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Simulates Midterm Exam. IntAcc1
Simulates Midterm Exam. IntAcc1
3. Cash is presented on the statement of financial position at face value being its fair value on the date. Cash
denominated in foreign currency must be translated using the exchange rate in effect at the
a. Beginning of the reporting period
b. End of the reporting period
c. Forward contract rate
d. Average exchange rate
4. Which of the following are considered cash for financial reporting purposes
i. Petty cash fund and change fund
ii. Money orders, traveler‟s checks and personal checks
iii. Coins, currency, and available funds
iv. Postdated checks and IOUs
v. Savings account for employees‟ travel
vi. Savings account for acquisition pf equipment
vii. Savings account for acquisition of inventories
a. i,ii,iii,iv,v,vi and vii b. i,ii,iii,v,vi, and vii c. i,ii,iii,iv,v and vi d. i,ii,iii,v, and vii
5. Which of the items should not be included in in cash caption on the balance sheet?
a. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposits in checking accounts at the bank
d. Postage stamps on hand and travel advances
7. In which account are cash in closed banks or in banks having financial difficulty or in bankruptcy classified?
a. Receivables
b. Prepaid Expenses
c. Cash
d. Payables
8. Bank overdrafts generally should be
a. reported as a deduction from the current asset section.
b. reported as a deduction from cash.
c. netted against cash and a net cash amount reported.
d. reported as a current liability.
9. Unreleased checks (checks drawn before balance sheet date but held for later delivery to creditors)
a. Should be treated as outstanding receivable
b. Should be restored to the cash balance
c. Should be treated as outstanding checks if the date is shortly after the balance sheet date
d. Should be treated as outstanding checks if they are ultimately en-cashed
11. Statement 1: In accordance with PAS 1, par. 66, an entity shall classify an asset as current when the asset
is cash or cash equivalents unless the asset is restricted from being exchange or used to settle a liability for
at least twelve months after the reporting period.
Statement 2: In accordance to PAS 7, par 6, cash equivalents are short-term, highly liquid investments that
are readily convertible to known amounts of cash and which subject to an insignificant risk of changes in
value.
a. Only statement 1 is correct
b. Only statement 2 is correct
c. Both statements are correct
d. Both statements are incorrect
12. All of the following can be classified as cash and cash equivalents, except?
a. Redeemable preference shares acquired and due in 60 days
b. Commercial papers held and due for repayments in 90 days
c. Equity investments
d. A bank drafts
13. Which of the following is NOT a basic characteristics of a system of cash control?
a. Use a voucher system
b. Combined responsibility for handling and recording cash
c. Daily deposits of all cash received
d. Internal audit at irregular interval
14. A system or method wherein the petty cash fund is replenished by writing a check equal to the payments
that have been made
a. Fluctuating fund method
b. Imprest fund system
c. Internal control systems
d. Voucher systems
17. Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed in the
depositor‟s records and to identify bank errors. Adjustments on the part of the depositor should be recorded
for
a. Bank errors, outstanding checks and deposit in transit
b. All items except bank errors, outstanding checks and deposit in transit
c. Book errors, bank errors, deposit in transit and outstanding checks
d. Outstanding checks and deposits in transit
18. Which of the following reconciling items would require an adjusting entry on the company‟s book
a. Non-sufficient funds check
b. Outstanding checks
c. Cash on Hand
d. Erroneous bank debit
19. If the cash shown in a company‟s accounting records is less than the correct cash balance, and neither the
company nor the bank has made any errors, there must be
a. Bank charges not yet recognized by the company
b. Outstanding checks
c. Deposits credited by the bank, not yet recorded by the company
d. Collections not yet deposited
20. Worship Company prepares a four-column bank reconciliation. Check #888 was written for P5,670 on the
books, but the checks was written and cleared by the bank for correct amount of P6,570. The correct
treatment on the reconciliation would be
a. On the bank side, deduct P900 from payments and add P900 to ending balance
b. On the book side, deduct P900 from payments and add P900 to ending balance
c. On the bank side, add P900 to receipts and add P900 to ending balance
d. On the book side, add P900 to payments and deduct P900 from ending balance
21. Accounts receivable is initially recognized at ____________ and subsequently to initial recognition are
