ACC 177-FAR

Choose the best answer.

1. In calculating the carrying amount of loan receivable, the lender adds to the principal

A. Interest incurred by the borrower

B. Loan origination fee charged to the borrower

C. Direct loan origination cost incurred by the lender

D. Indirect loan origination cost incurred by the lender FA © 2014

2. Subsequent to initial recognition, a loan receivable shall be measured at

A. Cost

B. Fair value

C. Amortized cost using the straight line method

D. Amortized cost using the effective interest method FA © 2014

3. The "amortized cost" of loan receivable is the amount at which

A. The loan receivable is measured initially.

B. The loan receivable is measured initially minus 
principal repayment.

C. The loan receivable is measured initially minus 
principal repayment, plus or minus the cumulative

amortization of any difference between the initial 
amount recognized and the principal maturity

amount.

D. The loan receivable is measured initially minus 
principal repayment, plus or minus the cumulative

amortization of any difference between the initial 
amount recognized and the principal maturity 
amount,
minus reduction for impairment.

Questions 1 & 2 are based on the following information. FA © 2014

ACC 177-FAR

National Bank granted a 10-year loan to Abbo Company in the amount of P1,500,000 with a stated interest rate of 6%.
Payments are due monthly and are computed to be PI6,650. National Bank incurred P40,000 of direct loan origination
cost and P20,000 of indirect loan origination cost. In addition, National Bank charged Abbo Company a 4-point
nonrefundable loan origination fee.

.4. What is the initial carrying amount of the loan receivable on the part of National Bank?

A. 1,440,000 C. 1,500,000

B. 1,480,000 D. 1,520,000

5. . What is the initial carrying amount of the loan payable on the part of Abbo Company?

A. 1,440,000 C. 1,500,000

B. 1,480,000 D. 1,520,000

6. If accounts receivable are pledged against borrowing, the amount of accounts receivable pledged shall be

A. Included in total receivables with disclosure

B. Excluded from total receivables with disclosure

C. Included in total receivables without disclosure

D. Excluded from total receivables without disclosure FA © 2014

7. If receivables are hypothecated against borrowings, the amount of receivables involved should be

A. Disclosed in the notes

B. Excluded from the total receivables with disclosure

C. Excluded from the total receivables with no disclosure

ACC 177-FAR

D. Excluded from the total receivables and a gain or loss is 
recognized between the face amount and the
amount of 
borrowings FA © 2014

8. Which of the following is not considered as a cash equivalent?

A. A 90-day T-bill

B. A 60-day money market placement

C. A three-year treasury note maturing on May 30 of the current year purchased by the entity on April 15 of the
current year

D. A three-year treasury note maturing on May 30 of the current year purchased by the entity on January 15 of
the current year FA © 2014

Cash & cash equivalent

9. What is the basic requirement for cash and cash equivalent?

A. Deposited in bank

B. Unrestricted in use for current operations

C. Set aside for the liquidation of long-term debt

D. Available for the purchase of property, plant and equipment FA © 2014

10. Which of the following should be excluded from cash and cash equivalents?

A. Time deposit which matures in one year.

B. A customer's check denominated in a foreign currency.

C. The minimum cash balance in the current account which is maintained to avoid service charge.

D. A check issued by the entity on December 27 of the current year but dated January 15 of next year.
FA © 2014
ACC 177-FAR

11. All of the following can be classified as cash and cash equivalents, except?

A. A bank overdraft

B. Equity investments

C. Commercial papers held and due for repayment in 90 days

D. Redeemable preference shares acquired and due in 60 days FA © 2014

12. Which is false concerning measurement of cash and cash equivalents?

A. Cash is measured at face value.

B. Cash in foreign currency is measured at the current exchange rate.

C. Cash equivalents should be measured at maturity value, meaning face value plus interest.

D. If a bank or financial institution holding the funds of the entity is in bankruptcy or financial difficulty, cash
should be written down to estimated realizable value. FA © 2014

Internal control over cash

13. Which of the following statements is incorrect?

A. Certain clerical personnel should be rotated among various jobs.

B. An entity's personnel should be given well-defined responsibilities.

C. The accounting function should be separated from the custodianship of assets.

D. The responsibility for receiving merchandise and paying for it should usually be given to one person.
FA © 2014

14. Which of the following is not a characteristic of a system of cash control?

A. Use of a voucher system

ACC 177-FAR

B. Daily deposit of all cash received

C. Internal audits at irregular intervals

D. Combined responsibility for handling and recording cash FA © 2014

Petty cash fund

15. Petty cash fund is

A. Restricted cash

B. Set aside for the payment of payroll

C. Separately classified as current asset

D. Money kept on hand for making minor disbursements of coin and currency rather than by writing checks
FA © 2014

16. Liwanag Company reported petty cash fund with the following details:

Coins & Currencies 22,000

Petty cash vouchers:

Gasoline payments for delivery equipment 3,000

Medical supplies for employees 1,000

Repairs of office equipment 1,500

Loans to employees 3,500

A check drawn by the entity payable to the order of Grace de la Cruz,

petty cash custodian, representing her salary 15,000

An employee's check returned by the bank for insufficiency of funds 3,000

A sheet of paper with names of several employees together with contribution for a birthday gift of a co-employee.
Attached to the sheet of paper is a currency of 5,000
ACC 177-FAR

The petty cash general ledger account has an imprest balance of P50,000.

