After an impairment loss is recorded for goodwill, the recoverable amount becomes the basis for

the impaired asset and is used to calculate amortization in future periods.

- False'.

Thompson Company incurred research and development costs of P100,000 and legal fees of
P50,000 to acquire a patent. The patent has a legal life of 20 years and a useful life of 10 years.
What amount should Thompson record as Patent Amortization Expense in the first year?

- P5,000.00

Limited-life intangibles are amortized by systematic charges to expense over their useful life.

- True'.

Application of research findings or other knowledge to a plan or design for a new product or
process is considered research and development costs.

- True'.

Internally generated goodwill associated with a business may be recorded as an asset when a
firm offer to purchase that business unit has been received.

- False'.

Conceptual formulation and design of possible product or process alternatives is considered

research and development costs.

- True'.

Start-up costs include organizational costs, such as legal fees incurred to organize a new
business entity should be expensed as incurred.
 - True'.

Some intangible assets are not required to be amortized every year.

- True'.

The impairment test for goodwill is conducted based on the cash-generating unit to which the
goodwill has been assigned.

- True'.

Cost of marketing research for a new product should be excluded from research and

development expense.

- True'.

A recovery of impairment for an intangible long-lived asset is limited to the carrying value that
would have been reported had the impairment not occurred.

- True'.

The total amount of patent cost amortized to date is usually shown in a separate Accumulated
Patent Amortization account which is shown contra to the Patent account.

- False'.

If a new patent is acquired through modification of an existing patent, the remaining book value
of the original patent may be amortized over the life of the new patent.

- True'.
Intangible assets are reported on the statement of financial position as a separate line item.

- True'.

Research and development costs must be expensed in the period incurred.

- 'False'.

Research and development costs are recorded as an intangible asset if it is felt they will provide
economic benefits in future years.

- False'.

Cost of testing prototype before economic feasibility has been demonstration would not be
capitalized.

- True'.

Goodwill is considered a master valuation account because it measures the value of specifically
identifiable intangible assets.

- False'.

Intangible assets derive their value from the right (claim) to receive cash in the future.

- False'.

Amortization of limited-life intangible assets should not be impacted by expected residual

values.

- False'.
Construction of prototypes would be considered research and development.

- True'.

Routine efforts to refine an existing product would be considered research and development.

- False'.

If a company constructs a laboratory building to be used as a research and development facility,

the cost of the laboratory building is matched against earnings as depreciation deducted as part
of research and development costs.

- True'.

A cash-generating unit is the smallest identifiable group of assets in a business that can
generate cash flow independently of the cash flows from the business’s other assets.

- True'.

Contra accounts must be reported for intangible assets in a manner similar to the reporting of
property, plant, and equipment.

- False'.

Marketing research to promote a new product would be considered research and development.

- False'.

Planned investigation undertaken with the prospect of gaining new scientific or technical
knowledge and understanding is considered research and development costs.

- True'.
In a business combination, a company assigns the cost, where possible, to the identifiable
tangible and intangible assets, with the remainder recorded as goodwill.

- True'.

If the recoverable amount of an indefinite-life intangible other than goodwill is less than its
carrying value, an impairment loss must be recognized.

- True'.

Recoveries of impairments for intangible long-lived assets are reported in "other income and
expense" on the income statement.

- True'.

Research and development costs must be expensed in the period incurred unless it can be
clearly demonstrated that the expenditure will have alternative future uses or unless
contractually reimbursable.

- True'.

Research and development costs may result in the development of a patent.

- True'.

Research and development costs that result in patents may be capitalized to the extent of the
fair value of the patent.

- False'.

Alonzo Co. acquires 3 patents from Shaq Corp. for a total of P300,000. The patents were carried
on Shaq’s books as follows: Patent AA: P5,000; Patent BB: P2,000; and Patent CC: P3,000. When
Alonzo acquired the patents their fair values were: Patent AA: P20,000; Patent BB: P240,000; and
Patent CC: P60,000. At what amount should Alonzo record Patent BB?

