ARTS

Accounting Review and Tutorial Services

San Isidro, Nueva Ecija

P1. – 1013 up to P1. - 1017 jloesguerra

The following data pertain to Lincoln Corporation on December 31, 2011:

Current account at Metrobank P 1,800,000

Current account at Allied Bank (100,000)
Payroll account 500,000
Foreign bank account (in equivalent
pesos) 800,000
Savings deposit in a closed bank 150,000
Postage Stamps 1,000
Employee’s post dated check 4,000
IOU from employees 10,000
Credit Memo from a vendor for purchase
return 20,000
Traveler’s check 50,000
Money Order 30,000
Petty Cash fund (P4,000 in currency and
expense receipts for P6,000) 10,000
Pension Fund 2,000,000
DAIF check of customer 15,000
Customer’s check dated 1/1/12 80,000
Time Deposit – 30 days 200,000
Money market placement (due 6/30/12) 500,000
Treasury bills, due 3/31/12 (purchased
12/31/11) 200,000
Treasury bills, due 1/31/12 (purchased
2/1/11) 300,000

1. The cash and cash equivalents as of December 31, 2011 is

a. P2,784,000 c. P3,784,000
b. P3,084,000 d. P3,584,000

Ralf Corporation had the following account balances at December 31, 2011:

Cash on hand and in bank P2,500,000

Cash restricted for bonds payable due on June 30, 2012 1,000,000
Time Deposit 3,000,000
Savings deposit set aside for dividends payable on June
30,2012 500,000

2. The total amount to be reported as cash and cash equivalents as of December 31, 2011 is

a. P7,000,000 c. P6,500,000
b. P6,000,000 d. P5,500,000

3. On December 31, 2011, Alfonso Company had the following cash balances:

Cash in bank P15,000,000

Petty cash fund 50,000
Time deposit 5,000,000
Savings deposit 2,000,000

Cash in bank includes P500,000 of compensating balance against short term borrowing arrangement at
December 31, 2011. The compensating balance is legally restricted as to withdrawal by Alfonso. A check
of P300,000 dated January 15, 2012 in payment of accounts payable was recorded and mailed on
 December 31, 2011. In the current assets section of the December 31, 2011 statement of financial
position, 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

4. On January 1, 2011, Tinoc Company borrows P2,000,000 from National Bank at 12% annual interest. In
addition, Tinoc is required to keep a compensatory balance of P200,000 on deposit at National Bank
which earn interest at 4%. The effective interest that Tinoc pays on its P2,000,000 loan is?

a. 10.0% c. 12.0%
b. 11.6% d. 12.9%

Cash in bank balance of William Co. on January 1, 2011 was P70,000 representing 35% paid-up Capital of
its authorized share capital of P200,000. During the year you ascertained the following postings to some
accounts, as follows:

Debit Credit
Petty cash fund P 2,000
Accounts receivable trade 450,000 P290,000
Subscription receivable 60,000 50,000
Delivery equipment 50,000
Accounts payable trade 280,000 430,000
Bank loan 35,000 80,000
Accrued expenses 1,500
Subscribed share capital 60,000
Unissued share capital 130,000
Authorized share capital 200,000
Sales 450,000
Purchases 430,000
Expenses (including
depreciation of
P5,000 and accrued
5. Cash in expenses of P1,500) 90,000 bank balance at December 31,
2011 was

a. P41,500 c. P34,500
b. P33,000 d. P39,500

An office supplies enterprise, operating on a calendar year basis, has the following data in its accounting
records:

01/01 12/31
Cash P 47,000
Inventory 101,000 P 93,000
Accounts receivable 82,000 116,000
Accounts payable 68,000 63,000
Sales 1,150,000
6. Cost of goods sold 900,000 What is the expected cash balance for
Operating expenses 200,000 December 31?

a. P50,000 c. P76,000
b. P66,000 d. P134,000

The Petty Cash fund of Guiguinto Company on December 31, 2011 is composed of the following:

Coins and currencies P 14,000

Petty cash vouchers:
Gasoline payments 3,000
Supplies 1,000
Cash advances to employees 2,000
Employee’s check returned by bank 5,000
marked NSF
Check drawn by the company payable
to the order of the petty cash
custodian, representing her salary 20,000
A sheet of paper with names of
employees together with
contribution for a birthday gift of a
co-employee in the amount of __8,000
 Total P 53,000

7. The petty cash ledger account has an imprest balance of P50,000. What is the correct amount of petty
cash on December 31, 2011?

a. P34,000 c. P39,000
b. P14,000 d. P42,000

The following data pertaining to the cash transactions and bank account of Mandirigma Company for the
month of May are available to you:

Cash balance, per records, May 31 P 17,194

Cash balance, per bank statement, 5/31 31,948
Bank service charge for May 109
Debit memo for the cost of printed checks
delivered by the bank 125
Outstanding checks, May 31 6,728
Deposit of May 30 not recorded by bank
until June 1 4,880
Proceeds of a bank loan of May 30 net of
interest of P300 5,700
Proceeds from a customer’s promissory
note, including interest of P100 8,100
Check No. 2772 issued to a supplier entered
in the accounting records at P2,100 but
deducted in the bank statement at an
erroneous amount of 1,200
Stolen check lacking an authorized signature,
deducted from Mandirigma’s account by
the bank in error 800
Customer’s check returned by the bank
marked NSF; no entry has been made in
the accounting records to record the
returned check 760

8. What is the correct cash balance at May 31?

a. P29,200 c. P30,000
b. P30,300 d. P30,900

The information below is from the books of the Seminole Corporation on June 30:

Balance per bank statement P11,164

Receipts recorded but not yet deposited in
the bank 1,340
Bank charges not recorded 16
Note collected by bank and not recorded on
books 1,120
Outstanding checks 1,100
NSF checks – not recorded on books nor
redeposited 160

9. Assuming no errors were made, compute the cash balance per books on June 30 before any reconciliation
adjustments

a. P11,404 c. P10,460
b. P12,348 d. P10,220

The cash in bank account of S-Mart, Inc. for April showed an ending balance of P129,298. Deposits in
transit on April 30 was P18,200. Outstanding checks as of April 30, were P59,435, including a P5,000 check
which the bank had certified on April 27. During the month of April, the bank charged back NSF checks in
the amount of P3,435 of which P1,835 had been redeposited by April 20. On April 23, the bank charged S-
Mart’s account for a P2,200 items which should have been charged against K-Mart, Inc., the proceeds
from notes collected by the bank for S-Mart, Inc. was P7,548 and bank charges for this services was P18.

10. How much is the unadjusted balance per bank on April 30?

a. P95,263 c. P173,663
b. P88,333 d. P169,263
 Use the following information for the next two questions.

Shown below is the bank reconciliation for YOUR Company for the month of May:

Balance per bank, May 31 P75,000

Add: Deposits in transit 12,000
Total 87,000
Less: Outstanding checks P14,000
Bank credit recorded in error 5,000 19,000
Cash balance per books, May 31 P68,000

The bank statement for the month of June contains the following data:

Total deposits P55,000

Total charges, including an NSF check of
P4,000 and a service charge of P200 48,000

All outstanding checks on May 31, including the bank credit, were cleared in the bank in June.

There were outstanding checks of P15,000 and deposits in transit of P19,000 on June.

11. Cash receipts per books in June is

a. P74,000 c. P62,000
b. P43,000 d. P48,000

12. Cash disbursements per books in June is

a. P90,200 c. P44,800
b. P42,800 d. P39,800

Use the following information for the next two questions.