What is the amount of petty cash fund that should be reported in the statement of financial position?

A. 22,000 C. 37,000

B. 27,000 D. 42,000 FA © 2014

Cash

.17. Thor Company provided the following data on December 31, 2014:

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, 2014, but not mailed until January 15,2015 500,000

Cash in sinking fund 2,000,000

On December 31, 2014, what amount should be reported as "cash" under current assets?

A. 3,500,000 C. 5,500,000

B. 4,500,000 D. 6,500,000 P1 © 2014

. 18. 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

Postdated customer check 300,000

Petty cash fund 50,000

Traveler's check ' 200,000

ACC 177-FAR

Manager's check 100,000

Money order 150,000

What total amount should be reported as "cash" at year-end?

A. 4,800,000 C. 6,800,000

B. 5,000,000 D. 7,000,000 P1 © 2014

.19 ABC Company reported that the cash account per ledger had a balance on December 31, 2014 of P4,415,000
which consisted of the following:

Petty cash fund 24,000

Undeposited receipts, including a postdated customer check for P70,000 1,220,000

Cash in Allied Bank, per bank statement, with

a check for P40,000 still outstanding 2,245,000

Bond sinking fund 850,000

Vouchers paid out of collections, not yet recorded 43,000

IOUs signed by employees, taken from collections 33,000

4,415,000

What amount should be reported as cash on December 31,2014?

A. 3,379,000 C. 3,449,000

B. 3,419,000 D. 3,489,000 P1 © 2014

.20. Dove Company reported checkbook balance on December 31, 2014 at P4,000,000. Data about certain cash items
follow:

* A customer check amounting to P200,000 dated January 2, 2015 was included in the December 31, 2014
checkbook balance.
ACC 177-FAR

* Another customer check for P500,000 deposited on December 22, 2014 was included in the checkbook
balance but returned by the bank for insufficiency of fund. This check was redeposited on December 26,
2014 and cleared two days later.

* A P400,000 check payable to supplier dated and recorded on December 30, 2014 was mailed on January
16, 2015.

* A petty cash fund of P50,000 with the following summary on December 31,2014:

Coins and currencies 5,000

Petty cash vouchers 43,000

Return value of 20 cases of soft drinks 2,000

50,000

* A check of P43,000 was drawn on December 31, 2014 payable to Petty Cash.

What total amount should be reported as "cash" on December 31, 2014?

A. 3,748,000 C. 4,205,000

B. 4,200,000 D. 4,248,000 P1 © 2014

Unrestricted cash

.21. Islander Company provided the following information with respect to the cash and cash equivalents on December
31,2014:

Checking account at First Bank (200,000)

Checking account at Second Bank 3,500,000

Treasury bonds 1,000,000

Payroll account 500,000

Value added tax account 400,000

Foreign bank account - unrestricted (in equivalent pesos) 2,000,000

Postage stamps 50,000

ACC 177-FAR

Employee's postdated check 300,000

IOU from president 750,000

Credit memo from a vendor for a purchase return 80,000

Traveler's check 300,000

Not-sufficient-fund check 150,000

Petty cash fund (P20,000 in currency and expense receipts for P30,000) 50,000

Money order 180,000

What amount should be reported as unrestricted cash on December 31, 2014?

A. 4,600,000 C. 5,900,000

B. 4,900,000 D. 6,900,000 P1 © 2014

Cash & cash equivalents

. On December 31, 2014, West Company had the following cash balances:

Cash in bank 1,800,000

Petty cash fund (all funds were reimbursed on 12/31/2014) 50,000

Time deposit (due February 1,2015) 250,000

Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement on
December 31, 2014. The compensating balance is legally restricted as to withdrawal. On December 31,2014,

22. what total amount should be reported as cash and cash equivalents?

A. 1,250,000 C. 1,850,000

B. 1,500,000 D. 2,100,000 P1 © 2014

. Pygmalion Company had the following account balances on December 31, 2014:
ACC 177-FAR

Cash in bank - current account 5,000,000

Cash in bank - payroll account 1,000,000

Cash on hand 500,000

Cash in bank - restricted account for building

construction expected to be disbursed in 2015 3,000,000

Time deposit, purchased December 15, 2014 and due March 15, 2015 2,000,000

23. The cash on hand included a P200,000 check payable to Pygmalion, dated January 15, 2015. What total
amount should be reported as "cash and cash equivalents" on December 31, 2014?

A. 6,300,000 C. 8,300,000

B. 6,500,000 D. 8,700,000 P1 © 2014

. Everlast Company reported the following information at the current year-end:

* Investment securities of P1,000,000. These securities are share investments in entities that are traded in the
Philippine Stock Exchange. As a result, the shares are very actively traded in the market.

* Investment securities of P2,000,000. These securities are government treasury bills. The treasury bills have
a 10-year term and purchased on December 31 at which time they had two months to go until they mature.

* Cash of P3,400,000 in the form of coin, currency, saving account and checking account.