- P225,000.00

Accounting for impairments for limited-life intangible assets follows the same rules used to
account for impairments of plant and equipment.

- True'.

Engineering costs incurred to advance the product to the full production stage would be
capitalized.

- True'.

Laboratory research aimed at discovery of new knowledge is considered research and

development costs.

- True'.

After an impairment loss is recorded for a limited-life intangible asset, the recoverable amount
becomes the basis for the impaired asset and is used to calculate amortization in future periods.

- True'.

In January, 2017, Findley Corporation purchased a patent for a new consumer product for
P840,000. At the time of purchase, the patent was valid for fifteen years. Due to the competitive
nature of the product, however, the patent was estimated to have a useful life of only ten years.
During 2022 the product was permanently removed from the market under governmental order
because of a potential health hazard present in the product. What amount should Findley
charge to expense during 2022, assuming amortization is recorded at the end of each year?

- P420,000.00
Research and development costs may be either capitalized or expensed when incurred,
depending upon the materiality of the amounts involved.

- False'.

Companies are required to assess the estimated useful life and salvage value of intangible assets
at least annually.

- True'.

Mini Corp. acquires a patent from Maxi Co. in exchange for 2,500 shares of Mini Corp.’s P5 par
value ordinary shares and P85,000 cash. When the patent was initially issued to Maxi Co., Mini
Corp.’s shares were selling at P7.50 per share. When Mini Corp. acquired the patent, its shares
were selling for P9 a share. Mini Corp. should record the patent at what amount?

- P107,500.00

All intangibles are subject to periodic consideration of impairment with corresponding potential
write-downs.

- True'.

PFRS permits reversals of impairment losses for all limited and indefinite-life intangible assets.

- False'.

The general ledger of Vance Corporation as of December 31, 2022, includes the following
accounts:
Copyrights                                                                                                                               P 
30,000
Deposits with advertising agency (will be used to promote goodwill)                              27,000
Bond sinking fund                                                                                                                     
70,000
Excess of cost over fair value of identifiable net assets of
      Acquired subsidiary                                                                                                         
390,000
Trademarks                                                                                                                             
120,000
In the preparation of Vance's statement of financial position as of December 31, 2022, what
should be reported as total intangible assets?

- P540,000.00

Adaptation of an existing capability to a particular requirement or customer's need would not be

considered an R & D activity.

- True'.

All research phase and development phase costs are expensed as incurred.

- False'.

Research phase costs are capitalized as an intangible asset once the project has economic
viability.

- False'.

The cost of acquiring a customer list from another company is recorded as an intangible asset.

- True'.

Periodic alterations to existing production lines would be considered research and development.

- False'.

An expenditure made in connection with a machine being used by a company should

be capitalized if it increases the quantity of units produced by the machine.
 - True'.

On December 1, 2015, Hogan Co. purchased a tract of land as a factory site for P800,000. The
old building on the property was razed, and salvaged materials resulting from demolition were
sold. Additional costs incurred and salvage proceeds realized during December 2015 were as
follows:
Cost to raze old building                                                                         P70,000
Legal fees for purchase contract and to record ownership                      10,000
Title guarantee insurance                                                                         16,000
Proceeds from sale of salvaged materials                                                  8,000
In Hogan's December 31, 2015 statement of financial position, what amount should be reported
as land?

- P888,000.00

During 2015, Churchill Inc. constructed assets costing P4,200,000. The weighted-average

accumulated expenditures on these assets during the year was P2,600,000. Churchill took out a
7% construction loan of P4,000,000 on January 1, 2015, and funds not needed for construction
were temporarily invested in short-term securities, yielding P30,000 in interest revenue. Other
than the construction loan, the only other debt outstanding during the year was a P2,000,000, 5-
year, 9% note payable dated January 1, 2011. What is the amount of interest that should be
capitalized by Churchill during 2015?

