NATIONAL COLLEGE OF BUSINESS AND ARTS

CUBAO * FAIRVIEW * TAYTAY

1st PREBOARD EXAMINATION

ACCOUNTING REVIEW
PRACTICAL ACCOUNTING 1

INSTRUCTION: Select the correct answer for each of the following questions. Mark
only one answer for each item by shading the box corresponding to the letter of your
choice on the answer sheet provided. STRICTLY NO ERASURES ALLOWED.

1. Santino Co. had the following account balances on December 31, 2009.

Petty cash fund P50,000

Cash in bank – current account 10,000,000
Cash in bank – payroll account 2,000,000
Cash on hand 500,000
Cash in bank – restricted account for plant additions,
expected to be disbursed in 2010 4,000,000
Treasury bills, due February 15, 2010 3,000,000

The petty cash fund includes unreplenished December 2009 petty cash expense
vouchers of P20,000 and employee IOUs of P10,000. The cash on hand includes a
P100,000 check payable to Santino dated January 15, 2010. What should be
reported as “cash and cash equivalents” on December 31, 2009?
a. P12,420,000 c. P15,420,000
b. P19,420,000 d. P15,450,000

2. The following information pertains to HILO Company as of December 31, 2009:

Cash balance per general ledger P15,000,000

Cash balance per bank statement 14,550,000
Checks outstanding (including certified check of P100,000)
1,000,000
Bank service charge shown in December bank statement 50,000
Error made by HILO in recording a check that cleared the bank in
December (check was drawn in December for P500,000
but recorded at P700,000) 200,000
Deposit in transit 1,500,000

At the December 31, 2009 balance sheet cash in bank should be

a. P15,150,000 c. P14,250,000
b. P14,650,000 d. P14,550,000

3. All of YUTANG Company’s sales are on a credit basis. The following information is
available for 2009:
Allowance for doubtful accounts, 1/1/2009 P1,000,000
Sales 22,000,000
Sales returns 2,000,000
Accounts written off as uncollectible 600,000
Recovery of accounts written off 200,000
 YUTANG provides for doubtful accounts expense at the rate of 10% of net sales. At
December 31, 2009, the allowance for doubtful accounts balance should be
a. P3,200,000 c. P2,800,000
b. P2,600,000 d. P2,000,000

4. On January 1, 2009, the balance of accounts receivable of PAKYAO Company

was P5,000,000 and the allowance for doubtful accounts on same date was P800,000.
The following data were gathered:

Credit sales Writeoffs Recoveries

2004 P10,000,000 P250,000 P20,000
2007 14,000,000 400,000 30,000
2008 16,000,000 650,000 50,000
2009 25,000,000 1,100,000 145,000

Doubtful accounts are provided for as percentage of credit sales. The accountant
calculates the percentage annually by using the experience of the three years prior
to the current year. How much should be reported as 2009 doubtful accounts
expense?
a. P750,000 c. P330,000
b. P812,500 d. P875,000

5. The following data pertain to Angat Corporation on December 31, 2005:

Current account at Metrobank P2,000,000

Current account at BPI (100,000)
Payroll account 500,000
Foreign bank account – restricted (in equivalent pesos) 1,000,000
Postage stamps 1,000
Employee’s post dated check 4,000
IOU from controller’s sister 10,000
Credit memo from a vendor for a purchase return 20,000
Traveler’s check 50,000
Not-sufficient-funds check 15,000
Money order 30,000
Petty cash fund (P4,000 in currency and expense receipts for
P6,000) 10,000
Treasury bills, due 3/31/06 (purchased 12/31/05) 200,000
Treasury bills, due 1/31/06 (purchased 1/1/05) 300,000

Based on the above information, compute for the cash and cash equivalent that
would be reported on the December 31, 2005 balance sheet.
a. P2,784,000 c. P2,790,000
b. P3,084,000 d. P2,704,000

6. The following data pertain to Balagtas Corporation on December 31, 2005:

Checkbook balance P10,000,000

Bank statement balance 15,000,000
Check drawn on Balagtas’ account, payable to supplier, dated and
recorded on Dec. 31, 2005, but not mailed until Jan. 15, 2006 3,000,000
Cash in sinking fund 4,000,000
Money market, three months due January 31, 2006 5,000,000

On December 31, 2005, how much should be reported as “cash and cash equivalents”?
a. P13,000,000 c. P18,000,000
b. P12,000,000 d. P17,000,000
7. On December 31, 2005, Baliuag Company had the following cash balances:

Cash in bank P15,000,000

Petty cash fund (all funds were reimbursed on December 31, 2005) 50,000
Time deposit 5,000,000
Saving deposit 2,000,000

Cash in bank includes P500,000 of compensating balance against short term

borrowing arrangement at December 31, 2005. The compensating balance is legally
restricted as to withdrawal by Baliuag. A check of P300,000 dated January 15, 2006
in payment of accounts payable was recorded and mailed on December 31, 2005. In
the current assets section of the December 31, 2005 balance sheet, what amount
should be reported as “cash and cash equivalents”?
a. P21,850,000 c. P21,800,000
b. P16,850,000 d. P14,850,000