Banaue Company deposits all receipts and makes all payments by checks. The following information is
available from the cash records:

May 31 Bank Reconciliation

Balance per bank P262,460
Add: Deposits in transit 21,000
Deduct: Outstanding checks (38,000)
Balance per books P245,460

Month of June Results Per Bank Per Books

Balance June 30 P279,950 P303,550
June deposits 107,840 158,890
June checks 111,000 100,800
June note collected (not included in
June deposits) 30,000 -0-
June bank service charge 350 -0-
June NSF check of a customer
returned by the bank (recorded by
bank as a charge) 9,000 -0-

13. The deposits in transit as of June 30 is

a. P72,050 c. P51,050
b. P70,250 d. P42,050

14. The outstanding checks as of June 30 is

a. P27,800 c. P37,150
b. P28,700 d. P31,750

On December 31, 2011 the account receivable control account of Ipil – Ipil Co. had a balance of 181,000.
An analysis of the account receivable account showed the following:
 Accounts known to be worthless P 2,000
Advance payments to creditors on
Purchase Orders 10,000
Advances to affiliated companies 25,000
Customers’ accounts reporting credit
balance arising from sales return (15,000)
Interest receivable on bonds 10,000
Other trade accounts receivable –
unassigned 50,000
Subscriptions receivable for ordinary share
capital due in 30 days 55,000
Trade accounts receivable – assigned 15,000
Trade installment receivable due 1 – 18
months, (including unearned finance
charges, P2,000) 22,000
Trade receivables from officers, due 1,50
currently 0

Trade accounts on which post – dated

checks are held (no entries were made
receipts of checks 5,000

15. The correct balance of trade accounts receivable of Ipil – Ipil on December 31, 2011 is
a. P86,500 c. P91,500
b. P103,500 d. P206,000

16. The unadjusted trial balance of John Company as at December 31, 2011 showed Account Receivable –
trade with a balance of P693,000. Investigation revealed that it included amounts due from officer –
P75,000; claim pending against freight company – P9,000; and refund on insurance policy – P4,500.
According to the subsidiary ledger which have been thoroughly checked and rechecked, the trade
accounts receivable totaled P600,000 (composed of current accounts – P375,00; two-months or more –
P105,000). Responsible Officials have acknowledged definite uncollectibility of three month accounts with
balance totaling P22,500; they have expressed doubt with respect to an additional P24,000 worth of
accounts in the same category; and they consider all other accounts collectible.

At what net realizable value should the Accounts Receivable – trade be carried in the statement of
financial position of the company as of December 31, 2011?
a. P553,500 c. P577,500
b. P582,000 d. P558,000

17. On June 9, 2011, Pol Corp. sold merchandise with list price of P5,000 to Pot on account. Pol allowed trade
discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was made FOB shipping point. Pol
accommodation. On June 25, 2011, Pol received from Pot a remittance in full payment amounting to
a. P2,744 c. P2,944
b. P2,940 d. P3,000

18. The Pacifier Company uses the net price method of accounting for cash discounts. In one of its
transactions on December 15, 2011, Pacifier sold merchandise with list price of P500,000 to client who
was given a trade discount of 20% and 15% Credit terms were 2/10, n/30. The goods were shipped FOB
Destination, Freight Collect. Total freight charges paid by the client amounted to P7,500. On December
20, 2011, the client returned damaged goods originally billed at P60,000.

What is the net realizable value of this receivable on December 31, 2011?
a. P272,500 c. P280,000
b. P274,400 d. P333,200
19. Dancing Shoes sold P21,000 of merchandise during the month of December, which was charged to a
national credit card. On December 15, Dancing bills the independent national credit card company for the
sales and is assessed a 5% service charge. On December 21, a customer returned merchandise originally
sold for P2,000 and Dancing notifies the credit card company of the return. On December 29, 2011, the
credit card company remitted amount owed to Dancing.