- P152,000.00

In January 2015, Fehr Mining Corporation purchased a mineral mine for P4,200,000 with
removable ore estimated by geological surveys at 2,500,000 tons. The property has an estimated
value of P400,000 after the ore has been extracted. Fehr incurred P1,150,000 of development
costs preparing the property for the extraction of ore. During 2015, 340,000 tons were removed
and 300,000 tons were sold.  For the year ended December 31, 2015, Fehr should include what
amount of depletion in its cost of goods sold?

- P594,000.00
Depletion expense excludes restoration costs from the depletion base.

- False'.

When funds are borrowed to pay for construction of assets that qualify for capitalization of
interest, the excess funds not needed to pay for construction may be temporarily invested in
interest-bearing securities. Interest earned on these temporary investments should be multiplied
by an appropriate interest rate to determine the amount of interest to be capitalized.

- False'.

In accounting for plant assets, expenditure made to maintain an existing asset so that it can
function in the manner intended should be fully expensed in the period the expenditure is
made.

- True'.

On January 1, 2007, Mill Corporation purchased for P152,000, equipment having a useful life of
ten years and an estimated salvage value of P8,000. Mill has recorded monthly depreciation of
the equipment on the straight-line method. On December 31, 2015, the equipment was sold for
P28,000. As a result of this sale, Mill should recognize a gain of?

- P5,600.00

A principal objection to the straight-line method of depreciation is that it provides for the
declining productivity of an aging asset.

- False'.

Giger Company acquired a tract of land containing an extractable mineral resource. Giger is
required by the purchase contract to restore the land to a condition suitable for recreational use
after it has extracted the mineral resource. Geological surveys estimate that the recoverable
reserves will be 5,000,000 tons, and that the land will have a value of P1,000,000 after
restoration. Relevant cost information follows:
Land                                             P7,000,000
Estimated restoration costs            1,500,000
If Giger maintains no inventories of extracted material, what should be the charge to depletion
expense per ton of extracted material?

- P1.50

Arlington Company is constructing a building. Construction began on January 1 and was

completed on December 31. Expenditures were P2,400,000 on March 1, P1,980,000 on June 1,
and P3,000,000 on December 31. Arlington Company borrowed P1,200,000 on January 1 on a 5-
year, 12% note to help finance construction of the building. In addition, the company had
outstanding all year a 10%, 3-year, P2,400,000 note payable and an 11%, 4-year, P4,500,000 note
payable.  What is the weighted-average accumulated expenditures?

- P3,155,000.00

When depreciation is computed for partial periods under a diminishing-charge depreciation

method, it is necessary to determine depreciation expense for the full year and then prorate the
expense between the two periods involved.

- True'.

Sutherland Company purchased machinery for P320,000 on January 1, 2011. Straight-line

depreciation has been recorded based on a P20,000 salvage value and a 5-year useful life. The
machinery was sold on May 1, 2015 at a gain of P6,000. How much cash did Sutherland receive
from the sale of the machinery?

- P66,000.00

Depreciation is the process of allocating the cost of tangible assets to expense in a systematic

and rational manner to those periods expected to benefit from the use of the asset.

- True'.
On August 1, 2015, Mendez Corporation purchased a new machine on a deferred payment
basis. A down payment of P2,000 was made and 4 annual installments of P6,000 each are to be
made beginning on September 1, 2015. The cash equivalent price of the machine was P23,000.
Due to an employee strike, Mendez could not install the machine immediately, and thus
incurred P300 of storage costs. Costs of installation (excluding the storage costs) amounted to
P800. The amount to be capitalized as the cost of the machine is?

- P23,800.00

Interest cost that is capitalized should not be written off until the related asset is fully
depreciated or disposed of.

- False'.

