. 0
8. Daisy Company sold accounts receivable without recourse with face amount of P 6,000,000.
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 P 200,000 for
these accounts.

By year- end, the entity had collected the factor’s holdback there being no customer returns
and other adjustments.

1. What amount of cash was initially received from factoring?

a. 4,500,000
b. 5,400,000
c. 5,100,000
d. 6,000,000
 2. What is the loss on factoring?
a. 700,000
b. 900,000
c. 200,000
d. 0

DISCOUNTING OF NOTE RECEIVABLE

1. Roth Company received from a customer a one – year, P 500,000 note bearing annual interest of
8%. After holding the note for six months, the entity discounted the note without recourse at
10%.

What amount of cash was received from the bank?

a. 540,000
b. 523,810
c. 513,000
d. 495,238

2. On July 1, 2016, Lee Company sold goods in exchange for P 2,000,000, 8 – month, noninterest –
bearing note receivable.

At the time of the sale, the market rate of interest was 12%. The entity discounted the note at
10% on September 1, 2016?

1. What is the cash received from discounting?

a. 1,940,000
b. 1,938,000
c. 1,900,000
d. 1,880,000

2. What is the loss on note receivable discounting?

a. 100,000
b. 75,000
c. 25,000
d. 0

3. Apex Company accepted from a customer P 1,000,000 face amount, 6 – month, 8% note
dated April 15, 2016. On the same date, the entity discounted the note without recourse at
10% discount rate.

1. What amount of cash was received from the discounting?

a. 1,040,000
 b. 990,000
c. 988,000
d. 972,000

2. What is the loss on note receivable discounting?

a. 50,000
b. 40,000
c. 52,000
d. 12,000

3. On June 30,2016, Ray Company discounted at the bank a customer P 6,000,000, 6 –

month, 10% note receivable dated April 30, 2016. The bank discounted the note at 12%
without recourse.

1. What is the amount received from the note receivable discounting?

a. 5,640,000
b. 5,760,000
c. 6,048,000
d. 6,174,000

2. What is the loss on note receivable discounting?

a. 252,000
b. 152,000
c. 52,000
d. 48,000
3. Rand Company accepted from a customer a P 4,000,000, 90 – days, 12% interest –
bearing note dated August 31, 2016. On September 30, 2016, the entity discounted
the note with recourse at the Apex State Bank at 15%.

However, the proceeds were not received until October 1, 2016. The discounting
with recourse is accounted for as a conditional sale with recognition of a contingent
liability.

1. What is the amount received from the discounting of note receivable?

a. 4,017,000
b. 4,120,000
c. 4,103,000
d. 3,965,500

2. What is the loss on note receivable discounting?

a. 40,000
b. 23,000
c. 17,000
 d. 20,000
3. On April 1, 2016, Shalimar Company discounted with recourse a 9 – month,
10% noted dated January 1, 2016 with face of P 6,000,000. The bank discount
rate is 12%. The discounting transaction is accounted for as a conditional sale
with recognition of contingent liability.

On October 1, 2016, the maker dishonoured the note receivable. The entity paid
the bank the maturity value of the note plus protest fee of P 50,000.

On December 31, 2016, the entity collected the dishonoured note in full plus
12% annual interest on the total amount due.

1. What amount was received from the note discounting on April 1, 2016?
a. 6,063,000
b. 6,450,000
c. 6,150,000
d. 5,963,000

2. What amount should be recognized as loss on note discounting?

a. 450,000
b. 387,000
c. 87,000
d. 63,000

3. What is the total amount collected from the customer on December 31,
2016?
a. 6,450,000
b. 6,500,000
c. 6,695,000
d. 6,662,500

4. If the discounting is a secured borrowing, what is included in the journal

entry to record the transaction?
a. Debit loss on discounting P 87,000
b. Debit interest expense P 87,000
c. Credit liability for note discounted P 6,063,000
d. Credit interest income P 63,000

NOTES RECEIVABLE

1. On June 1, 2016, Yola Company loaned Dale P 500,000 on a 12% note, payable in five annual
instalments of P 100,000 beginning January 1, 2017.
 In connection with this loan, Dale was required to deposit P 5,000 in a noninterest – bearing
escrow account.