How much was received by Dancing from the credit card company
a. P21, 000 c. P19,000
b. P19,950 d. P18,050
20. Bangui Company provides for doubtful accounts expense at the rate of 3 percent of credit sales. The
following data are available for last year:
Allow. For Doubtful Accounts, Jan. P54,000
Accounts written off as uncollectible 60,000
Collection of accounts written off 15,000
Credit sales, year-ended December 31 3,000,000
 The allowance for doubtful accounts balance at December 31, after adjusting entries should be

a. P45,000 c. P90,000

b. P84,000 d. P99,000

21. On January 1, 2011, the balance of accounts receivable of Burgos Company was P5,000,000 and the
balance of doubtful account on the same date was P800,000. The following data were gathered:

Credit Sales Write offs Recoveries

2008 P10,000,000 P250,000 P20,000
2009 14,000,000 400,000 30,000
2010 16,000,000 650,000 50,000
2011 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 2011 doubtful accounts expense?

a. P750,000 c. P330,000
b. P812,500 d. P875,000
22. John Corp. has the following data relating to account s receivable for the year ended December 31, 2011:

Accounts receivable, January 1, 2011 P480,000

Allowance for doubtful accounts, 1/1/2011 19,200
Sales during the year, all on account, terms
2/10, 1/15, n/60 2,400,000
Cash received from customer during the year 2,560,000
Accounts written off during the year 17,600

An analysis of cash received from customers during the year revealed that P1,411,200 was received from
customers availing the 10 day discount period, P792,000 from customers availing the 15-day discount,
P4,800 represented recovery of accounts written-off, and the balance was received from customer paying
beyond discounts period.

The allowance for doubtful accounts is adjusted so that it represent certain percentage of the outstanding
account receivable at year end. The required percentage at December 31, 2011 is 125% of the rate used in
December 31, 2010.

The doubtful accounts expense for the year ended December 31, 2011 is

a. P6,880 c. P8,720
b. P7,120 d. P8,960
23. The accounts receivable subsidiary ledger of Besao Corporation shows the following information:

12/31/11 Invoice
Customer Account Balance Date Amount
Maybe, Inc. P140,720 12/06/11 P56,000
11/29/11 84,720
Perhaps Co. 83,680 09/27/11 48,000
08/20/11 35,680
Pwede Corp. 122,400 12/08/11 80,000
10/25/11 42,400
Perchance Co. 180,560 11/17/11 92,560
10/09/11 88,000
Possibly Co. 126,400 12/12/11 76,800
12/02/11 49,600
Luck, Inc. 69,600 09/12/11 69,600

The estimated bad debt rates below are based on the Corporations receivable collection experience.

Age of accounts Rate

0 – 30 days 1%
31- 60 days 1.5%
61- 90 days 3%
91 – 120 days 10%
Over 120 days 50%
The allowance for doubtful Accounts had a credit balance of P14,000 on December 31, 2011, before
adjustment.
 The adjusting journal entry to adjust the allowance for doubtful accounts as of December 31, 2011 will
include a debit to doubtful accounts expense of
a. P52, 795 c. P24,795
b. P38,795 d. P14,000

24. Badoc Corporations Books disclosed the following information for the year ended December 31, 2011:
Net credit sales P1,500,000
Net cash sales 240,000
Accounts Receivable at beginning of year 200,000
Accounts Receivable at end of year 400,000
Bandoc’s accounts receivable turnover is
a. 3.75 times c. 4.35 times
b. 5.00 times d. 5.80 times
25. Smart Company has P3,000,000 note receivable from sale of plant bearing interest at 12% per annum. The
note is dated June 1, 2010. The note is payable is 3 annual installments of P1,000,000 plus interest on the
unpaid balance every June 1, 2011. The initial principal and interest payments was made on June 1, 2011.