* Investment securities of P1,500,000. These securities are commercial papers. The term of the papers is nine
months and they were purchased on December 31 at which time they had three months to go until they
mature.

24. What total amount should be reported as cash and cash equivalents at the current year-end?

A. 5,400,000 C. 6,900,000

B. 6,400,000 D. 7,900,000

25. Celine Company provided the following information on December 31,2014:

ACC 177-FAR

Cash on hand 200,000

Petty cash fund 20,000

Philippine Bank current account 5,000,000

Manila Bank current account 4,000,000

City Bank current account (bank overdraft) (100,000)

Asia Bank saving account for equipment acquisition 250,000

Asia Bank time deposit, 90 days 2,000,000

Cash on hand included customer check of P30,000 dated January 10, 2015 received on December 23,2014.

Included among the checks drawn by Celine against the Philippine Bank current account and recorded in
December 2014 are:

* Check written and dated December 23, 2014 and delivered to payee on January 3,2015, P25,000.

* Check written December 26, 2014, dated January 30, 2015, delivered to payee on December 28, 2014,
P45,000.

What total amount should be reported as cash and cash equivalents on December 31,2014?

A. 11,160,000 C. 11,330,000

B. 11,260,000 D. 11,510,000 P1 © 2014

.26. Tawiran Company reported cash account which consisted of the following:

Bond sinking fund 1,500,000

Checking account in BPI (A P320,000 check is still outstanding

per bank statement) 3,155,000

Currency and coins awaiting deposit 1,135,000

Deposit in a bank closed by BSP 500,000

Petty cash fund (of which P10,000 in is the form of paid vouchers) 50,000
ACC 177-FAR

Receivables from officers and employees 175,000

6,515,000

What total amount of cash should be reported under current assets?

A. 4,330,000 C. 4,830,000

B. 4,440,000 D. 5,830,000 P1 © 2014

27. ABC Company provided the following information on December 31, 2014:

Balance per book 6,776,000

Balance per bank statement 6,532,000

Deposit in bank closed by BSP 1,600,000

Deposit in transit1,234,000

Outstanding checks 987,000

Currency and coins counted 950,000

Petty cash fund (of which P10,000 is in the form of paid vouchers) 50,000

Bank service charge not yet taken up in the book 6,000

Bond sinking fund 1,000,000

Receivables from employees 70,000

Error in recording a check in the book. The correct amount as paid by the

bank is P89,000 instead of P98,000 as recorded in the book, or a difference of 9,000

What total amount of cash should be reported as current asset on December31,2014?

A. 6,779,000 C. 8,769,000

B. 7,769,000 D. 9,309,000 P1 © 2014

ACC 177-FAR

28. . Esteem Company provided the month-end bank statement which showed a balance of P3,600,000.
Outstanding checks amounted to PI,200,000, a deposit of P400,000 was in transit at month-end, and a
check for P50,000 was erroneously charged by the bank against the account. What amount should be
reported as cash in bank at month-end?

A. 2,050,000 C. 2,850,000

B. 2,750,000 D. 4,350,000 FA © 2014

. Gallant Company showed a cash account balance of P4,500,000. The bank statement did not include a
deposit of P230,000 made on the last day of the month. The bank statement showed a collection by the
bank of P94,000 and a customer check for P32,000 returned because it was NSF. A customer check for
P45,000 was recorded on the books as P54,000, and a check written for P79,000 was recorded as
P97,000. What amount should be reported as cash in bank?

A. 4,571,000 C. 4,801,000

B. 4,765,000 D. 4,819,000

29. Core Company provided the following data for the purpose of reconciling the cash balance per book with
the balance per bank statement on December 31,2014:

Balance per bank statement 2,000,000

Outstanding checks (including certified check of P100,000) 500,000

Deposit in transit200,000

December NSF checks (of which P50,000 had

been redeposited and cleared by December 27) 150,000

Erroneous credit to Core's account, representing

proceeds of loan granted to another company 300,000

Proceeds of note collected by bank for Core, net of service charge of P20,000 750,000

What amount should be reported as cash in bank on December 31,2014?

ACC 177-FAR

A. 1,400,000 C. 1,500,000

B. 1,450,000 D. 1,800,000

30. On June 30,2014, the bank statement of Bougainvilla Company had an ending balance of P3,735,000.
The following data were assembled in the course of reconciling the bank balance:

* The bank erroneously credited Bougainvilla Company for P21,000 on June 22.

* During the month, the bank charged back NSF checks amounting to P23,000 of which P8,000 had
been redeposited by June 25.

* Collection for June 30 totaling PI03,000 was deposited the following month.

* Checks outstanding on June 30 amounted to P302,000.

* Note collected by the bank for Bougainvilla Company was P80,000 and the corresponding bank
charge was P5,000.

What is the unadjusted cash in bank per ledger on June 30,2014?