The amount held in escrow is to be returned to Dale after all principal and interest payments
through November 1, 2016.

On January 1, 2017, Yola received payment of the first principal instalment plus all interest due.

On December 31, 2016, what is the accrued interest receivable on the loan?
a. 0
b. 5,000
c. 10,000
d. 15,000

2. Frame Company has an 8% note receivable dated June 30, 2016, in the original amount of P
1,500,000.

Payments of P 500,000 in principal plus accrued interest are due annually on July 1, 2017, 2018,
and 2019.

1. What is the balance of the note receivable on July 1, 2017?

a. 1,500,000
b. 1,000,000
c. 500,000
d. 0

2. In the June 30, 2018 statement of financial position, what amount should be reported as a
current asset for interest on the note receivable?
a. 120,000
b. 40,000
c. 80,000
d. 0

3. On December 31, 2016, Park Company sold used equipment with carrying amount of P
2,000,000 in exchange for a noninterest bearing note of P 5,000,000 requiring ten annual
payments of P 500,000. The first payments was made on December 31, 2017.

The market interest for similar note was 12%. The present value of an ordinary annuity of 1
at 12% is 5.65 for ten periods and 5.33 for nine periods.

1. What is the carrying amount of the note receivable on December 31, 2016?
a. 5,000,000
b. 2,285,000
c. 2,665,000
 d. 4,500,000
2. What is the gain on sale of equipment to be recognized in 2016?
a. 3,000,000
b. 2,175,000
c. 825,000
d. 0

3. What amount should be recognized as interest income for 2017?

a. 600,000
b. 339,000
c. 319,800
d. 300,000

4. What is the carrying amount of the note receivable on December 31, 2017?
a. 2,664,000
b. 4,500,000
c. 2,825,000
d. 2,325,000

4. Pangasinan Company is a dealer in equipment. On December 31, 2016, the entity sold an
equipment in exchange for a non interest bearing note requiring five annual payments of P
500,000. The first payment was made on December 31, 2017.

The market interest for similar notes was 8%. The PV of 1 at 8% for 5 periods is .68, and the
PV of an ordinary annuity of 1 at 8% for 5 periods is 3.99.

1. On December 31, 2016, what is the carrying amount of the note receivable?
a. 2,500,000
b. 1,995,000
c. 1,700,000
d. 1,495,000

2. What amount of interest income should be reported for 2017?

a. 505,000
b. 101,000
c. 159,600
d. 119,600

3. What is the carrying amount of the note receivable on December 31, 2017?
a. 1,654,600
b. 2,000,000
c. 2,154,600
d. 1,495,000
4. On December 31, 2016, Flirt Company sold for P 3,000,000 an old equipment having an
original cost of P 5,400,000 and carrying amount of P 2,400,000.

The terms of the sale were P 600,000 down payment and P 1,200,000 payable each
year on December 31 of the next two years. The sale agreement made no mention of
interest.

However, 9% would be a fair rate for this type of transaction. The present value of an
ordinary annuity of 1 at 9% for two years is 1.76.

1. What is the interest income for 2017?

a. 216,000
b. 190,080
c. 108,000
d. 106,000

2. What is the carrying amount of the note receivable on December 31, 2017?
a. 1,200,000
b. 1,102,080
c. 2,302, 080
d. 1,009,920

5. On January 1, 2016, Emme Company sold equipment with a carrying amount of P

4,800,000 in exchange for a P 6,000,000 noninterest bearing note due January 1, 2019.
There was no established exchange price for the equipment.

The prevailing rate of interest for note of this type on January 1, 2016 was 10%. The
present value of 1 at 10% for three periods is 0.75.

1. What amount should be reported as interest income for 2016?

a. 90,000
b. 450,000
c. 500,000
d. 600,000

2. What amount should be reported as gain or loss on sale of equipment?

a. 300,000 loss
b. 300,000 gain
c. 1,200,000 gain
d. 2,700,000 gain
 6. Ayala Company sold an equipment with carrying amount of P 800,000, receiving a
noninterest – bearing note due in three years with a face amount of P 1,000,000. There
is no established market value for the equipment.