The Interest income for 2011 is

a. P300,000 c. P210,000
b. P290,000 d. P140,000
26. Bangkok Corporation sold a machine on July 1, 2011, the cash price of the machine is P79,000. The buyer
signed a deferred payment contract that provides for a down payment of P10,000 and an 8-year note
bearing interest at 10%. The note is to be paid in 8 equal annual payments. The payments are made on
June 30 of each year, beginning June 30, 2012, the 8 equal annual payments is
a. P14,808 c. P13,462
b. P12,934 d. P11,758

27. On January 1, 2011, Santayana Company sold a special machine that had a list price of P900,000. The
buyer paid P100,000 cash and signed an P800,000 note. The note specified that it would be paid off in
four equal annual payment of 274,565 each starting on December 31, 2011. The carrying amount of the
receivable on December 31, 2011 is
a. P525,435 c. P701,435
b. P637,435 d. P725,435

28. Silay Corporation sells a financial asset with a carrying amount of P100,000 for 143,000. On the date of
sale, the entity enters amount into an agreement with the buyer to repurchase the asset in three months
for P145,000. How much should be recognized as gain on sale?
a. P45,000 c. P43,000
b. P2,000 d. P 0

29. Avent Company sells a financial assets with a carrying amount of P500,000 for P600,000 and
simultaneously enters into a total return swap with the buyer under which the buyer will return any
increase in value to Avent and Avent will pay the buyer interest plus compensation for any decrease in
value of the investment. Avent expect the fair value of the financial asset to decrease by P40,000. How
much should Avent recognize as gain on sale of financial asset?
a. P600,000 c. P60,000
b. P100,000 d. P 0

30. Talisay Corporation sells a portfolio of short-term accounts receivables carried on its books at P2,100,000
for P2,000,000 and promises to pay up to P60,000 to compensate the buyer if and when any defaults
occur. Expected credit losses are significantly less than P60,000, and there are no other significant risks.
How much should be recognized as loss on sale of receivables?
a. P160,000 c. P40,000
b. P100,000 d. P 0

Use the following information for the next two questions.

Sipalay Co. assigned P500,000 of accounts receivable to Hinigaran Finance Co. as security for4 a loan of
P420,000. Hinigaran charge a 2% commission on the amount of the loan; the interest rate on the note was
10%. During the first month, Sipalay collected P110,000 on assigned accounts after deducting P380 of
discounts. Sipalay accepted returns P1,350 and wrote off assigned accounts totaling P3,700.

31. The amount of cash Sipalay received from Hinigaran at the time of the transfer was?
a. P378,000 c. P410,000
b. P411,600 d. P420,000
32. Entries during the first month would include a
a. Debit to cash of P110,380
b. Debit to bad debt expense of P3,700
c. Debit to allowance for doubtful accounts of P3,700
d. Debit to accounts receivable of P115,430

33. On July 1, 2011, Shaw Co. sold a machine costing P500,000 with accumulated depreciation of P380,000 on
the date of sale. Shaw received as consideration for the a sale, a P300,000 noninterest bearing note, due
 July 1, 2014. There was no established exchange price for the equipment and the note had no ready
market. The prevailing rate of interest for a note of this type at July 1, 2011 was 12% and 13% on
December 31, 2011. In relation to this transaction, the total income to be recognized in Shaw’s 2011 profit
or loss is?
a. P180,000 c. P101,445
b. P119,165 d. P106,352
34. On December 30, 2011, Chang Co. sold a machine to Door Co. in exchange for a non interest-interest
bearing note requiring ten annual payments of P10,000. Door made the first payment on December 30,
2011. The market interest rate for similar note at the date of issuance was 8%. Information on present
value factors is as follows:

Present Value Present Value of Ordinary

Period of 1 at 8% Annuity of 1 at 8%
9 0.50 6.25
10 0.46 6.71
In its December 31, 2011 statement of financial position, what amount should Chang report as note
receivable?
a. P45,000 c. P62,500
b. P46,000 d. P67,100
35. On December 31, 2010, Sadangan Company finished consultation services and accepted in exchange a
promissory note with a face value of P300,000, a due date of December 31, 2013, and a stated rate of 5%,
with interest receivable at the end of each year. The fair value of the service is not readily available
marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of
interest of 10%.

The carrying amount of the note receivable as of December 31, 2011 is

a. P300,000 c. P262,694
b. P273,963 d. P247,920