A. 3,455,000 C. 3,557,000

B. 3,515,000 D. 3,497,000

31. Nontrade receivables are classified as current assets only if they are reasonably expected to be realized in cash

A. Within the normal operating cycle.

B. Within one year, the length of the operating cycle notwithstanding

C. Within one year or within the operating cycle, whichever is longer.

D. Within one year or within the operating cycle, whichever is shorter. FA © 2014

32. Which of the following statements is true in relation to presentation of receivables in the statement of financial
position?
ACC 177-FAR

A. Nontrade receivables are presented as noncurrent assets

B. Trade receivables and nontrade receivables are shown separately

C. Trade accounts receivable and trade notes receivable shall be presented separately

D. Trade receivables and nontrade receivables which are currently collectible shall be presented as one line
item called "trade and other receivables" TOA © 2013

33. Long-term notes receivable which nominally bear no interest or an interest which is unreasonably low shall be
recognized initially at

A. Current value C. Maturity value

B. Face value D. Present value TOA © 2013

34. In the case of long-term installments receivable (real estate installment sales) where a major portion of the
receivables will be collected beyond the normal operating cycle

A. The entire receivables are shown as noncurrent.

B. Only the portion currently due is shown as current and the balance as noncurrent.

C. The entire receivables are shown as current with disclosure of the amount not currently due.

D. The entire receivables are shown as current without disclosure of the amount not currently due. FA ©
2014

35. Credit balances in accounts receivable shall be classified as

A. Current liabilities C. Long term liabilities

B. Deduction from accounts receivable D. Part of accounts payable FA © 2014

36. Receivables from subsidiaries shall be classified as

A. Current assets
ACC 177-FAR

B. Noncurrent assets

C. Partly current and partly noncurrent

D. Either as current or noncurrent depending on the expectation of realizing them within one year or over one
year FA © 2014

37. All of the following are required when classifying receivables, except

A. Disclose any receivables pledged as collateral.

B. Indicate the receivables classified as current and noncurrent.

C. Disclose all significant concentrations of credit risk arising from receivables.

D. All of these are required. FA © 2014

38. Which of the following statements is incorrect regarding how the impairment assessment of accounts receivable
is to be performed?

A. Any accounts receivable not individually assessed should be collectively assessed for impairment.

B. Not individually significant accounts receivable should be assessed individually and if impaired, the
impairment loss is recognized.

C. Individually significant accounts receivable should be considered for impairment separately and if impaired,
the impairment loss is recognized.

D. Any account receivable individually assessed that is not considered impaired should be included with a group
of assets with similar credit-risk characteristics and collectively assessed for impairment. TOA © 2013

39. An entity uses the allowance method for recognizing doubtful accounts. The journal entry to record the writeoff of
a specific uncollectible account

A. Affects neither net income nor working capital

B. Decreases both net income and working capital

C. Affects neither net income nor accounts receivable

ACC 177-FAR

D. Decreases both net income and accounts receivable FA © 2014

40. When the allowance method of recognizing doubtful accounts is used, the entry to record the writeoff of a specific
account would

A. Increase both accounts receivable and the allowance for doubtful accounts

B. Decrease both accounts receivable and the allowance for doubtful accounts

C. Decrease accounts receivable and increase allowance for doubtful accounts FA © 2014

D. Increase accounts receivable and decrease the allowance for doubtful accounts

41. A debit balance in the allowance for doubtful accounts

A. Should never occur.

B. May occur before the end-of-period adjustment for uncollectible accounts.

C. May exist even after the end-of-period adjustment for uncollectible accounts.

D. Is always the result of management not providing a large enough allowance in order to manage earnings.

42. Roxy Company provided the following information relating to accounts receivable for 2014:

Accounts receivable on January 1 1,300,000

Credit sales 5,400,000

Collections from customers, excluding recovery 4,750,000

Accounts written off 125,000

Collection of accounts written off in prior year

(customer credit was not reestablished) 25,000

Estimated uncollectible receivables per aging of receivables

ACC 177-FAR

at December 31 165,000

On December 31,2014, what is the balance of accounts receivable, before allowance for doubtful accounts?

A. 1,825,000 C. 1,950,000

B. 1,850,000 D. 1,990,000 P1 © 2014

. 43. Faith Company provided the following information relating to current operations:

Accounts receivable, January 1 4,000,000

Accounts receivable collected 8,400,000

Cash sales 2,000,000

Inventory, January 1 4,800,000

Inventory, December 31 4,400,000

Purchases 8,000,000

Gross margin on sales 4,200,000

What is the balance of accounts receivable on December 31 ?

A. 2,000,000 C. 6,200,000

B. 4,200,000 D. 8,200,000 P1 © 2014

.44. On December 31,2014, Honduras Company revealed a balance of P8,200,000 in the accounts receivable control
account. An analysis of the accounts receivable showed the following:

Accounts known to be worthless 100,000

Advance payments to creditors on purchase orders 400,000

Advances to affiliated companies 1,000,000

Customers' accounts reporting credit balances arising from sales returns (600,000)
ACC 177-FAR

Interest receivable on bonds 400,000

Trade accounts receivable - unassigned 2,000,000

Subscription receivable due in 30 days ' 2,200,000

Trade accounts receivable - assigned (Finance

Company's equity in assigned accounts is P500,000)1,500,000

Trade installments receivable due 1-18 months,

including unearned finance charge of P50,000 850,000

Trade accounts receivable from officers, due currently 150,000

Trade accounts on which postdated checks are held

(no entries were made on receipt of checks) 200,000

Total 8,200,000

What amount should be reported as trade accounts receivable on December 31,2014?