The interest rate on similar obligations is estimated at 12%. The present value of 1 at
12% for three periods is .712.

1. What amount should be reported as gain or loss on sale of equipment?

a. 200,000 gain
b. 200,000 loss
c. 88,000 gain
d. 88,000 loss

2. What amount should be reported as interest income for first year?

a. 288,000
b. 120,000
c. 96,000
d. 85,440
7. Alamo Company sold a factory on January 1, 2016 for P 7,000,000. The entity received a
cash down payment of P 1,000,000 and a 4-year, 12% note for the balance.

The note is payable in equal annual payments of principal and interest of P 1,975,400
payable on December 31 of each year until 2019.

1. What is the interest income for 2016?

a. 840,000
b. 720,000
c. 120,000
d. 975,400

2. What is the carrying amount of the note receivable on December 31, 2016?
a. 4,500,000
b. 4,744,600
c. 4,624,600
d. 4,025,600

LOAN RECEIVABLE

1. Appari bank granted a loan to a borrower on January 1, 2016. The interest rate on the loan is
10% payable annually starting December 31, 2016. The loan matures in five years on December
31, 2020.

Principal amount 4,000,000

Origination fee received from borrower 350,000
 Direct origination cost incurred 61,500

The effective rate on the loan after considering the direct origination cost incurred and
origination fee received is 12%.

1. What is the carrying amount of the loan receivable on January 1, 2016?

a. 4,000,000
b. 4,650,000
c. 4,411,500
d. 3,711,500

2. What is the interest income for 2016?

a. 400,000
b. 558,000
c. 529,380
d. 445,380

3. What is the carrying amount of the loan receivable on December 31, 2016?
a. 4,000,000
b. 3,756,880
c. 4,243,120
d. 3,600,000

2. National Bank granted a loan to a borrower on January 1, 2016. The interest on the loan is 10%
payable annually starting December 31, 2016. The loan matures in three years on December 31,
2018.

Principal amount 4,000,000

Origination fee charged against the borrower 342,100
Direct origination cost incurred 150,000

After considering the origination fee charged against the borrower and the direct origination
cost incurred, the effective rate on the loan is 12%.

1. What is the carrying amount of the loan receivable on January 1, 2016?

a. 4,000,000
b. 3,807,900
c. 4,150,000
d. 3,657,900

2. What is the interest income for 2016?

a. 400,000
b. 380,900
 c. 456,948
d. 480,000

3. What is the carrying amount of the loan receivable on December 31, 2016?
a. 4,000,000
b. 3,807,900
c. 3,864,848
d. 3,750,932

4. What is the interest income for 2017?

a. 480,000
b. 400,000
c. 386,485
d. 463,782

3. Philippine Bank granted a loan to a borrower on January 1, 2016. The interest on the loan is 8%
payable annually starting December 31, 2016. The loan matures in three years on December 31,
2018.

Principal amount 3,000,000

Origination fee charged against the borrower 100,000
Direct origination cost incurred 260,300

After considering the fee charged to the borrower and the direct origination cost incurred, the
effective rate on the loan is 6% .

1. What is the carrying amount of the loan received on January 1, 2016?

a. 3,160,300
b. 3,260,300
c. 2,900,000
d. 3,000,000

2. What is the interest income for 2016?

a. 240,000
b. 189,618
c. 252,824
d. 180,000

3. What is the carrying amount of the loan receivable on December 31, 2016?
a. 3,000,000
b. 3.160,300
c. 3,109,918
d. 3,210,682
4. What is the interest income for 2017?
a. 240,000
b. 180,000
c. 248,793
d. 186,595

5. On December 1, 2016, Nicole Company gave Dawn Company a P 2,000,000, 12% loan.
Nicole Company paid proceeds of P 1,940,000 after the deduction of a P 60,000
nonrefundable loan origination fee.

Principal and interest are due in sixty monthly instalments of P 44,500, beginning January 1,
2017.

The repayments yield an effective interest rate of 12% at a present value of P 2,000,000 and
13.4% at a present value of P 1,940,000.

