AE 15 INTERMEDIATE ACCOUNTING 1

Directions: Read the problem carefully. Select 5 out of 7 problems. On a piece of paper
write your answer and your solution. Send your answer in our GC on messenger. (you may
send your answer either word docs or picture). Deadline: March 20, 2020.

1. Zenith Company provided the following chronological transactions in relation to petty

cash: (PROBLEM 1-6 IA 1 2019 EDITION)
1. The entity established a petty cash fund of P10,000.
2. Petty cash disbursement were:
Postage 1,500
supplies 3,000
3. Petty cash disbursement
Transportation 1,000
Accounts payable 3,500
4. Issued check for an amount to replenish the fund and bring the balance of the petty
cash to P20,000.

Required:
Prepare all entries to record the transactions under each of the following:
a. Fluctuating fund system
b Imprest fund system.
.

2. From the following information, prepare a bank reconciliation statement, using the
adjusted balance method. Also, prepare adjusting entries on the books of Apathy Co..
(PROBLEM 2-1 IA 1 2019 EDITION)
Apathy Company
Date Check No. Withdrawal Deposits Balance
Dec. 2 100,000 100,000
18 104 10,000 90,000
20 101 5,000 85,000
22 106 25,000 60,000
27 50,000 110,000
29 10,000 120,000
29 103 40,000 80,000
29 CM 30,000 110,000
31 SERVICE CHARGE 2,000 108,000
DM

FIRST BANK
Dec. 1 Deposit 10,000 Dec.4 Check No. 101 5,000
21 Deposit 50,000 6 Check No. 102 15,000
27 Deposit 10,000 8 Check No. 103 40,000
31 Deposit 80,000 8 Check No. 104 10,000
10 Check No. 105 30,000
 14 Check No. 106 25,000
28 Check No. 107 50,000

The credit made by the bank on December 29 represents the proceeds of a note received
from a customer which was given to the bank or collection by the entries on December
29.

Required:
Prepare a bank reconciliation statement, using the adjusted balance method.
Also, prepare adjusting entries on the books of Apathy Company.

3. The records of Efficient Company showed the following: (PROBLEM 3-5 IA 1 2019
EDITION)
Cash in bank balance, March 31 200,000
Book credits for April 720,000
Book debits for April 800,000

Bank statement balance, March 31 330,000

Bank debits 530,000
Bank credits 700,000

Note collected by bank

March 31 60,000
April 30 100,000

Service charge
March 31 8,000
April 30 2,000

NSF check
March 31 20,000
April 30 30,000

Deposit in transit
March 31 80,000
April 30 220,000

Outstanding checks:
March 31 178,000
April 30 372,000

Required: Prepare proof of cash for the month of April following the “book to
bank” method.
4. Grumpy Company sells directly to customers. On January 1, 2020, the balance of
accounts receivable of accounts receivable is P250,000 and the allowance for doubtful
accounts has a credit balance of P20,000.
The following data are available:
Credit sales Writeoff Recoveries
2017 1,100,000 26,000 2,000
2018 1,200,000 29,000 3,000
2019 1,500,000 30,000 4,000
2020 3,000,000 40,000 5,000

Doubtful accounts are provided for 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 accounts written off less recoveries expresses as a percentage of the
credit sales for the period.

Cash receipts in 2020 from credit sales including recoveries amounted to P2,615,000.

Required:
1. What is the percentage to be used in computing the allowance for doubtful
accounts on December 31, 20120?
2. How much is the provision for doubtful accounts for 2020?
3. What is the ledger balance of accounts receivable on December 31, 2020?
4. What is the ledger balance of the allowance for doubtful accounts after
necessary adjustments on December 31, 2020?

5. Feasible Company sold to another entity a tract of land costing P5,000,000 for
P7,000,000 on January 1, 2020. The buyer paid P1,000,000 down and signed a two-
year promissory note for the remainder of the purchase price plus 12% interest
compounded annually. The notes matures on January 1, 2022.

Required: Prepare all indicated entries for 2020, 2021, 2022. (PROBLEM 6-1 IA 1
2019 EDITION)

6. Solvent Bank loaned P10,000,000 to a borrower on January 1, 2017. The terms of the
loan require principal payments of P2,000,000 each year for 5 years plus interest at 8%.
The first principal and interest payments is due on December 31, 2017. The borrower
made the required payments on December 31, 2017 and December 31, 2028. However,
during 2019 the borrower began to experience financial difficulties, requiring the bank
 to reassess the collectability of the loan.

On December 31, 2019, the bank has determined that the remaining principal payments
will be collected but the collection of the interest is unlikely. The bank has accrued the
interest for 2019. The principal payments are expected to be P1,000,000 on December
31, 2020, P2,000,000 on December 31, 2021 and P3,000,000 on December 31, 2022.
The present value of 1 at 8% for one period is .93, for two period is .86 and for three
periods is .79.

Required: (PROBLEM 7-5 IA 1 2019 EDITION)

1. Compute the impairment loss on the loan receivable.
2. Prepare all indicated entries for 2019, 2020 and 2021.

7. Pauper Bank granted a loan to a borrower on January 1, 2020. The interest on the loan
is 8% payable annually starting December 31, 2020. The loan matures in three years on
December 31, 2022. Data related to the loan are:

Principal amount 3,000,000

Origination fees charged against the borrower 100,000
Direct origination cost incurred 260,300

After considering the origination fees charged to the borrower and the direct origination
cost incurred, the effective rate of the loan is 6%.

Required: Prepare all indicated entries for 2020, 2021 and 2022. (PROBLEM 7-3
IA 1 2019 EDITION)