measured at _____________
a. Present Value, Cost
b. Fair Value, Amortized cost using effective interest method
c. Net Realizable value, Amortized cost using straight line method
d. Maturity Value, Fair Value
22. If the note receivable is exchange for property and no interest rate is stated, the note to be recorded at the
a. Fair market value of property or note
b. Maturity value of the note
c. Face value of the note
d. Carrying (book) value of the property
23. Trade receivables are classified as current assets when they are reasonable expected to be collected
a. Within one year
b. Within normal operating cycle
c. Within one year or within normal operating cycle, whichever is shorter
d. Within one year or within normal operating cycle, whichever is longer
26. ABC cycle shop sells a bicycle to BSA, a customer who uses Express Card (a national credit card, but not
issued by a bank). In recording this sale, ABC cycle shop should record
a. A cash receipt (cash sales)
b. An account receivable from BSA
c. An account receivable from Express Card
d. A small increase in allowance for doubtful accounts
27. If accounts receivable are pledge against borrowings, the amount of accounts receivable pledge should be
a. Excluded from total receivables with disclosures
b. Excluded from total receivables without disclosures
c. Included from total receivables with disclosures
d. Included from total receivables without disclosures
29. A method of estimating doubtful accounts that emphasize asset valuation rather than income measurement
is the allowance method based on
a. Aging the accounts receivable
b. Direct write-off
c. Gross sales
d. Credit sales less return and allowances
30. When the accounts receivable of a company are sold outright to a company that normally buys accounts
receivable of other companies without recourse , the accounts receivable have been
a. Transferred with recourse
b. Factored
c. Assigned
d. Pledged
Part II. Multiple Choice Problems
Choose the letter of the correct answer.
31. The following information has been extracted from the accounting records of Moira Company at December
31, 2018:
Cash on hand (undeposited sales receipts) P 40,800.00
Certificate of time deposit with maturity of three months 1,000,000.00
Customer‟s note receivable 40,000.00
Reconciled balance in BPI checking account (14,000.00)
Reconciled balance in BDO checking account 374,000.00
Balance in Metrobank savings account 342,400.00
Customer‟s post-dated check 54,000.00
Employee travel advances 64,000.00
Cash in bond sinking fund 48,000.00
Bond sinking fund investments 323,600.00
Postage stamps 17,200.00
What is the total amount of cash to be reported in the statement financial position?
33. In connection with your observation of Lucas Corporation for the year ended December 31, 2018, you
gathered the following:
Current Account at BDO P2,000,000
Current Account at Metrobank (600,000)
Payroll account 500,000
IOU from controller‟s sister 10,000
Credit Memo from a vendor for purchase return 16,000
Traveler‟s Checks 50,000
NSF checks 12,000
Money order 30,000
Petty cash fund ( P4,000 in currency and expense receipts for P6,000) 10,000
Treasury Bills, due 2/28/19 (purchased 11/31/18) 200,000
Treasury Bills, due 3/31/19 (purchased 3/1/18) 500,000
Foreign bank account (in USD) 25,000
USD to PHP conversion rate are follows: average – P41, closing – P40. Based on the above information, compute
for the cash and cash equivalents that would reported on the December 31, 2018 balance sheet.
a. P2,704,000 b. 2,790,000 c. P3,084,000 d. P3,784,000
34. Dan Company had the following account balances at December 31, 2018
Cash in Bank P900,000
Cash on Hand 120,000
Cash legally restricted for plant expansion ( expected to be disbursed on 1,500,000
2019)
Cash in bank include P250,000 of compensating balance against short-term borrowing arrangements. The
compensating balance is not legally restricted as to withdrawal by Dan. In the current assets sections of Dan‟s
December 31, 2018 statement of financial position, total cash should be reported at
a. P770,000 b. P1,020,000 c. P2,270,000 d, P2,520,000
35. Regine Company is negotiating a loan with BPI Family Bank. Regine needs P3,600,000. As part of the loan
agreement, BPI will require Regine to maintain a compensating balance of 15% of the loan amount on
deposit in checking account at the bank. Regine currently maintains a balance of P200,000 in the checking
account. The interest rate Regine is required to pay on the loan is 12% BPI pays 1% interest on checking
accounts. The amount of the loan is:
a. P3,400,000 b. P3,600,000 c. P3,800,000 d. P4,000,000
36. James Company decided to establish a petty cash fund to help ensure internal control over its small cash
expenditures. The following information is available for the month of May.