1. What amount of interest income should be reported in 2016?

a. 22,333
b. 19,400
c. 21,663
d. 20,000

2. What amount should be reported as accrued interest receivable on December 31, 2016?
a. 44,500
b. 60,000
c. 20,000
d. 0

6. National Bank granted a 10 –year loan to Abbo Company in the amount of P 1,500,000 with
a stated interest rate of 6%. Payments are due monthly and are computed to be P 16,650.

National Bank incurred P 40,000 of direct loan origination cost.in addition, National Bank
charged Abbo Company a 4 – point non-refundable loan origination fee.

1. What is the initial carrying amount of the loan receivable on the part of National Bank?
a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000

2. What is the initial carrying amount of the loan payable on the part of Abbo Company?
 a. 1,440,000
b. 1,480,000
c. 1,500,000
d. 1,520,000

INVENTORY COST FLOW

1. Lagoon Company accumulated the following data for the current year.

Raw materials – beginning inventory 90,000 units @ P 7.00

Purchases 75,000 units @ P 8.00
Purchases 120,000 units @ P 8.50

The entity transferred 195,000 units of raw materials to work in process during the year.

Work in progress – beginning inventory 50,000 units @ P 14.000

Direct labor 3,100,000
Manufacturing overhead 2,950,000
Work in process – ending inventory 48,000 units @ P 15.00

The entity used the FIFO method for valuing inventory.

1. What is the cost of raw materials used?

a. 1,485,000
b. 2,250,000
c. 1,530,000
d. 3,015,000

2. What is the total manufacturing cost?

a. 8,300,000
b. 7,535,000
c. 7,580,000
d. 9,065,000

3. What is the cost of goods manufactured for the current year?

a. 7,535,000
b. 8,235,000
c. 7,515,000
d. 8,280,000

2. Yakal Company reported that a flood recently destroyed many of the financial records. The
entity used an average cost inventory valuation system. The entity made a physical count at the
 end of each month in order to determine monthly ending inventory value. By examining various
documents, the following data are gathered:

Ending inventory at July 31 60,000 units

Total cost of units available for sale in July 1,452,100
Cost of goods sold during July 1,164,100
Gross profit on sales for July 935,900

Units Unit cost Total cost

July 5 55,000 5.10 280,500
11 53,000 5.00 265,000
15 45,000 5.50 247,500
16 47,000 5.30 249,100
Total 200,000 1,042,100

1. What is the number of units on July 1?

a. 102,500
b. 140,000
c. 76,500
d. 60,000

2. How many units were sold during the month of July?

a. 242,500
b. 140,000
c. 302,500
d. 260,000

3. What is the cost of the inventory on July 31?

a. 288,000
b. 410,000
c. 312,600
d. 240,000

4. Corolla Company incurred the following costs:

Materials 700,000
Storage costs of finished goods 180,000
Delivery to customers 40,000
Irrecoverable purchase taxes 60,000

At what amount should the inventory be measured?

a. 880,000
b. 760,000
 c. 980,000
d. 940,000

5. Eagle Company incurred the following costs in relation to a certain product:

Direct material and labor 180,000

Variable production overhead 25,000
Factory administrative costs 15,000
Fixed production costs 20,000

What is the correct measurement of the product?

a. 205,000
b. 225,000
c. 195,000
d. 240,000

6. Fenn Company provided the following information for the current year:

Merchandise purchased for resale 4,000,000

Freight in 100,000
Freight out 50,000
Purchase returns 20,000
Interest on inventory loan 200,000

What is the inventoriable cost 0f the purchase?

a. 4,280,000
b. 4,030,000
c. 4,080,000
d. 4,130,000

7. On December 28, 2016, Kerr Company purchased goods costing P 500,000 FOB destination.
These goods were received on December 31, 2016. The costs incurred in connection with the
sale and delivery of the goods were:

Packaging for shipment 10,000

Shipping 15,000
Special handling charges 25,000

On December 31, 2016, what total cost should be included in inventory?

a. 540,000
b. 535,000
c. 550,000
d. 500,000
8. Hero Company reported inventory on December 31, 2016 at P 6,000,000 based on a physical
count of goods priced at cost and before any necessary year – end adjustments relating to the
following :

 Included in the physical count were goods billed to a customer FOB shipping point on
December 30, 2016. These goods had a cost of P 125,000 and were picked up by the carrier
on January 7, 2017.
 Goods shipped FOB SHIPPING point on December 28, 2016, from a vendor to Hero were
received and recorded on January 4, 2017. The invoice cost was P 300,000.

