CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING —_ VALINISIY/VALLUESCALA/SANTOSDELA CRUZ CASH AND CASH EQUIVALENTS: 1. An entity provided the following data on December 31, 2020: Checkbook balance 5,000,000 Bank statement balance 4,000,000 ‘Check drawn on entity's account, payable to supplier, dated and ‘eoorded on December 31, 2020 but not mailed until January 31, 2021 1,000,000 (Cash in sinking find 1,500,000 ‘Treasury bills, purchased November 1, 2020 and maturing January 31, 2021 2,500,000 ‘Time deposit, purchased October 1, 2020 and maturing January 31, 2021 2,000,000, ‘What amount should be reported as cash and cash equivalents on December 31, 2020? 8,000,000 8,500,000 ©. 7,500,000 x 4. 6,000,000 2. An entity had the following cash balances on December 31, 2020: Cash in bank 5,000,000 Petty cash fund, all funds were reimbursed on December 31, 2020 30,000 ‘Money market placement or commercial papers 1,500,000 Saving deposit '800,000 Cash in bank included P500,000 of compensating balance against short-term borrowing arrangement on December 31, 2020. The compensating balance is legally restricted as to ‘withdrawal. A check of P1,000,000 dated January 31, 2021 in payment of accounts payable was recorded and mailed on December 31, 2020. ‘What amount should be reported as cash and eash equivalents on December 31, 2020? 6,350,000 b. 7,850,000 ©. 6,850,000 5,550,000 3. An entity had the following account belances on Decetber 31,2020 ‘Cash on hand, including a customer check P100,000 dated January 31, 2021 500,000 (Cash in bank ~ eurrent account 4,000,000 ‘Cash in bank — payroll account 1,000,000 Cash in bank — restricted aecount for plant addition expected to be disbursed in 2021 00,000 (Cash in sinking find set aside for bond payable due December 31, 2021 1,500,000 ‘Three-month time deposit 2,000,000 Traveler's check 200,000 Manager's check 300,000 ‘Money order 100,000 |, What total amount should be reported as eash under current assets? 7,500,000 ». 9,500,000 ‘7,600,000 4. 6,000,000 2, What total amount should be reported as cash equivalents? a 2,000,000 —— ». 2,600,000 3,500,000 4. 4,000,000 67324. An entity reported an imprest petty cash fund of P50,000 with the following details: Currencies 20,000 Coins 2,000 Peity cash vouchers: Gasoline payments for delivery equipment 3,000 “Medical supplies for employees 1,000 Repairs of office equipment 1,500 Loans to employee 3500 ‘A check drawn by the entity payable to the order of the petty cash custodian representing salary forthe month 15,000 ‘An employee's check returned by the bank for insufficiency of fund 3,000 ‘A sheet of paper with names of several employees together with contribution fora birthday gift of a co-employee. Attached to the sheet of paper is a currency of 5,000 ‘What amount of petty cash und should be reported in the statement of financial position? b. ©. 4 42,000 27,000 37,000 22,000 ‘An entity 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 P8,500,000. ‘A deposit of P1,000,000 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 that the bank collected note for the entity and eredited the proceeds of P9S0,000 to the entity's account, net of collection charge P50,000. ‘Checks outstanding on June 30 amount to P300,000 including certified check P100,000. ‘The entity discovered that a check written in June for P200,000 in payment an account payable hnad been recorded inthe entity’s records as P20,000, Included with the June bank statement was NSF check for P250,000 that the entity had received ‘rom a customer on une 26. ‘The bank statement shows P20,000 service change for June. ‘What amount should be reported as eash in bank on June 30? 9,000,000 8,300,000 9,360,000 9,180,000 . What isthe balance per bank statement on June 30? 8,300,000 b. 9,700,000 ©. 8,660,000 4. 8,200,000 . What is the net adjustment to cash in bank on June: 30? a. Net debit P950,000 . Net credit P450,000 ¢. Net debit P500,000 4. Net debit P860,000 END 6732CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING —_ VALIW/SIY/VALIX/ESCALA/SANTOS/DELA CRUZ ACCOUNTS RECEIVABLE b An entity provided the following information for the current year: a ee oe 10,000,000 Collection from customers, excluding recovery of accounts written off 0.00 ‘Accounts written off as worthless oon Sales retums 00.000 Recovery of accounts writen off 1300 Estimated future sales returns on December 31 beret Estimated uncollectibie accounts on December 31 per aging ‘What isthe “amortized cost” of accounts receivable on December 31? a. 3,400,000 . 3,100,000 ©. 2,950,000 4. 2,900,000 2. During the current year, an entity reported beginning allowance for doubtful accounts P200,000, sales, 9,500,000, sales returns and allowances P1,000,000, sales discounts P500,000, accounts written off 300,000 and recovery of accounts written off P50,000. It is estimated that 5% of net sales may prove uuncollectibe. 