8. Bocaue Company had the following account balances on December 31, 2005.

Petty cash fund

P50,000
Cash in bank – current account 10,000,000
Cash in bank – payroll account 2,000,000
Cash on hand
500,000
Cash in bank – restricted account for plant additions, expected to
be disbursed in 2006 4,000,000
Treasury bills, due February 15, 2006 3,000,000

The petty cash fund includes unreplenished December 2005 petty cash expense
vouchers of P20,000 and employee IOUs of P10,000. The cash on hand includes a
P100,000 check payable to Bocaue dated January 15, 2006. What should be
reported as “cash and cash equivalents” on December 31, 2005?
c. P12,420,000 c. P15,420,000
d. P19,420,000 d. P15,450,000

9. Bulacan Corporation's checkbook balance on December 31, 2005, was

P800,000. In addition, Bulacan held the following items in its safe on December 31:

Check payable to Bulacan Corporation, dated January 2, 2006, not included

in December 31 checkbook balance P200,000
Check payable to Bulacan Corporation, deposited December 20, and
included in December 31 checkbook balance, but returned by bank on
December 30, stamped "NSF." The check was redeposited January 2,
2006, and cleared January 7 40,000
Post-dated checks 15,000
Check drawn on Bulacan Corporation's account, payable to a vendor, dated
and recorded December 31, but not mailed until January 15, 2006 100,000

The proper amount to be shown as cash on Bulacan's balance sheet at December

31, 2005, is
a. P760,000 c. P860,000
b. P800,000 d. P975,000

10. All of Urdaneta Company’s sales are on a credit basis. The following information
is available for 2005:

Allowance for doubtful accounts, 1/1/2005 P1,000,000

Sales 22,000,000
Sales returns 2,000,000
Accounts written off as uncollectible 600,000
Recovery of accounts written off 200,000
 Urdaneta provides for doubtful accounts expense at the rate of 10% of net sales. At
December 31, 2005, the allowance for doubtful accounts balance should be
c. P3,200,000 c. P2,800,000
d. P2,600,000 d. P2,000,000

11. On January 1, 2005, the balance of accounts receivable of Manaoag Company

was P5,000,000 and the allowance for doubtful accounts on same date was P800,000.
The following data were gathered:

Credit sales Writeoffs Recoveries

2002 P10,000,000 P250,000 P20,000
2003 14,000,000 400,000 30,000
2004 16,000,000 650,000 50,000
2005 25,000,000 1,100,000 145,000

Doubtful accounts are provided for as percentage of credit sales. The accountant
calculates the percentage annually by using the experience of the three years prior
to the current year. How much should be reported as 2005 doubtful accounts
expense?
c. P750,000 c. P330,000
d. P812,500 d. P875,000

12. The Natividad Publishing Company follows the procedure of debiting Bad Debts
Expense for 2% of all new sales. Sales for 4 consecutive years and year-ended
allowance account balances were as follows:

Allowance for Bad Debts

End-of-Year Credit
Balance
Year Sales
2002 P2,100,000 P21,500
2003 1,975,000 35,500
2004 2,500,000 50,000
2005 2,350,000 66,000

Compute the amount of accounts written off for the year 2005.
a. P31,000 b. P25,500 c. P35,500 d. P5,500

13. Reconciliation of Malolos Corporation’s bank account at November 30, 2005 follows:
Balance per bank statement P3,150,000
Deposits in transit 450,000
Checks outstanding (45,000)
Correct cash balance P3,555,000

Balance per books P3,558,000

Bank service charge (3,000)
Correct cash balance P3,555,000
 December data are as follows:
Bank Books
Checks recorded P3,450,000 P3,540,000
Deposits recorded 2,430,000 2,700,000
Collection by bank (P600,000 plus interest) 630,000 -
NSF check returned with December bank 15,000 -
statement
Balances 2,745,000 2,715,000

The checks outstanding on December 31, 2005 amount to

a. P45,000 b. P135,000 c. P90,000 d. P0

14. Mangaldan Company obtained a one-year loan of P5,000,000 from a bank on

April 1, 2005. The loan was discounted at 12%. The company signed a note and
pledged its accounts receivable of P5,000,000 as collateral for the loan. In relation to
the loan, Mangaldan should report note payable on December 31, 2005 at
a. P4,850,000 c. P5,450,000
b. P4,400,000 d. P4,550,000

15. On December 1, 2005 Pozurrubio Company assigned on a nonnotification basis

accounts receivable of P5,000,000 to a bank in consideration for a loan of 90% of the
receivables less a 5% service fee on the accounts assigned. Pozurrubio signed a note
for the bank loan. On December 31, 2005, Pozurrubio collected assigned accounts of
P3,000,000 less discount of P200,000. Pozurrubio remitted the collections to the bank
in partial payment for the loan. The bank applied first the collection to the interest and
the balance to the principal. The agreed interest is 1% per month on the loan balance.
In its December 31, 2005 balance sheet, Pozurrubio should report note payable as a
current liability at
a. P1,745,000 c. P1,545,000
b. P1,700,000 d. P2,250,000

For items 16-17

Binalonan Company factored P5,000,000 of accounts receivable to ABC Company on
July 1, 2005. Control was surrendered by Binalonan. ABC assessed a fee of 5% and
retains a holdback equal to 20% of the accounts receivable. In addition ABC charged
12% computed on a weighted average time to maturity of the receivables of 30 days.