On January 1, 2015, Fredo Inc. purchased equipment with a cost of P2,550,000, a useful life of
15 years and no salvage value. The company uses straight-line depreciation. At December 31,
2015, an independent appraiser determines that the fair value of the equipment is P2,500,000
Fredo prepares financial statements using IFRS and elects to revalue the asset.  The 2016
(second year) income statement will report depreciation expense for the equipment of?   (Round
off your answer to the nearest Peso)

- P178,571.00

Under IFRS, the account revaluation surplus reported as “other revenues and expenses” on the
income statement.

- False'.

Pike Co. purchased a machine on July 1, 2015, for P400,000. The machine has an estimated
useful life of five years and a residual value of P80,000. The machine is being depreciated from
the date of acquisition by the 150% declining-balance method. For the year ended December
31, 2015, Pike should record depreciation expense on this machine of?

- P60,000.00
The minimum amount of interest to be capitalized is determined by multiplying a weighted
average interest rate by the amount of average accumulated expenditures on qualifying assets
during the period.

- False'.

On January 1, 2015, Edmondton Inc. purchased equipment with a cost of P4,500,000, a useful life
of 12 years and no salvage value. The Company uses straight-line depreciation. At December 31,
2015, the company determines that impairment indicators are present. The fair value less cost to
sell the asset is estimated to be P3,850,000. The asset’s value-in-use is estimated to
be P3,500,000. There is no change in the asset’s useful life or salvage value.  The 2015 income
statement will report Loss on Impairment of?

- P275,000.00

Depreciation is a function of time rather than a function of usage is the realistic assumption of

the straight-line method of depreciation.

- True'.

When computing the amount of interest cost to be capitalized, the concept of "avoidable
interest" refers to that portion of total interest cost which would not have been incurred if
expenditures for asset construction had not been made.

- 'True'.

The cost of the asset less the related depreciation recorded to date refers to the term
"depreciable base," or "depreciation base," as it is used in accounting.

- False'.

On January 2, 2015, York Corp. replaced its boiler with a more efficient one. The following
information was available on that date:
Purchase price of new boiler                                              P150,000
Carrying amount of old boiler                                                  10,000
Fair value of old boiler                                                               4,000
Installation cost of new boiler                                                  20,000
The old boiler was sold for P4,000. What amount should York capitalize as the cost of the new
boiler?

- P170,000.00

On January 1, 2015, Fredrichs Inc. purchased equipment with a cost of P3,060,000, a useful life of
12 years and no salvage value. The company uses straight-line depreciation. At December 31,
2015, the company determines that impairment indicators are present. The fair value less cost to
sell the asset is estimated to be P2,600,000. The asset’s value-in-use is estimated to
be P2,365,000. There is no change in the asset’s useful life or salvage value.  The 2015 income
statement will report Loss on Impairment of?

- P205,000.00

The term "depreciable base," or "depreciation base," as it is used in accounting, refers to the
cost of the asset less the related depreciation recorded to date.

- False'.

When a closely held corporation issues preference shares for land, the land should be recorded
at the total book value of the shares issued.

- False'.

Hahn Co. takes a full year's depreciation expense in the year of an asset's acquisition and no
depreciation expense in the year of disposition. Data relating to one of Hahn's depreciable
assets at December 31, 2015 are as follows:
Acquisition year                                        2013
Cost                                                     P140,000
Residual value                                        20,000
Accumulated depreciation                   96,000
Estimated useful life                            5 years
Using the same depreciation method as used in 2013, 2014, and 2015, how much depreciation
expense should Hahn record in 2016 for this asset?

- P16,000.00

In March, 2015, Maley Mines Co. purchased a coal mine for P6,000,000. Removable coal is
estimated at 1,500,000 tons. Maley is required to restore the land at an estimated cost of
P720,000, and the land should have a value of P630,000. The company incurred P1,500,000 of
development costs preparing the mine for production. During 2015, 450,000 tons were removed
and 300,000 tons were sold. The total amount of depletion that Maley should record for 2015 is?