A. 4,050,000 C. 4,650,000

B. 4,150,000 D. 4,700,000 P1 © 2014

Accounts receivable - net

. 45. Jay Company provided the following data relating to accounts receivable for 2014:

Accounts receivable, January 1 650,000

Credit sales 2,700,000

Sales returns 75,000

Accounts written off 40,000

Collections from customers 2,150,000

Estimated future sales returns at December 31 50,000

ACC 177-FAR

Estimated uncollectible accounts at 12/31 per aging 110,000

What amount should be reported as net realizable value of accounts receivable on December 31, 2014?

A. 925,000 C. 1,125,000

B. 1,085,000 D. 1,200,000 P1 © 2014

. 46. Infra Company provided the following data for the year ended December 31,2014:

Sales on account 3,600,000

Notes received to settle accounts 400,000

Provision for doubtful accounts 90,000

Accounts receivable determined to be worthless 25,000

Purchases on account 3,900,000

Payments to creditors 3,200,000

Discounts allowed by creditors 260,000

Merchandise returned by customer 15,000

Collections received to settle accounts 2,450,000

Notes given to creditors in settlement of accounts 250,000

Merchandise returned to suppliers 70,000

Payments on notes payable 100,000

Discounts taken by customers 40,000

Collections received in settlement of notes 180,000

47. What is the net realizable value of accounts receivable on December 31, 2014?

A. 605,000 C. 825,000

B. 670,000 D. 890,000 P1 © 2014

ACC 177-FAR

.48. Katherine Company provided the following information for 2014:

January 1 December-31

Accounts receivable 1,200,000

Allowance for doubtful accounts 60,000

Sales 8,000,000

Cash collected from customers 7,000,000

The cash collections included a recovery of P10,000 from a customer whose account had been written off as
worthless in prior year. During 2014, it was necessary to recognize doubtful accounts expense of P100,000 and
write off worthless customers' accounts of P30,000. On December 1, 2014, a customer settled an account by
issuing a 12%, six-month note for P400,000. What is the net realizable value of accounts receivable on December
31, 2014?

A. 1,630,000 C. 1,670,000

B. 1,640,000 D. 1,780,000

49. Roanne Company used the allowance method of accounting for uncollectible accounts. During 2014, the entity
had charged P800,000 to bad debt expense, and wrote off accounts receivable of P900,000 as uncollectible.
What was the decrease in working capital?

A. 0 C. 800,000

B. 100,000 D. 900,000 P1 © 2014

. 50. Mill Company's allowance for doubtful accounts was P1,000,000 at the end of 2014 and P900,000 at the end
of 2013. For the year ended December 31,2014, the entity reported doubtful accounts expense of P160,000 in
the income statement. What amount was debited to the appropriate account to write off uncollectible accounts
in2014?

A. 60,000 C. 160,000
ACC 177-FAR

B. 100,000 D. 260,000 P1 © 2014

. 51. Boholano Company used the statement of financial position approach in estimating uncollectible accounts
expense. The entity prepared an adjusting entry to recognize this expense at the end of the year. During the year,
the entity wrote off a P100,000 receivable and made no recovery of previous writeoff. After the adjusting entry for
the" year, the credit balance in the allowance for doubtful accounts was P250,000 larger than it was on January
1. What amount of uncollectible account expense was recorded for the year?

A. 100,000 C. 250,000

B. 150,000 D. 350,000

52. Marian Company used 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:

Number of days Probability

outstanding Amount of collection

0-30 days 5,000,000 .98

31 -60 days 2,000,000 .90

Over 60 days 1,000,000 .80

The following additional information is available for the current year:

Net credit sales for the year 40,000,000

Allowance for doubtful accounts:

Balance, January 1 450,000 (cr)

Balance before adjustment, December 31 20,000 (dr)

The entity based the estimate of doubtful accounts on the aging of accounts receivable. What amount should be
recognized as doubtful accounts expense for the current year?

A. 470,000 C. 500,000

B. 480,000 D. 520,000 P1 © 2014

ACC 177-FAR

. 53. Effective with the year ended December 31, 2014, Hall Company adopted a new accounting method for
estimating the allowance for doubtful accounts at the amount indicated by the year-end aging of accounts
receivable. The following data are available:

Allowance for doubtful accounts, January 1 250,000

Provision for doubtful accounts during the current year

(2% of credit sales of P10,000,000) 200,000

Accounts written off 205,000

Estimated uncollectible accounts per aging on December 31 220,000

After year-end adjustment, what is the doubtful accounts expense for current year?

A. 175,000 C. 205,000

B. 200,000 D. 220,000

54. Accounting for the interest in a noninterest bearing note receivable is an example of what aspect of accounting
theory?

A. Form over substance C. Substance over form

B. Matching D. Verifiability FA © 2014

55. On July 1 of the current year, an entity received a one-year note receivable bearing interest at the market rate.
The face amount of the note receivable and the entire amount of the interest are due in one year. When the note
receivable was recorded on July 1, which of the following was debited?