1. What amount should be reported as doubtfal accounts expense? a. 400,000 b. 425,000 450,000 a. 475,000 2, What is the ending allowance for doubtful accounts? a. 350,000 . 375,000 400,000 4. 300,000 |. On December 31, 2020, an entity reported accounts receivable of P6,000,000 and allowance for doubtful accounts of P1,000,000 on January 1, 2020. ‘Net credit sales ‘Writeofts Recoveries 2017 9,000,000, 400,000 30,000 2018 13,000,000 600,000 70,000 2019 15,000,000 700,000 120,000 2020 20,000,000 650,000 150,000 Doubiful accounts are provided for as percentage of net credit sales. The percentage is computed annually by using the data of the three years prior to the current year. 1. What amount should be reported as doubtful accounts expense for 2020? a. 800,000 b. 650,000 c. $00,000 4. 600,000 2. What is the allowance for doubtful accounts on December 31, 2020? a 1,300,000 b. 1,950,000 1,150,000 41,800,000 6733‘ Page 2 4. An entity provided the following accounts abstracted from the unadjusted trial balance at year-end: Debit Credit Accounts receivable 5,000,000 ‘Allowance for doubtful accounts 50,000 ‘Net credit sales 20,000,000 “The entity estimated that 3% of the gross accounts receivable will become uncollectible. ‘What amount should be recognized as doubtful aceounts expense for the current year? a 100,000 . 150,000 ©, 200,000 4. 600,000 5. From inception of operations, an entity provided for doubtful accounts under the allowance method ‘and provisions were made monthly at 2% of eredit sales. No yearend adjustments to the allowance account were made. The balance in the allowance for doubtful accounts was P1,000,000 on January 1, 2020. Daring 2020, credit sales totaled P20,000,000, interim provisions for doubtful accounts were made at 2% of credit sales, P200,000 of bad debts were writen off, and recoveries of accounts previously ‘writen off amounted to PS0,000. An aging was made on December 31, 2020. Classification Balance Uncollectible November - December 6,000,000, 10% July ~ October 2,000,000 20% January - June 41,500,000 30% Prior to January 1, 2020 ‘500,000 50% Based on the review of collectibility of the account balances in the “prior to January 1, 2020” aging category, additional accounts totaling P100,000 are to be written off on December 31, 2020. Effective December 31, 2020, the entity adopted aging method for estimating the allowance for doubsful sccounts, 1, Whatis the required allowance for doubtful accounts on December 31, 2020? 1. 1,650,000 ». 1,950,000 © 1,700,000 1,450,000 2. What amount should be reported as doubtful accounts expense for eurent year? 1,200,000 ’. 1,650,000 . "900,000 4 950,000" 3. What is the adjustment to the allowance for doubtful accounts on December 31, 2020? 2, 900,000 debit b, 900,000 eredit ©, 500,000 debit 4. $00,000 credit 4. What isthe net realizable value of accounts receivable on December 31, 2020? 9,900,000 b. 8,250,000 ©. 8,350,000 . 8,200,000 6733CPA REVIEW SCHOOL OF THE PHILIPPINES Manila FINANCIAL ACCOUNTING AND REPORTING _ VALIWSIY/VALIX/ESCALA/SANTOS/DELA CRUZ. RECEIVABLE FINANCING 1, On December 1, 2020, an entity assigned on a nonnotification basis accounts receivable of 5,000,000 to a bank in consideration for a loan of 80% of the accounts less a 5% service fee on the accounts assigned. The entity signed a note for the bank loan. On December 31, 2020, the entity collected assigned accounts 0 P2,000,000 less discount of 'P200,000. The entity remitted the collections to the bank in partial payment forthe 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. ‘The entity accepted sales returns of P100,000 on the assigned accounts and wrote off assigned accounts of P300,000. |. What is the balance of accounts receivable assigned on December 31, 20207 ‘a. 3,000,000 'b. 2,600,000 2,400,000 4. 2,900,000 . 2. What is the carrying amount ofthe note payable on December 31, 2020? a. 2,240,000 ‘b, 2,000,000, ‘c. 4,000,000 4. 2,200,000. 3, What isthe equity of the assignor in assigned accounts on December 31, 2020? a. 2,600,000 b. 2,240,000 360,000 a 0 2. An entity factored P5,000,000 of accounts receivable. Control was surrendered by the entity. The transaction met the criteria to be accounted for as sale but subject to recourse for nonpayment. The fair value of the recourse obligation is P250,000. The finance company assessed a fee of 6% and retained a holdback equal to 10% of the accounts receivable, In addition, the finance company charged 12% interest computed on a weighted average time to maturity of the accounts receivable for 30 days, 1. What amount was initially received from the factoring of accounts receivable? a 4,300,000 . 4,200,000 ©. 4,700,685 a. 4,150,685 2. What total amount should be recognized initially as loss on factoring? a 349,315 b. 849,315 ©. 755,000 4. 