PROBLEM NO.

1
Shown below is the bank reconciliation for Marikina Company for November 2017:
Balance per bank, Nov. 30, 2017 P150,000
Add: Deposits in transit 24,000
Total 174,000
Less: Outstanding checks P28,000
Bank credit recorded in error 10,000 38,000
Cash balance per books, Nov. 30, 2017 P136,000

The bank statement for December 2017 contains the following data:

Total deposits P110,000

Total charges, including an NSF check of P8,000 and a
service charge of P400 96,000

All outstanding checks on November 30, 2017, including the bank credit, were cleared in the bank in
December 2017.
There were outstanding checks of P30,000 and deposits in transit of P38,000 on December 31, 2017.
QUESTIONS:
A. Based on the above and the result of your audit, answer the following:
1. How much is the cash balance per bank on December 31, 2017? (2PTS), Php164,000

2. How much is the December receipts per books? (2PTS), Php124,000

3. How much is the December disbursements per books? (2PTS), Php79,600

4. How much is the cash balance per books on December 31, 2017? (2PTS), Php180,400

5. The adjusted cash in bank balance as of December 31, 2017 is ________. (2PTS), Php172,000

Supporting Computations (8pts), please follow below format.

Nov Receipts Disbursements Dec

Balance per bank
statement 150,000 110,000 96,000 164,000
Bank Reconciling Items
Deposits in transit
November 24,000 (24,000)
December 38,0000 38,000
Outstanding checks
November (28,000) (28,000)
December 30,000 (30,000)
Bank Credit recorded in
error (10,000) (10,000)

Adjusted Bank Balance 136,000 124,000 88,000 172,000

Balance per book 136,000 124,000 79,600 180,400

Book Reconciling Items
NSF check 8,000 (8,000)
Bank service
charge 400 (400)

Adjusted Book Balance 136,000 124,000 88,000 172,000

B. Adjusting Entry (compound entry-one entry only) 5pts

Accounts receivable 8,000

Bank service charge 400
Cash in bank 8,400

PROBLEM NO. 2
You have been assigned to audit the books of ZAA General Merchandising Corp. for the
year ended December 31, 2017. It is the company’s first year of operations.

The bookkeeper has provided you with the trial balance reproduced below:

Debit Credit

Cash and cash equivalents 1,250,000

Accounts receivable 1,500,000
Allowance for doubtful accounts -
Inventories 1,340,000
Prepaid expenses 336,000
Land and building 3,504,000
Land -
Building -
Accumulated depreciation 315,360.00
Offi ce furniture and fixtures 550,000
Accumulated depreciation 110,000
Accounts payable 1,977,640
Accrued expenses -
Loans payable 3,200,000
Share capital 1,000,000
Retained earnings -
Sales 5,580,000
Cost of sales 3,348,000
Operating expenses 1,400,000
Other income (expenses) 1,045,000
13,228,000 13,228,000

You have prepared the following audit notes:

Audit note 1 Cash and Cash Equivalents

The following compose the cash and cash equivalents:

Cash and cash equivalents

Petty cash fund 10,000
Savings account - MBTC 500,000
Current account - MBTC 840,000
Current account - BOC - 100,000
Total 1,250,000

The petty cash fund is composed of : bills and coins P5,000; IOUs from employee – P3,000,
petty cash vouchers paid – P2,000 and piece of paper with employees name as contribution
for the medical mission – P2,000.

The bookkeeper has provided you with the following bank reconciliation of MBTC.

Balance per book 840,000

Add: Interest income 2,000
Outstanding checks 260,000
Error in crediting deposit
to the account of the company 25,000
Sub-total 1,127,000
Less: Deposit in transit - 240,000
Error in recording check in
payment of a supplier:
Recorded as 23,400
Cleared by bank 32,400 - 9,000
Balance per bank 878,000

Audit Note 2

Accounts receivables

Trade receivables 1,350,000

Non-trade receivables 150,000
Total 1,500,000
The bookkeeper also provided the following aging analysis of trade receivables. The credit
term of the company is 30 days.