A. Interest receivable

B. Unearned discount on note receivable

C. Both interest receivable and unearned discount on note receivable

ACC 177-FAR

D. Neither interest receivable nor unearned discount on note receivable FA © 2014

56. On August 15 of the current year, an entity sold goods for which it received a note bearing the market rate of
interest on that date. The four-month note was dated July 15 of the current year. Note principal, together with all
interest, is due November 15 of the current year. When the note was recorded on August 15, which of the following
accounts increased?

A. Interest receivable C. Prepaid interest

B. Interest revenue D. Unearned discount

57. On June 1, 2014, Yola Company loaned Dale P500,000 on a 12% note, payable in five annual installments of PI
00,000 beginning January 1, 2015.

In connection with this loan, Dale was required to deposit P5,000 in a noninterest-bearing escrow account. The
amount held in escrow is to be returned to Dale after all principal and interest payments have been made.

Interest on the note is payable on the first day of each month beginning July 1, 2014. Dale made timely payments
through November 1, 2014. On January 1, 2015, Yola received payment of the first principal installment plus all
interest due.

On December 31,2014, what is the accrued interest receivable on the loan?

A. 0 C. 10,000

B. 5,000 D. 15,000 P1 © 2014

Carrying amount

. 58. Alamo Company sold a factory on January 1,2014 for P7,000,000. The entity received a cash down payment
of P1,000,000 and a 4-year, 12% note for the balance. The note is payable in equal annual payments of principal
and interest of P1,975,400 payable on December 31 of each year until 2017. What is the carrying amount of the
note receivable on December 31,2014?

A. 4,025,600 C. 4,624,600

B. 4,500,000 D. 4,744,600 FA © 2014

ACC 177-FAR

. 59.On December 31, 2014, Park Company sold used equipment and received a noninterest-bearing note
requiring payment of P500,000 annually for ten years. The first payment is due December 31,2015 and the
prevailing rate of interest for this type of note at date of issuance is 12%. The present value of an ordinary annuity
of 1 at 12% for 10 periods is 5.65. On December 31,2014, what is the carrying amount of the note receivable?

A. 1,610,000 C. 2,825,000

B. 2,175,000 D. 5,000,000

60. Jeah Company purchased from Carmina Company a P2,000,000,8%, five-year note that required five equal annual
year-end payments of P5O0,P00. The note was discounted to yield a 9% rate to Jean Company. At the date of
purchase, Jean Company recorded the note at the present value of P1,948,500. What is the total interest revenue
earned by Jean Company over the life of this note?

A. 504,500 C. 800,000

B. 556,000 D. 900,000

61. It is a financing arrangement whereby one party formally transfers its rights to accounts receivable to another
party in consideration for a loan.

A. Assignment C. Factoring

B. Discounting D. Pledge FA © 2014

62. It is a financing arrangement that is usually done on a "without recourse, notification basis".

A. Assignment C. Factoring

B. Discounting D. Pledge FA © 2014

63. When the accounts receivable of an entity are sold outright to a bank which normally buys accounts receivable,
the accounts receivable have been

A. Assigned C. Factored

B. Collateralized D. Pledged FA © 2014

ACC 177-FAR

64. Which of the following is used to account for probable sales discounts, sales returns and sales allowances?

A. Due from factor

B. Recourse liability

C. Both due from factor and recourse liability

D. Neither due from factor nor recourse liability FA © 2014

65. When accounts 'receivable are factored

A. Payable to factor is credited

B. Accounts receivable shall be credited

C. A contingent liability is ordinarily created

D. The factoring is accounted for as a borrowing TOA © 2013

65. It is a predetermined amount withheld by a factor as a protection against customer returns, allowances and other
special adjustments.

A. Equity in assigned accounts C. Loss on factoring

B. Factor's holdback D. Service charge

Questions 1 & 2 are based on the following information. P1 © 2014

Zeus Company factored P6,000,000 of accounts receivable to a finance entity on October 1,2014. Control was
surrendered by Zeus Company. The factor assessed a fee of 3% and retained a holdback equal to 5% of the accounts
receivable. In addition, the factor charged 15% interest computed on a weighted average time to maturity of the
accounts receivable of 54 days.

. 66. What is the amount of cash initially received from the factoring?
ACC 177-FAR

A. 5,296,850 C. 5,476,850

B. 5,386,850 D. 5,556,850

. 67. If all accounts are collected, what is the cost of factoring the accounts receivable?

A. 180,000 C. 433,150

B. 313,150 D. 613,150

68. Roth Company received from a customer a one-year, P500,000 note bearing annual interest of 8%. After holding
the note for six months, the entity discounted the note without recourse at 10%. What amount of cash was received
from the bank?

A. 495,238 C. 523,810

B. 513,000 D. 540,000

69 . The cost of inventory is the sum of

A. Direct cost, indirect cost and other cost.

B. Cost of purchase and cost of conversion.

C. Cost of conversion and other cost incurred in bringing 
 the inventory to the present location and
condition.

D. Cost of purchase, cost of conversion and other cost 
incurred in bringing the inventory to the present

location and condition. FA © 2014

70. The cost of purchase of inventory does not include

A. Purchase price

B. Import duties and irrecoverable taxes

C. Trade discounts, rebates and other similar items

ACC 177-FAR

D. Freight, handling and other cost directly attributable 
to the acquisition of goods FA © 2014

71. Costs that are incurred in bringing the inventories to their present location and condition are capitalized as cost
of inventories and these include

A. Distribution cost

B. Cost of designing products for specific customers

C. Abnormal amount of wasted material, labor and 
production cost FA © 2014

D. Storage cost not necessary in the production process 
before a further production

Why is inventory included in the computation of net income?