1. On May 1, it a petty cash fund in the amount of P40,000
2. A summary of the petty cash expenditures made by the petty cash custodian as of May 22 is as follows
Delivery charges paid on merchandise purchased P12,000.00
Supplies purchased and used 5,000.00
Postage expense 6,600.00
IOU from employees 3,400.00
Miscellaneous expense 7,200.00
The petty cash was replenished on May 22. The balance in the fund was P5,400.00
The petty cash fund was increase to 60,000 on May 25.
The balance of the petty cash fund that will be presented as part of cash in the April 30 balance sheet is
a. P60,000 b. P40,000 c. P34,6000 d.P100,000
37. You rendered a cash count on the company‟s petty cash fund on June 30, 2018. The custodian presented
you the following :
Currencies and coins P37,620
A disbursement check payable to the custodian 46,800
An officer‟s personal check accommodated by the fund 12,000
Manager‟s checks marked NSF 6,000
Petty Cash expense vouchers
6/20 Transportation expense 4,500
6/24 Office repairs 2,700
6/27 Miscellaneous 6,300
Unused postage stamps 1,500
An enveloped marked “collections for charity” with list of names
and corresponding amounts contributed. There is no money inside
the envelope. 7,500
The company‟s fiscal year ends of June 30. The petty cash fund was established for an amount of
P120,000.
How much is the shortage or overage in the petty cash fund at June 30, 2018
a. P11,580 b. P17,580 c. P4,080 d. P10,080
38. The cash account shows a balance of P900,000 before reconciliation. The bank statement does not include
a deposits of P46,000 made on the last day of they of the month. The bank statement shows a collection by
the bank of P18,800 and a customer‟s check for P6,400 was returned because it was NSF. A customer‟s
check for P10,800 was recorded on the books at P9,000, and a check written for P1,590 was recorded as
P1,950. The correct cash balance in the cash account was:
a. P910,240 b. P910,960 c. P914,560 d. P956,960
39. The following pertains to checking account of a company at June 30, 2018.
Balance per book P214,500
Interest earned for the second quarter 500
Outstanding Checks 15,000
Customer‟s checks returned for insufficient funds 5,000
Deposits in Transit 25,000
How much is cash balance per bank?
a. P220,000 b.210,000 c. P224,500 d. P200,000
40. The following information pertains to James Corporation as December 31, 2018:
Cash balance per bank statement P8,000,000
Deposit in Transit 2,600,000
Checks outstanding (including certified checks of 200,000) 1,000,000
Customer note collected by the bank for James 300,000
NSF checks of customers returned by bank 400,000
Bank service charge shown in December bank statement 40,000
42. What is the amount of deposit in transit for the month of November?
a. P40,00 b. P100,000 c. P140,000 d. P220,000
Problem 43-44
The following bank reconciliation is presented for the Trish Co. for the month of November 2018:
Balance per bank statement, P360,800
11/30/18
Add: Deposit in Transit P 83,000
Erroneous bank charges 30,000 113,000
Subtotal P473,800
Less: Outstanding Checks 156,400
Balance per books, 11/31/18 P317,400
44. What is the amount of cash receipts per book in December 2018?
a. P409,000 b. P439,000 c. P492,000 d. P635,000
45. Fatima Inc. reported a balance of P43,000 in its cash account at the end of the month. There were P20,000
deposits in transit and P15,000 outstanding checks. The bank statement showed a balance of P50,000,
including a note with face value of P15,000 and P6,000 service charge .
How much is the interest on the note collected by the bank?
a. P3,000 b. P6,000 c. P9,000 d. P12,000
46. On June 1, 2018, FINEST Corp. sold a merchandise with a list price of P300,000 to JPIA Co. on account.
Peter was given the following trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale
was made F.O.B. point of destination. On June 10, 2018, the merchandise were delivered to JPIA Co.