Aging analysis Total Current 1-60 Days 61-90 Days Over 90 days

JCL Mdsing Corporation 405,000 162,000 121,500 40,500 81,000

Aaliyah Corporation 200,000 60,000 80,000 60,000
Nicole, Inc. 210,000 168,000 42,000
Jian Corporation 285,000 142,500 85,500 57,000
Angela, Inc. - 50,000 - 50,000
Fran Corporation 300,000 135,000 60,000 90,000 15,000
1,350,000 617,500 347,000 289,500 96,000

Your workpaper for the confirmation is reproduced below:

Customers Per books Per reply Difference Remarks

JCL Mdsing Corporation 405,000 243,000 162,000 Accdg to the client, the goods were shipped
on December 29 and based on the Delivery Receipt
the goods were received by the customer on
January 3, 2018.

Aaliyah Corporation 200,000 60,000 140,000 Customer reply: We have paid previous invoices
via telegraphic transfer made last January 2, 2018.
This was verified by the client.

Nicole, Inc. 210,000 210,000 - Customer reply: We will pay the P42,000 by next
week. Sorry for the delay.

Jian Corporation 285,000 142,500 142,500 Customer reply: We have received shipment from
our supplier last January 2, 2018.
Client's reply: The goods were picked up by the
common carrier last December 31 and it normally
takes 3 to 4 days for the goods to arrive at the
customers' warehouse.

Fran Corporation 300,000 300,000 - Customer reply: We received the goods on

consignment last December 16 and we will remit
once we have sold the items.
Client's reply: Fran Corporation is a consignee.
The P300,000 represents the selling price.

It is the policy of the company to provide for allowance for doubtful accounts based on the
following:
Current 1%
1 to 60 days overdue 5%
61 to 90 days overdue 10%
Over 90 days overdue 50%
Non-trade receivables are advances made to employees that are subject to salary
deduction. About 90% of the non-trade receivables are not collectible within 12 months from
balance sheet date.

From the information above, compute for the audited amounts of:

1. Cash and cash equivalents, Final Answer __________ (1pt), Php 1,338,000
Supporting computation (2pts)
Petty Cash Fund Php 5,000
MBTC-Savings account 500,000
MBTC-Current account 833,000
Bank Book
Balances 878,000 840,000
Interest income 2,000
Error in recording ( 9,000)
DIT 240,000
O/C ( 260,000)
Error in crediting ( 25,000)
-----------------------------------
Adjusted Balance 833,000 833,000
==================== -----------------------
Php 1,338,000
=============

2. Accounts Receivable, net Final answer __________ (1pt), Php718,420

Supporting computation (2pts)

3. Allowance for doubtful accounts, Final answer ________ (1pt), Php77,080

Supporting computation (2pts)

Supporting Computations for No. 2 and No. 3

Current 1-60 days 61-90 days 0ver 90 days Total

JCL Mdsg. Corp 121,500 40,500 81,000 243,000
Aliyah Corp 60,000 80,000 60,000 200,000
Nicole Inc. 168,000 42,000 210,000
Jian Corp 85,500 57,000 142,500
Adjusted
balance of A/R 228,000 287,000 199,500 81,000 795,500
Rate 1% 5% 10% 50%
Allo for D/A 2,280 14,350 19,950 40,500 77,080
NRV 718,420

PROBLEM 3
Mari Company sells direct to retail customers and also to wholesalers. On January 1, 2017
the balance of the retail accounts receivable was Php 418,000 while the allowance for
doubtful accounts with respect to retail customers was a credit of Php15,200.

The following summary pertains only to retail sales since 2014:

Credit Doubtful Accounts Doubtful Accounts
Sales Written Off Recoveries
2014 Php 2,220,000 Php 52,000 Php 4,300
2015 2,450,000 59,000 7,500
2016 2,930,000 60,000 7,200
2017 3,000,000 62,000 8,400
Doubtful accounts are provided for as a percentage of credit sales. The accountant
calculates the percentage annually by using the experience of the three years prior to the
current year. The formula is doubtful accounts written off less recoveries expressed as a
percentage of the credit sales for the same period. Total collections from customers
amounted to Php2,760,400. This amount included Php50,000 for which the goods are to be
delivered next year. During the year, the company recorded the bad debts written off as bad
debts expense.