A. To determine sales revenue

B. To determine cost of goods sold

C. To determine merchandise returns

D. Inventory is not included in the computation of net income FA © 2014

72. Valuation of inventory requires the determination of all, except

A. The cost flow assumption.

B. The costs to be included in inventory.

C. The cost of goods held on consignment.

D. The physical goods to be included in inventory.

Vigor Company provided the following information for the current year:

Accounts receivable, January 1 900,000

Accounts receivable, December 31 1,000,000

Accounts receivable turnover 8 to 1

ACC 177-FAR

Inventory, January 1 . 1,100,000

Inventory, December 31 1,200,000

Inventory turnover 4 to 1

Hint: Cost of sales = Average inventory x turnover

What is the gross margin for the current year?

A. 3,000,000 C. 4,600,000

B. 3,400,000 D. 7,600.000 FA © 2014

Purchases

.73. Brilliant Company purchased motorcycles from various countries for export to other countries. The entity has
incurred the following costs during the current year:

Cost of purchases based on vendors' invoices 5,000,000

Trade discounts on purchases already deducted from vendors' invoices 500,000

Import duties 400,000

Freight and insurance on purchases 1,000,000

Other handling costs relating to imports 100,000

Salaries of accounting department 600,000

Brokerage commission paid to agents for arranging imports 200,000

Sales commission paid to sales agents 300,000

After-sales warranty costs 250,000

What is the total cost of the purchases?

A. 5,700,000 C. 6,500,000

B. 6,100,000 D. 6,700,000
ACC 177-FAR

74. Stone Company had the following transactions during December 2014:

Inventory shipped on consignment to Beta Company 1,800,000

Freight paid by Stone 90,000

Inventory received on consignment from Alpha Company 1,200,000

Freight paid by Alpha50,000

No sales of consigned goods were made in December 2014. What amount should be included in inventory on
December 31,2014?

A. 1,200,000 C. 1,800,000

B. 1,250,000 D. 1,890,000 P1 © 2014

75. . Fenn Company provided the following information for the current year:

Merchandise purchased for resale 4,000,000

Freight in 100,000

Freight out 50,000

Purchase returns 20,000

Interest on inventory loan 200,000

What is the inventoriable cost of the purchase?

A. 4,030,000 C. 4,130,000

B. 4,080,000 D. 4,280,000 FA © 2014

.76 Brilliant Company has incurred the following costs during the current year:

Cost of purchases based on vendors' invoices 5,000,000

Trade discounts on purchases already deducted from vendors' invoices 500,000

ACC 177-FAR

Import duties 400,000

Freight and insurance on purchases 1,000,000

Other handling costs relating to imports 100,000

Salaries of accounting department 600,000

Brokerage commission paid to agents for arranging imports 200,000

Sales commission paid to sales agents 300,000

After-sales warranty costs 250,000

What is the total cost of purchases?

A. 5,700,000 C 6,500,000

B. 6,100,000 D. 6,700,000 FA © 2014

Inventories

.77. Tequila Company had at year-end P200,000 office supplies, P1,350,000 raw materials, P2,950,000 goods in
process, P3,600,000 finished goods and P300,000 prepaid insurance. What total amount should be reported as
inventories in the statement of financial position at year-end?

A. 3,600,000 C. 7,900,000

B. 3,800,000 D. 8,100,000 FA © 2014

. Corolla Company incurred the following costs:

Materials 700,000

Storage costs of finished goods 180,000

Delivery to customers 40,000

Irrecoverable purchase taxes 60,000

At what amount should the inventory be measured?

ACC 177-FAR

A. 760,000 C. 940,000

B. 880,000 D. 980,000 FA © 2014

.78. Aman Company provided the following data:

Items counted in the bodega 4,000,000

Items included in the count specifically segregated per sale contract 100,000

Items in receiving department, returned by customer, in good condition 50,000

Items ordered and in the receiving department 400,000

Items ordered, invoice received but goods not

received. Freight is on account of seller. 300,000

Items shipped today, invoice mailed, FOB shipping point 250,000

Items shipped today, invoice mailed, FOB destination 150,000

Items currently being used for window display 200,000

Items on counter for sale 800,000

Items in receiving department, refused because of damage 180,000

Items included in count, damaged and unsalable 50,000

Items in the shipping department 250,000

What is the correct amount of inventory?

A. 5,150,000 C. 5,800,000

B. 5,700,000 D. 6,000,000 P1 © 2014

. 79. Company included the following items under inventory:

Materials 1,400,000
ACC 177-FAR

Advance for materials ordered 200,000

Goods in process 650,000

Unexpired insurance on inventory 60,000

Advertising catalogs and shipping cartons 150,000

Finished goods in factory 2,000,000

Finished goods in entity-owned retail store, including 50% profit on cost 750,000

Finished goods in hands of consignees including 40% profit on sales 400,000

Finished goods in transit to customers, shipped FOB destination at cost 250,000

Finished goods out on approval, at cost 100,000

Unsalable finished goods, at cost 50,000

Office supplies 40,000

Materials in transit, shipped FOB shipping point,

excluding freight of P30,000 330,000

Goods held on consignment, at sales price, cost P150,000 200,000

What is the correct amount of inventory?