599315 3. What amount should be reported as loss on factoring assuming the accounts are fully collected by the factor? 349,315 . 300,000 $50,000 4d. 299,315 6734Page 2 ‘An entity accepted from a customer in settlement of an account a P4,000,000. 90-day 12% note dated ‘August 31, 2020. On September 30, 2020, the entity discounted the note at 15% with recourse at ‘the bank. The note was paid in full by the maker on maturity. The discounting is accounted for as a conditional sale with recognition ofa contingent liability, |. What amount was received from the note receivable discounting? ‘a. 4,017,000 4,120,000 ‘e. 4,103,000 4. 3,965,500 2. What is the loss on note receivable discounting? a. 40,000 b. 23,000 fe. 17,000 4. 20,000 On April 1, 2020, an entity discounted with recourse a 9-month, 10% note dated January 1, 2020 with face of P6,000,000. The bank discount rate is 12%, The discounting transaction is accounted for as a conditional sale with recognition of contingent liability. ‘On October 1, 2020, the maker dishonored the note receivable. The entity paid the bank the maturity value of the note plus protest fee of PS0,000. (On December 31, 2020, the entity collected the dishonored note in full plus 12% annual interest on the total amount due. 1. What amount was received from the note receivable discounting? a. 6,063,000 ’. 6,450,000 c. 6,150,000 4. 5,963,000 ‘2. What amount should be recognized as loss on note receivable discounting? a. 450,000 . 387,000 ©. 87,000 63,000 3, What isthe total amount collected from the customer on December 31, 2020? a. 6,450,000 . 6,500,000 . 6,695,000 4. 6,662,500. 4, If the discounting is secured borrowing, what is included in the journal entry to record the ‘transaction? ‘a, Debit interest expense P87,000 'b. Credit liability for note discounted P6,000,000. ‘c. Credit interest income P150,000 4. Allof these are included in the journal entry END 67345 CPA REVIEW SCHOOL OF THE PHILIPPINES : * Manila FINANCIAL ACCOUNTING AND REPORTING VALDUSIYIVALIX/ESCALA/SANTOSDELA CRUZ NOTES RECEIVABLE AND LOAN IMPAIRMENT 1. On January 1, 2020, an entity sold equipment with a carrying amount of P4,800,000 in exchange for 'P6,000,000 noninterest bearing note due January 1, 2023. There was no established exchange price for the equipment. The prevailing interest rate for this note was 10%, The present value of 1 at 10% for tee periods is 0.75 1. ‘What amount should be reported as gain or loss on sale of equipment in 2020? a. 1,200,000 gain b. 2,700,000 gain 300,000 gain d. 300,000 loss 2. What amount should be reported as interest income for 2020? a. 600,000 b. 500,000 450,000 4. 400,000 3. What amount should be reported as interest income for 2021? 480,000 495,000 528,000 300,000 2. On January 1, 2020, an entity sold equipment with carrying amount of P2,000,000 in exchange for a noninterest bearing note of P5,000,000 requiring ten annual payments of P500,000. The first payment ‘was made on December 31, 2020. The market interes for similar note was 12%. The present value of an ordinary annuity of 1 is 5.65 for ten periods and 5.33 for nine periods. 1. What isthe carrying amount of the note receivable on January 1, 20207 5,000,000 nist, . 2,825,000 c. 2,665,000 4. 4,500,000 2, What amount should be recognized as gain on sale of equipment in 2020? 3,000,000 2,175,000 825,000 0 ao oe 3. What amount should be recognized as interest income for 2020? 600,000 b. 339,000 e. 319,800 4. 261,000 4, What is the carrying amount of the note receivable on December 31, 2020? 2,664,000 yon 4,500,000 31164,000 2,644,800 eeore 6735Page 2 ‘Solid Bank loaned P7,500,000 to a borrower on January 1, 2020. The terms of the loan were payment ‘in full on January 1, 2025 plus annual interest payment at 12%. ‘The interest payment was made as scheduled on January 1, 2021. However, due to financial setbacks, the borrower was unable to make the 2022 interest payment, ‘The bank considered the Ioan impaired and projected the cash flows from the loan on December 31, 2022. ‘The bank had accrued the interest on December 31, 2021 but did not continue to acerue interest for 2022 due to the impairment of the loan. Amount projected Date of cash flow ‘December 31, 2022 December 31, 2023, 500,000 December 31, 2024 1,000,000 December 31, 2025 2,000,000 December 31, 2026 4,000,000 Present value of 1 at 12% For one period 89 Fortwo periods 80 For three periods 7m For four periods 64 1, Whats the present value ofthe eash flows from the loan receivable on December 31, 20222 a. 5,225,000 7,500,000 ©. 5,376,000 4 4,800,000 2. What amount should be recognized as impairment loss for 2022? a b. e. a 3, What amount should be reported by the bank as interest income for 2023? a. 627,000 ». 900,000 ©. 567,000 a 0 4. What is the carrying amount of the loan receivable on December 31, 20237 a. 5,352,000 . 4,725,000 © 5,225,000 4. 7,000,000 . END 6735