1.

Bank overdrafts, if material, 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.

2. Deposits held as compensating balances

a. usually do not earn interest.
b. if legally restricted and held against short-term credit may be included as cash.
c. if legally restricted and held against long-term credit may be included among current
assets.
d. none of these.

3. The category "trade receivables" includes

a. advances to officers and employees.
b. income tax refunds receivable.
c. claims against insurance companies for casualties sustained.
d. none of these.

4. Which of the following should be recorded in Accounts Receivable?

a. Receivables from officers
b. Receivables from subsidiaries
c. Dividends receivable
d. None of these

5. What is the preferable presentation of accounts receivable from officers, employees, or

affiliated companies on a balance sheet?
a. As offsets to capital.
b. By means of footnotes only.
c. As assets but separately from other receivables.
d. As trade notes and accounts receivable if they otherwise qualify as current assets.

6. When a customer purchases merchandise inventory from a business organization, she

may be given a discount which is designed to induce prompt payment. Such a discount
is called a(n)
a. trade discount.
b. nominal discount.
c. enhancement discount.
d. cash discount.

7. Trade discounts are

a. not recorded in the accounts; rather they are a means of computing a price.
b. used to avoid frequent changes in catalogues.
c. used to quote different prices for different quantities purchased.
d. all of the above.

8. If a company employs the gross method of recording accounts receivable from

customers, then sales discounts taken should be reported as
a. a deduction from sales in the income statement.
b. an item of "other expense" in the income statement.
c. a deduction from accounts receivable in determining the net realizable value of
accounts receivable.
d. sales discounts forfeited in the cost of goods sold section of the income statement.

9. Which of the following is not considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks, and personal checks
c. Coin, currency, and available funds
d. Postdated checks and I.O.U.'s

10. Which of the following is considered cash?

a. Certificates of deposit (CDs)
b. Money market checking accounts
c. Money market savings certificates
d. Postdated checks

11. Travel advances should be reported as

a. supplies.
b. cash because they represent the equivalent of money.
 c. investments.
d. none of these.

12. Which of the following items should not be included in the 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 deposit in checking account at the bank
d. Postage stamps on hand

13. The accounts receivable turnover ratio is computed by dividing

a. gross sales by ending net receivables.
b. gross sales by average net receivables.
c. net sales by ending net receivables.
d. net sales by average net receivables.

14. A Cash Over and Short account

a. is not generally accepted.
b. is debited when the petty cash fund proves out over.
c. is debited when the petty cash fund proves out short.
d. is a contra account to Cash.

15. Which of the following methods of determining annual bad debt expense best achieves
the matching concept?
a. Percentage of sales
b. Percentage of ending accounts receivable
c. Percentage of average accounts receivable
d. Direct write-off

16. When using a perpetual inventory system,

a. no Purchases account is used.
b. a Cost of Goods Sold account is used.
c. two entries are required to record a sale.
d. all of these.

17. Goods in transit which are shipped f.o.b. shipping point should be
a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. none of these.

18. Goods in transit which are shipped f.o.b. destination should be

a. included in the inventory of the seller.
b. included in the inventory of the buyer.
c. included in the inventory of the shipping company.
d. none of these.

19. Which of the following types of interest cost incurred in connection with the purchase or
manufacture of inventory should be capitalized as a product cost?
a. Purchase discounts lost
b. Interest incurred during the production of discrete projects such as ships or real
estate projects
c. Interest incurred on notes payable to vendors for routine purchases made on a
repetitive basis
d. All of these should be capitalized.

20. Valuation of inventories requires the determination of all of the following except
a. the costs to be included in inventory.
b. the physical goods to be included in inventory.
c. the cost of goods held on consignment from other companies.
d. the cost flow assumption to be adopted.

21. The failure to record a purchase of merchandise on account even though the goods are
properly included in the physical inventory results in
a. an overstatement of assets and net income.
b. an understatement of assets and net income.
c. an understatement of cost of goods sold and liabilities and an overstatement of
assets.
 d. an understatement of liabilities and an overstatement of owners' equity.
22. Horvath Company has the following items at year-end:
Cash in bank P20,000
Petty cash 300
Short-term paper with maturity of 2 months 5,500
Postdated checks 1,400
Horvath should report cash and cash equivalents of
a. 20,000
b. 20,300
c. 25,800
d. 27,200

23. Marshell Company has cash in bank of P15,000, restricted cash in a separate account of
P4,000, and a bank overdraft in an account at another bank of P2,000. Marshell should
report cash of
a. 13,000
b. 15,000
c. 18,000
d. 19,000