What amount should be reported as inventory on December 31, 2016?

a. 5,875,000
b. 6,000,000
c. 6,175,000
d. 6,300,000

9. Delicate Company is a wholesale distributor of automotive replacement parts.

Initial amounts taken from accounting records on December 31, 2016 are as follows:

A. Parts held on consignment from another entity to Delicate, the consignee, amounting to P
165,000, were included in the physical count on December 31, 2016, and in accounts
payable on December 31, 2016.
B. P 20,000 of parts which were purchased and paid for in December 2016, were sold in the
last week of 2016 and appropriately recorded as sales of P 28,000.
The parts were included in the physical count on December 31, 2016 because the parts were
on the loading dock waiting to be picked up by the customer.
C. Parts in transit on December 31, 2016 to customers, shipped FOB shipping point on
December 28, 2016, amounted to P 34,000. The customers received the parts on January 6,
2017.

Sales of the p 40,000 to the customers for the parts were recorded by Delicate on January 2,
2017.

D. Retailers were holding P 210,000 at cost and P 250,000 at retail, of goods on consignment
from Delicate, at their stores on December 31, 2016.
E. Goods were in transit from a vendor to Delicate on December 31,2016. The cost of goods
was P 25,000. The goods were shipped FOB shipping point on December 29, 2016.

1. What is the correct amount of inventory?

a. 1,300,000
b. 1,320,000
c. 1,334,000
d. 1,090,000
 2. What is the correct amount of accounts payable?
a. 835,000
b. 960,000
c. 975,000
d. 860,000

3. What is the correct amount of sales?

a. 9,250,000
b. 9,290,000
c. 9,040,000
d. 9,000,000

10. Chicago Company has the two products in the inventory.

Product X Product Y

Selling price 2,000,000 3,000,000

Materials and conversion costs 1,500,000 1,800,000

General administration costs 300,000 800,000

Estimated selling cost 600,000 700,000

At the year – end, the manufacture of items of inventory has been completed but no selling
costs have yet been incurred.

1. What amount should be reported as inventory using the LCNRV individual approach?
a. 3,700,000
b. 3,200,000
c. 3,800,000
d. 3,300,000

2. What amount should be reported as inventory using the LCNRV total approach?
a. 3,300,000
b. 3,200,000
c. 3,700,000
d. 2,450,000

In the absence of any statement to the contrary, the LCNRV should be applied using the
individual approach.

11. On November 15, 2016, Diamond Company entered into a commitment to purchase 10,000
ounces of gold on February 15, 2017 at a price of P 310 per ounce. On December 31, 2016, the
market price of gold is P 270 per ounce. On February 15, 2017, the price of gold is P 300 per
ounce
 1. What is the loss on purchase commitment to be recognized on December 31, 2016?
a. 400,000
b. 100,000
c. 300,000
d. 0

2. What is the gain on purchase commitment to be recognized on February 15, 2016?

a. 400,000
b. 300,000
c. 100,000
d. 0

3. What amount should be debited to purchases on February 15, 2017?

a. 3,000,000
b. 3,100,000
c. 2,700,000
d. 3,500,000

4. What amount should be recognized as accounts payable on February 15, 2017?

a. 2,700,000
b. 3,100,000
c. 3,500,000
d. 3,000,000

12. On January 1, 2016, Card Company signed a three – year, noncancelable purchase contract,
which allows Card to purchase up to 5,000 units of a computer part annually from Hart
Company at P 100 per unit and guarantees a minimum annual purchase of 1,000 units.

During 2016, the part unexpectedly became obsolete. Card had 2,500 units of this inventory on
December 31, 2016, and believed these parts can be sold as scrap for P 20 per unit.