16. Binalonan Company will receive and record cash of

a. P3,700,685 c. P3,750,000
b. P3,700,000 d. P4,700,685

17. Assuming all receivables are collected, Binalonan Company’s cost of factoring
the receivables would be
a. P250,000 c. P49,315
b. P299,315 d. P 0

18. On September 30, 2005, Asingan Company discounted at the bank a customer’s
P5,000,000 6-month 10% note receivable dated June 30, 2005. The bank discounted
the note at 12%. The proceeds from this discounted note amounted to
a. P5,092,500 c. P4,842,000
b. P5,250,000 d. P5,170,000

19. Urdaneta Company accepted from a customer P5,000,000, 120-day, 12% note
dated August 31, 2005. On September 30, 2005, Urdaneta discounted the note at the
National Bank. However, the proceeds were not received until October 1, 2005. In the
September 30, 2005 balance sheet, the amount receivable from the bank includes
accrued interest revenue of
a. P200,000 c. P44,000
b. P156,000 d. P 0
 20. Umingan Company has a 10% note receivable dated June 30, 2005, in the
original amount of P9,000,000. Payments of P3,000,000 in principal plus accrued
interest are due annually on July 1, 2006, 2007 and 2008. In its June 30, 2007 balance
sheet, what amount should Umingan report as a current asset for interest on the note
receivable?
a. P900,000 c. P300,000
b. P600,000 d. P 0

21. KHUPIT Company’s accounting records indicated the following for 2009:

Inventory, January 1 P6,000,000

Purchases 20,000,000
Sales 30,000,000

A physical inventory taken on December 31, 2009 resulted in an ending inventory of

P4,500,000. The gross profit on sales remained constant at 30% in recent years.
Benguet suspects some inventory may have been taken by a new employee. At
December 31, 2009 what is the estimated cost of missing inventory?
a. P5,000,000 c. P500,000
b. P4,500,000 d. P 0

22. The LOUGI Corporation was organized on January 1, 2008. On December 31,
2009, the corporation lost most of its inventory in a warehouse fire just before the year-
end count of inventory was to take place. Data from the records disclosed the following:

2008 2009
Beginning inventory, January 1 P 0 P1,020,000
Purchases 4,300,000 3,460,000
Purchases returns and allowances 230,600 323,000
Sales 3,940,000 4,180,000
Sales returns and allowances 80,000 100,000

On January 1, 2009, the Corporation’s pricing policy was changed so that the gross
profit rate would be three percentage points higher than the one earned in 2008.

Salvaged undamaged merchandise was marked to sell at P120,000 while damaged

merchandise was marked to sell at P80,000 had an estimated realizable value of
P18,000.

How much is the inventory loss due to fire?

a. P918,200 c. P856,200
b. P947,000 d. P824,600

23. In preparing the bank reconciliation of Crews Company for the month of July, the
following information is available:

Balance per bank statement, 7/31 ..................... $54,075

Deposits in transit, 7/31 ............................ 9,375
Outstanding checks, 7/31 ............................. 8,625
Deposit erroneously recorded by bank to Crews 375
account, 7/18 ......................................
Bank service charges for July ........................ 75

What is the correct cash balance at July 31?

a. $52,875
b. $54,375
c. $54,450
d. $54,825
24. Richards Company uses the allowance method of accounting for bad debts. The
following summary schedule was prepared from an aging of accounts receivable
outstanding on December 31 of the current year.

No. of Days Probability

Outstanding Amount of Collection
0-30 days $500,000 .98
31-60 days 200,000 .90
Over 60 days 100,000 .80

The following additional information is available for the current year:

Net credit sales for the year .................. $4,000,000

Allowance for Doubtful Accounts:
Balance, January 1 ............................. 45,000 (cr)
Balance before adjustment, December 31 ......... 2,000 (dr)

If Richards determines bad debt expense using 1.5 percent of net credit sales, the net
realizable value of accounts receivable on the December 31 balance sheet will be
a. $738,000.
b. $740,000.
c. $742,000.
d. $750,000.

25. Gekko, Inc. reported the following balances (after adjustment) at the end of 2005 and
2004.

12/31/2005 12/31/2004
Total accounts receivable ................. $105,000 $96,000
Net accounts receivable ................... 102,000 94,500

During 2005, Gekko wrote off customer accounts totaling $3,200 and collected $800 on
accounts written off in previous years. Gekko's doubtful accounts expense for the year
ending December 31, 2005 is
a. $1,500.
b. $2,400.
c. $3,000.
d. $3,900.