Under allowance method how much of account receivable recognized by FINEST Corp. upon sale?
a. P168,000 b. P164,640 c. P300,000 d.P146,460
47. Montefalco Company provided some information on their financial records on December 31, 2019.
Accounts Receivable, January 1 P1, 920,000
Collections of account receivable 6,240,000
Bad debts 200,000
Inventory, January 1 2,880,000
Inventory, December 31 2,640,000
Accounts Payable, January 1 1,000,000
Accounts Payable, December 31 1,500,000
Cash Sales 1,200,000
Purchases 4,800,000
Gross Profit on Sales 2,160,000
48. The following data relate to accounts receivable of Arryn Company for 2019:
What amount should Arryn report as net realizable value of accounts receivable on December 31, 2019?
a. 1,200,000 b. 1,125,000 c. 1,085,000 d. 925,000
49. JPIA 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:
50. On December 31, 2019, general ledger of Jonaxx Company‟s account receivable showed a balance of P1,
100,000. Because of continuing decrease in expected cash flows on its financial asset, Jonaxx Company
has decided to estimate the cash flows of the outstanding receivables. The estimates are based on the
expected peso amount to be received on the outstanding receivable; the category (age) which also includes
the length and period of collectability and time factor for similar borrowers.
Category Amount Time factor
Elijah 400,000 .909
Azi 300,000 .826
Noah 250,000 .751
Rozen 150,000 .683
How much should Jonaxx Company report its account receivable in its December 31, 2019 statement of financial
position?
a. P 799,150 b. P 901,600 c. P 1,200,000 d. P 1,400,000
51. Lance Corporation‟s Accounts Receivable subsidiary ledger shows the following information:
Customer Account Balance Invoices
December 31, 2018 Sales Amount
Date
Buwan Company P35,180 12/6/2018 P14,000
11/29/2018 21,180
Klwkn Inc. 20,920 9/27/2018 12,000
8/20/2018 8,920
Mundo Corp. 30,600 12/8/2018 20,000
10/25/2018 10,600
Ikaw at Ako Co. 45,140 11/17/2018 23,140
10/9/2018 22,000
Hindi na Nga Inc. 31,600 12/12/2018 19,200
12/2/2018 12,400
Kahit Ayaw Mo Na Corp. 17,400 9/12/2018 17,400
The estimated bad debts rates below are based on Lance‟s receivable collection experience.
Age of Accounts Rate
0-30 days 1%
31-60 days 1.50%
61-90 days 3%
91-120 days 10%
Over 120 days 50%
The allowance method for bad debts account had a debit balance of P5,500 on December 31, 2018 before
adjustments. The allowance of bad debts to be reported at December 31, 2018 is
a. P9,699 b. P15,199 c. P4,199 d. P5,500
52. You are given the following information relating to Elle Trading:
Gross Profit based on cost 25%
Accounts Receivable, December 31, 2017 P120,000
Allowance for bad debts, December 31, 2017 3,000
Collections of accounts receivable in 2018 645,000
Cost of Goods Available for Sale in 2018 690,000
Merchandise Inventory, December 31, 2018 150,000
Assuming all sales were on account and estimated bad debts was 5% of sales, what is net realizable value of
accounts receivable December 31, 2018?
a. P150,000 b. 142,500 c. P116,250 d. P113,250
53. . Miguel Department Store starts its business on May 1, 2019 and completes the following transactions
relating to credit card sales during May:
Total sales charged by customers are as follows:
BPI P600,000
RCBC 1,200,000
Eastwest 1,500,000
Deposits made by the bank to charge the account of Miguel for credit card sales , net of 3% service charge.