1. What amount of loss from the purchase commitment should be reported in the 2016
income statement?
a. 240,000
b. 200,000
c. 160,000
d. 360,000
2. What amount should be recognized as loss on inventory writedown in 2016?
a. 360,000
b. 560,000
c. 200,000
d. 0
13. Lin Company sells merchandise at a gross profit of 30%. On June 30, 2016, all of the inventory
was destroyed by fire.

The following figures pertain to the operations for six months ended June 30, 2016:

Net sales 8,000,000

Beginning inventory 2,000,000
Net purchases 5,200,000

What is the estimated cost of the destroyed inventory?

a. 4,800,000
b. 2,800,000
c. 1,600,000
d. 800,000

14. Karen Company reported the following information for the current year:

Beginning inventory 5,000,000

Purchases 26,000,000
Freight in 2,000,000
Purchase returns and allowances 3,500,000
Purchase discounts 1,500,000
Sales 40,000,000
Sales returns 3,000,000
Sales allowances 500,000
Sales discounts 1,000,000

A physical inventory taken at year – end resulted in an ending inventory of P 4,000,000.

At year- end, unsold goods out on consignment with selling price of P 1,000,000 are in the hands
of a consignee. The gross profit was 40% on sales.

1. What is the cost of goods available for sale?

a. 28,000,000
b. 31,000,000
c. 33,000,000
d. 29,500,000

2. What is the cost of goods sold?

a. 21,900,000
b. 22,200,000
c. 21,300,000
d. 24,000,000
 3. What is the estimated cost of inventory shortage?
a. 1,800,000
b. 2,700,000
c. 1,200,000
d. 2,100,000

15. On October 31, 2016, Pamela Company reported that a flood caused severe damage to the
entire inventory.

Based on recent history, the entity has a gross profit of 25% of sales.

The following information is available from the records for ten months ended October 31, 2016:

Inventory, January 1 520,000

Purchases 4,120,000
Purchase returns 60,000
Sales 5,600,000
Sales returns 400,000
Sales allowances 100,000

A physical inventory disclosed usable damaged goods which can be sold for P 70,000.

What is the estimated cost of goods sold for the ten months ended October 31, 2016?
a. 3,360,000
b. 3,830,000
c. 3,900,000
d. 3,825,000

16. On September 30, 2016, Brock Company reported that a fire caused severe damage to the
entire inventory. The entity has a gross profit of 30% on cost.

The following data are available for nine months ended September 30, 2016:

Inventory at January 1 1,100,000

Net purchases 6,000,000
Net sales 7,280,000

A physical inventory disclosed usable damaged goods which can be sold for P 100,000.

1. What is the estimated cost of goods sold for the nine months ended September 30, 2016?
a. 5,500,000
b. 4,970,000
c. 5,096,000
d. 5,600,000
 2. What is the estimated amount of fire loss?
a. 1,500,000
b. 1,400,000
c. 2,004,000
d. 1,964,000

17. On December 31, 2016, Empress Company had a fire which completely destroyed the goods in
process inventory. After the fire a physical inventory was taken.

The raw materials were valued at P 600,000, the finished goods at P 1,000,000 and factory
supplies at P 100,000 on December 31, 2016.

The inventories on January 1, 2016 consisted of the following:

Finished goods 1,400,000

Goods in process 1,000,000
Raw materials 300,000
Factory supplies 400,000

Data for the current year

Sales 3,000,000
Purchases 1,000,000
Freight in 100,000
Direct labor 800,000
Manufacturing overhead – 50% of direct labor ?
Average gross profit rate on sales 30%

1. What is the cost of goods sold?

a. 2,100,000
b. 1,700,000
c. 1,900,000
d. 2,300,000
2. What is the cost of goods manufactured?
a. 2,500,000
b. 1,700,000
c. 3,100,000
d. 2,300,000

3. What is the estimated cost of the goods in process on December 31, 2016 what were
completely destroyed by fire?

a. 1,300,000
b. 2,100,000
c. 2,000,000
d. 1,700,000