A. 5,375,000 C. 5,500,000

B. 5,250,000 D. 5,540,000 P1 © 2014

80. . Brandy Company took a physical inventory at the end of the year and determined that P2,600,000 of goods
were on hand. In addition, the entity determined that P200,000 of goods purchased in transit shipped FOB shipping
point were actually received two days after the physical count and that the entity had P300,000 of goods out on
consignment. What amount should be reported as inventory at year-end?

A. 2,600,000 C. 2,900,000

B. 2,800,000 D. 3,100,000 FA © 2014

ACC 177-FAR

81. . The audit of Joust Company revealed a physical inventory on December 31, 2014 with a cost of P4,000,000.
The following items were excluded from the count:

* A special machine, fabricated to order for a customer costing P400,000, was finished and specifically
segregated on December 31, 2014. The customer was billed on that date and the machine excluded from
inventory although it was shipped on January 4, 2015.

• Merchandise costing P50,000 shipped by a vendor FOB seller on December 28, 2014 and received b3?
Joust Company on January 10, 2015.

What is the correct inventory on December 31, 2014?

A. 4,000,000 C. 4,400,000

B. 4,050,000 D. 4,450,000 FA © 2014

82. The physical count conducted in the warehouse of Lenient Company on December 31, 2014 revealed total cost of
P3,600,000. However, the following items were excluded from the count:

 Goods sold to a customer, which are being held for the customer to call for at the customer's convenience
with a cost of P200,000.
 A packing case containing a product costing P80,000 was standing in the shipping room when the physical
inventory was taken. It was not included in the inventory because it was marked "hold for shipping
instructions". Goods in process costing P300,000 held by an outside processor for further processing.

What is the correct inventory on December 31, 2014?

A. 3,880,000 C. 4,100,000

B. 3,980,000 D. 4,180,000 FA © 2014

.
ACC 177-FAR

83. The retail method is based on the assumption that

A. Ratio of cost to retail changes at a constant rate.

B. Ratio of gross margin to sales is approximately the same 
each period.

C. Proportions of markup and markdown to selling price 
are the same.

D. Final inventory and the total of goods available for sale 
contain the same proportion of high cost and low
cost 
ratio goods. FA © 2014

84. A major advantage of the retail inventory method is that it

A. Hides costs from customers and employees.

B. Permits entities to avoid taking an annual physical 
inventory.

C. Gives a more accurate measurement of inventory than 
other methods.

D. Provides a method for inventory control and facilitates 
determination of the periodic inventory. FA ©
2014

85. On June 30, a fire destroyed Intense Company's entire inventory. The inventory on January 1 totaled
P6,600,000. From January 1 through the time of the fire, the entity made purchases of P3,000,000, incurred freight in
of P300,000, and had sales of P7,800,000. The rate of gross profit on selling price is 30%. What is the approximate
cost of the inventory that was destroyed?

A. 3,600,000 C. 4,140,000

B. 3,900,000 D. 4,440,000 FA © 2014

. 86. . On December 31, 2014, a storm surge damaged the warehouse of Braveheart Company. The entire
inventory and many accounting records were completely destroyed.

January 1 December 31

Inventory 1,500,000

Purchases 5,500,000
ACC 177-FAR

Cash sales 900,000

Collections of accounts receivable 8,400,000

Accounts receivable 700,000 1,100,000

Gross profit rate on sales 40%

What is the inventory loss from the storm surge?

A. 1,180,000 C. 2,260,000

B. 1,720,000 D. 2,700,000

.87. Bouquet Company used the conventional retail inventory method to account for inventory.

Cost Retail

Beginning inventory and purchases 6,000,000 9,200,000

Net markup 400,000

Net markdown 600,000

Sales 7,800,000

What amount should be reported as cost of sales?

A. 4,800,000 C. 5,200,000

B. 4,875,000 D. 5,250,000

88. Where there is a long aging or maturation process after harvest, the accounting for such products shall be dealt
with by

A. PAS 41, Agriculture C. PAS 40, Investment property FA © 2014

ACC 177-FAR

B. PAS 2, Inventories D. PAS 16, Property, plant and equipment

Righteous Company provided the following data:

Value of biological asset at acquisition cost on December 31, 2014 6,000,000

Fair valuation surplus on initial recognition at fair value on December 31, 2014 500,000

Change in fair value on December 31, 2015 due to growth and price fluctuation 900,000

Decrease in fair value due to harvest 100,000

. 89. What is the carrying amount of the biological asset on December 31, 2015?

A. 6,500,000 C. 7,400,000

B. 7,300,000 D. 7,500,000

. 90. What amount of net gain from the change in fair value of biological asset should be reported in 2015?

A. 800,000 C. 1,300,000

B. 900,000 D. 1,400,000

- End of Examination-

“He made everything beautiful in His time.”

Persevere. MAP 