BPI P407,400
RCBC 814,800
Eastwest 1,018,500
How much is the accounts receivable as of May 31, 2019?
a. P3,300,000 b. P2,310,000 c. P1,059,300 d. P990,000
54. The Tully Company's ledger balance for Notes Receivable includes a note receivable from Arryn Company.
Company Arryn is undergoing bankruptcy proceedings and has negotiated for restructuring of its note, with
face amount of P4,000,000, and accrued interest of P480,000, based on interest rate of 12%. The note is
due on this date, December 31, 2019. The restructuring arrangement calls for P1.120,000 annual payment
with first payment due on December 31, 2020. No further interest will be collected during the extended four-
year term. Based on the ledger balance of the company for allowance for uncollectible notes and accounts,
P100,000 relates to this note.
What is the impairment loss on Notes Receivable on December 31, 2019?
b. P987,422 b. P978,224 c. P1,120,000 d. P4,000,000
Problem 54-56
On January 1, 2019, Finest Company sold an equipment that originally cost of P750,000. Finest Company received
a P900,000 note as payment for this transaction. The note is payable in three annual installments of P300,000
beginning December 31, 2019 plus interest at the rate of 15% based on the outstanding balance. At January 1,
2019, the prevailing rate of interest for a similar obligation is 10%.
57. Based on above statement, assuming the nominal interest is 8%, what is the balance of Discount on Notes
Receivable on January 1, 2019?
a. 976,975 b. P97,697.50 c. P30,786 d. P746,055
58. On July 1, 2019 Hyungsik Corporation sold equipment to Bogum Corporation for 250,000. Hyungsik
accepted a 10% note receivable for the entire sales price. This note is payable in two equal installments of
125,000 plus accrued interest on December 31, 2019 and December 31, 2020. On July 1, 2020, Hyungsik
discounted the note at a bank at an interest rate of 12%
59. On July 31, 2019 Elizalde Company discounted at the bank a customer‟s 600,000, 6-month, 10% note
receivable dated May 31,2019. The bank discounted the note at 12%. How much is the proceeds Elizalde
receive from this discounted note?
a. P564,000 b. P576,000 c. P604,800 d. P617,400
60. On February 1, 2019, Marga Corporation factored receivables with the carrying amount of 2,000,000 to
Cassie Corporation. Marga Corporation assesses a finance charge of 3% of the receivables and retains 5%
of the receivables.
If the factoring is treated as a sale, what amount of loss from sale should the company report in its 2019 statement if
comprehensive income for the year 2019?
a. None b. P60,000 c. P100,000 d. P160,000
61. Blue Company factored 750,000 of accounts receivable to Red Company on December 1, 2019. Blue
Company retained significant amount of risks and rewards of ownership and continues to manage the
financial asset.
Red accepted the receivable, assessed a fee of 2% and retains a holdback equal to 4% of the accounts
receivable. In addition, Red charged 12% interest on the amount advanced.
What amount of finance cost should Blue Company report in its December 2019 statement of
comprehensive income related to the factoring of its account receivable?
62. On October 31, 2019, Jeydon Lopez Company engaged in the following transaction s:
Obtained 500,000, six month loan from City Bank, discounted at 12%. The company pledged 500,000 of
accounts receivable as security for the loan.
Factored 1,000,000 of accounts receivable without recourse on a non-notification on basis with Candice
Gonzales Company. Help charged a factoring fee of 2% of the amount of receivables factored and withheld
10% of the amount factored.
Problem 62-63
On December 1, 2019, Rage Company assigned specific accounts receivable totaling P4,000,000 as collateral on a
P3,000,000, 12% note from certain bank. The entity will continue to collect the assigned accounts receivable. In
addition to the interest on the note, the bank also charged 5% finance fee deducted in advance on the P3, 000,000
value on the note. The December collections assigned account receivable amounted to P 2,000,000 less cash
discount of P100, 000. On December 31, 2019, the entity remitted the collections to the bank in payment for the
interest accrued on December 31, 2019 and the note payable. The entity accepted sales returns of P 150,000 on
the assigned accounts and wrote off assigned accounts of P200,000.
63. What amount of cash was received from assignment of accounts receivable on December 1,2019?
a. P 4,000,000 b. P 3,000,000 c. P 3,800,000 d. P 2,850,000
64. What is the carrying amount of note payable on December 31, 2019?
a. 1,000,000 b. 1,100,000 c. 1,130,000 d. 1,460,000