24. Peterson Company has the following items at year-end:

Cash in bank P30,000
Petty cash 500
Short-term paper with maturity of 2 months 8,200
Postdated checks 2,100
Peterson should report cash and cash equivalents of
a. 30,000
b. 30,500
c. 38,700
d. 40,800

25. Simpson Company has the following account balances at year-end:

Accounts receivable P60,000
Allowance for doubtful accounts 3,600
Sales discounts 2,400
Simpson should report accounts receivable at a net amount of
a. 54,000
b. 56,400
c. 57,600
d. 60,000

26. Sandler Company has the following account balances at year-end:

Accounts receivable P80,000
Allowance for doubtful accounts 4,800
Sales discounts 3,200
Sandler should report accounts receivable at a net amount of
a. 72,000
b. 75,200
c. 76,800
d. 80,000

27. Hamilton Company has cash in bank of P10,000, restricted cash in a separate account
of P3,000, and a bank overdraft in an account at another bank of P1,000. Hamilton
should report cash of
a. 9,000
b. 10,000
c. 12,000
d. 13,000

Use the following information for questions 28 and 29.

A trial balance before adjustments included the following:

Debit Credit
Sales P425,000
 Sales returns and allowance P14,000
Accounts receivable 43,000
Allowance for doubtful accounts 760

28. If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the
adjustment is
a. 6,700
b. 8,220
c. 8,500
d. 9,740

29. If the estimate of uncollectibles is made by taking 10% of gross account receivables, the
amount of the adjustment is
a. 3,540
b. 4,300
c. 4,224
d. 5,060

Use the following information for questions 30 and 31.

Henry Co. assigned P400,000 of accounts receivable to Easy Finance Co. as security for a loan
of P335,000. Easy charged a 2% commission on the amount of the loan; the interest rate on the
note was 10%. During the first month, Henry collected P110,000 on assigned accounts after
deducting P380 of discounts. Henry accepted returns worth P1,350 and wrote off assigned
accounts totaling P2,980.

30. The amount of cash Henry received from Easy at the time of the transfer was
a. 301,500
b. 327,000
c. 328,300
d. 335,000

31. Entries during the first month would include a

a. debit to Cash of P110,380.
b. debit to Bad Debt Expense of P2,980.
c. debit to Allowance for Doubtful Accounts of P2,980.
d. debit to Accounts Receivable of P114,710.

32. The following information is available for Kerr Company for 2007:
Freight-in P 30,000
Purchase returns 75,000
Selling expenses 150,000
Ending inventory 260,000
The cost of goods sold is equal to 400% of selling expenses. What is the cost of goods
available for sale?
a. 600,000
b. 890,000
c. 815,000
d. 860,000

33. How should the following costs affect a retailer's inventory valuation?
Freight-in Interest on Inventory Loan
a. Increase No effect
b. Increase Increase
c. No effect Increase
d. No effect No effect

34. Tysen Retailers purchased merchandise with a list price of P50,000, subject to trade
discounts of 20% and 10%, with no cash discounts allowable. Tysen should record the
cost of this merchandise as
a. 35,000
b. 36,000
c. 39,000
d. 50,000
35. On June 1, 2007, Mills Corp. sold merchandise with a list price of P20,000 to Linn on
account. Mills allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40
and the sale was made f.o.b. shipping point. Mills prepaid P400 of delivery costs for Linn
as an accommodation. On June 12, 2007, Mills received from Linn a remittance in full
payment amounting to
a. 10,976
b. 11,368
c. 11,376
d. 11,196

Tranvia Company had the following balances on December 31, 2020:

Cash in checking account 350,000

Cash in money market account 750,000
Treasury bill, purchased November 1, 2020
maturing January 31, 2021 3,500,000
Time deposit purchased December 1, 2020
maturing March 31, 2021 4,000,000

36. What amount should be reported as cash and cash equivalents on December 31, 2020?
a. 1,100,000
b. 3,850,000
c. 4,600,000
d. 8,600,000

Thor Company provided the following data on December 31, 2020:

Checkbook balance 4,000,000

Bank Statement balance 5,000,000
Check drawn on Thor’s account payable to supplier,
dated and recorded on December 31, 2020 but
not mailed until January 15, 2021 500,000
Cash in sinking fund 2,000,000

37. On December 31, 2020, what amount should be reported as “Cash” under current
assets?
a. 4,500,000
b. 5,500,000
c. 3,500,000
d. 6,500,000

At year-end, Myra Company reported cash and cash equivalents which comprised the
following:

Cash on hand 500,000

Demand deposit 4,000,000
Certificate of deposit 2,000,000
Posdated customer check 300,000
Petty cash fund 50,000
Traveler’s check 200,000
Manager’s check 100,000
Money order 150,000

38. What total amount should be reported as “cash” at year-end?

a. 7,000,000
b. 4,800,000
c. 6,800,000
d. 5,000,000
 37. What total amount should be reported as “cash” at year-end?
e. 7,000,000
f. 4,800,000
g. 6,800,000
h. 5,000,000

Everlast Company reported the following information at year-end:

 Share investments of P1,000,000 that are very actively traded in the stock market.
 Government treasury bills of P2,000,000 with a 10-year term but purchased on
December 31 at which time they had two months to go until maturity.
 Cash of P3,400,000 in the form of coin, currency, saving account and checking account.
 Commercial papers of P1,500,000 with term of nine months but purchased on December
31 at which time they had three months to go until maturity.

38. What total amount should be reported as cash?

a. 3,400,000
b. 4,900,000
c. 4,400,000
d. 5,400,000

39. What total amount should be reported as cash equivalents?

a. 2,000,000
b. 1,500,000
c. 3,500,000
d. 4,500,000

On December 31, 2020, West Company had the following cash balances:
Cash in bank- current account 1,800,000
Petty cash fund- all funds were reimbursed at year-end 50,000
Time deposit due February 1, 2021
250,000 Time deposit in bank closed by BSP
1,000,000

Cash in bank included P600,000 of compensating balance against short-term borrowing

arrangement on December 31, 2020. The compensating balance is legally restricted as to
withdrawal.

41. On December 31, 2020, what total amount should be reported as cash and cash
equivalents?
a. 2,500,000
b. 1,250,000
c. 2,100,000
d. 1,500,000

Karla Company provided the following information on December 31, 2020:

Cash on hand 500,000
Security Bank current account 1,000,000
PNB Current account No. 1 400,000
PNB Current account No. 2 (overdraft)
(50,000) BSP treasury bill – 60days
3,000,000
 The cash on hand included a customer postdated check of P100,000 and postal
money order of P40,000.
 A check for P200,000 in payment of account was drawn against Security Bank
account, dated January 15, 2019, delivered to the payee and recorded
December 31, 2020.

42. What total amount of cash and cash equivalents should be reported on December 31,
2020?
 a. 4,550,000
b. 5,050,000
c. 4,750,000
d. 1,950,000

Ral Company reported the checkbook balance on December 31, 2020 at P5,000,000
and held the following items on same date:

Check payable to Ral, dated January 2, 2021 in

payment of sale made in December 2020, not
included in December 31 checkbook balance 2,000,000
Check payable to Ral, deposited December 15 and included
in December 31 checkbook balance, but returned by
bank on December 30 stamped “NSF.” The check
was redeposited on January 2, 2021 and cleared on
January 9, 2021 500,000
Check drawn on Ral’s account, payable to a vendor, dated and
recorded in Ral’s books on December 31, 2020 but not
mailed until January 10, 2021 300,000
Certficate of time deposit 1,000,000

43. What amount should be reported as cash on December 31, 2020?

a. 4,800,000
b. 5,300,000
c. 6,500,000
d. 5,800,000

On December 31, 2020, Roma Company reported cash of P9,950,000 with the following
details:
Undeposited collections 600,000
Cash in Bank – BDO checking account
4,000,000 Undeposited NSF check received from customer,
dated December 1, 2020
150,000 Undeposited check from a customer,
dated January 15, 2021
250,000 Cash in bank – BDO fund for
payroll 1,000,000
Cash in bank – BDO money market instrument, 90 days 2,000,000
Cash in foreign bank restricted 1,500,000
Cash in bank – BDO value added tax account 450,000
Total 9,950,000

44. On December 31,2020, what total amount should be reported as cash and cash
equivalents?
a. 7,600,000
b. 8,200,000
c. 6,050,000
d. 8,050,000

Yasmin Company provided the following information on December 31, 2020:

Petty cash fund 50,000
Current account – First Bank 4,000,000
Current account – Second Bank (overdraft) (250,000)
Money market placement – Third Bank 1,000,000
Time deposit 2,000,000
 A check for P100,000 was drawn against First Bank current account dated and recorded
December 29, 2020 but delivered to payee on January 15, 2021.
 The Fourth Bank time deposit is set aside for land acquisition in early January 2019.

45. What total amount should be reported as cash and cash equivalents on December 31,
2020?
a. 5,050,000
b. 5,150,000
c. 4,900,000
d. 4,150,000