Questions:
1. The percentage to be used to compute the allowance for bad debts on December 31,
2017 is _________.
Final answer ___________ (1pt), 2%
Supporting computation (2pts)

Credit Sales Accounts w/off Recoveries

2014 2,220,000 52,000 4,300
2015 2,450,000 59,000 7,500
2016 2,930,000 60,000 7,200
-------------------------------------------------------------------
7,600,000 171,000 19,000
======================================

Percentage = Accounts W/off – Recoveries/Total credit sales

= 171,000-19,000/7,600,000
=152,000/7,600,000
=2%

2. How much is the doubtful accounts expense for 2017?

Final answer _________(1pt), 60,000
Supporting computation (2pts)

Doubtful account expense = 3,000,000 x 2%

= 60,000

3. The doubtful accounts expense for 2017 is overstated by ____________.

Final answer __________ (1pt), Php2,000
Supporting computation (2pts)

Reported doubtful account expense (doubtful accounts w/off) 62,000

Less : correct doubtful account expense 60,000
----------
Overstatement in doubtful account expense 2,000
======
4. The ledger balance of the accounts receivable after the necessary adjustments on
December 31, 2017 was a debit of ___________.
Final answer _________ (1pt), Php645,600
Supporting computation (2pts)

Accounts Receivable
---------------------------------------------------------------------------------------------------------------------------
Balance 1/12017 418,000 :
Sales 3,000,000 : 2,710,400 collection
: (2,760,400-500,000)
: 62,000 Accts written off
---------------------------------------------------------------------------------------------------------------------------
Balance 12/31/2017 645,600 :
======

PROBLEM 4

In your year-end audit of J.P. Rizal Corporation, the cashier showed a cash accountability of
Php12,000 as at December 31, 2020. Selected transactions of the corporation for 2020, in
summary from, follows:
Accounts written off Php 5,000
Depreciation of fixed assets 30,000
Disbursements for cost and expenses 750,000
Income tax accrued 10,000
Payment of bank loan 40,000
Subscriptions receivable 300,000
Subscribed share capital 900,000
Proceeds from short-term bank loan 100,000
Purchases of fixed assets 450,000
Sales (80% collected in 2020) 700,000
The cashier’s correct cash accountability at December 31, 2020 was _______.
Final Answer ___________ (2pts.), Php20,000
Supporting computations (6pts)

Total cash Receipts:

Collection from Subscribed share capital:
Subscribed share capital Php 900,000
Subscription receivable 300,000
--------------------- Php 600,000
Proceeds from short-term loan 100,000
Collections from sales (Php700,000 x 80%) 560,000
-------------------------
Total 1,260,000
Less: Total Cash Disbursements
Disbursements for cost and exp 750,000
Payt of bank loan 40,000
Purchases of fixed assets 450,000
---------------------- 1,240,000
-------------------------
Cashier’s accountability Php 20,000
==============
PROBLEM 5

A count of undeposited receipts under the custody of Ms. Pau, cashier of MPC Company, on
October 1, 2020, 7:30AM showed the following composition:
Currency and coins Php 14,750
Checks:
Date Payee Drawer Amount
02/29/20 Cash Ms. Pau Php 1,000
09/29/20 MPC Co. Bul Corp 3,400
09/30/20 MPC Co. Kevin 2,500
09/30/20 Meralco MPC Co. 1,900
------------------ 8,800
Postage and doc stamps 120
Paid vouchers covering transportation expense 1,200
Customer’s returned by bank, NSF 900
Money in envelop with list of contributors to
Sweepstakes pool 800
IOU from employees 500
-------------------
Total Php 27,070
===========
The cashier’s accountability is Php24,500.

Required: (no supporting computations, no credit)

A. Compute the following
1. Cashier accountability (5pts), Php24,500 or Php26,200
24,500 + 800+ 900 = 26,200

2. Total amount per account (5pts)

Accountability Php 24,500 Php 26,200
Per Count
Currency and coins 14,750 14,750
Checks 6,900 6,900
Paid vouchers 1,200 1,200
Customer’s check
returned-NSF - 900
Postage and doc stamp 120 120
Money in envelope - 800
IOUs 500 500
Total 23,470 25,170
Shortage 1,030 1,030

Currency and coins

3. Shortage or Overage (5pts), Php1,030

B. Journal entry (12pts)

Transportation expense 1,200
Petty cash fund 1,200

Postage and documentary stamps 120

Petty cash fund 120
Cash in bank 5,900
Accts Receivable or Sales 5,900

Accounts Receivable 900

Cash in bank 900

Advances to officers and employees 500

Petty cash fund 500

Cash short or over /Receivable to

Custodian 1,030
Petty cash fund 1,030