- P2,277,000.00

If a government entity provides an interest free loan to a company and the company accounts
for the grant using the deferred revenue approach, no interest expense will be recorded.

- False'.

Use of the double-declining balance method means residual value is not deducted in computing

the depreciation base.

- True'.

Storm Corporation purchased a new machine on October 31, 2015. A P1,200 down payment was
made and three monthly installments of P3,600 each are to be made beginning on November
30, 2015. The cash price would have been P11,600. Storm paid no installation charges under the
monthly payment plan but a P200 installation charge would have been incurred with a cash
purchase. The amount to be capitalized as the cost of the machine on October 31, 2015 would
be

- P11,800.00
On August 1, 2015, Hayes Corporation purchased a new machine on a deferred payment basis.
A down payment of P3,000 was made and 4 monthly installments of P2,500 each are to be made
beginning on September 1, 2015. The cash equivalent price of the machine was P12,000. Hayes
incurred and paid installation costs amounting to P500. The amount to be capitalized as the cost
of the machine is

- P12,500.00

The major difference between the service life of an asset and its physical life is that service life
refers to the length of time an asset is of use to its original owner, while physical life refers to
how long the asset will be used by all owners.

- False'.

Use of the sum-of-the-years'-digits method means the denominator is the years remaining at

the beginning of the year.

- False'.

When excess borrowed funds not immediately needed for construction are temporarily invested,
any interest earned should be recorded as interest revenue.

- False'.

Interest revenue earned on specific borrowings for qualifying assets reduces interest expense
reported on the income statement.

- False'.

Tangible equipment costs associated with machinery used to extract the mineral resource is
a costs related to the development of mineral resources which is part of depletion cost.

- False'.
During 2015, Bella Corporation constructed assets costing P4,215,000. The weighted-average
accumulated expenditures on these assets during 2015 was P3,900,000. Bella borrowed
P2,000,000 at 7.5% on January 1, 2015. Funds not needed for construction were temporarily
invested in short-term securities, and earned P59,000 in interest revenue. In addition to the
construction loan, Bella had two other notes outstanding during the year: (1) a P1,500,000, 10-
year, 10% note payable dated October 1, 2013, and (2) a P1,000,000, 8% note payable dated
November 2, 2014. What is the amount of interest that should be capitalized by Bella during
2015?

- P265,800.00

Fences and parking lots are reported on the statement of financial position as land
improvements.

- True'.

An asset’s recoverable amount is the lower of its value-in-use and its fair value less cost to sell.

- False'

The period of time during which interest must be capitalized ends when the asset is substantially
complete and ready for its intended use.

- True'.

On April 1, 2013, Verlin Co. purchased new machinery for P240,000. The machinery has an
estimated useful life of five years, and depreciation is computed by the sum-of-the-years'-digits
method. The accumulated depreciation on this machinery at March 31, 2015, should be?

- P144,000.00

Interest cost capitalized in connection with the purchase of land to be used as a building site
should be debited to the land account and not to the building account.
 - False'.

The major difference between the service life of an asset and its physical life is that service life
refers to the time an asset will be used by a company and physical life refers to how long the
asset will last.

- True'.

The sale of a depreciable asset resulting in a loss indicates that the proceeds from the sale
were less than current fair value.

- False'.

If an asset’s recoverable amount is higher than the carrying amount, no impairment loss will be
reported on the period’s income statement.

- True'.

Plant assets purchased on long-term credit contracts should be accounted for at the present
value of the future payments.

- True'.

Gates Co. purchased machinery on January 2, 2009, for P440,000. The straight-line method is
used and useful life is estimated to be 10 years, with a P40,000 residual value. At the beginning
of 2015 Gates spent P96,000 to overhaul the machinery. After the overhaul, Gates estimated that
the useful life would be extended 4 years (14 years total), and the residual value would be
P20,000. The depreciation expense for 2015 should be?

- P34,500.00

Blatche Company completed the construction of a shopping mall at the end of 2016 for a total
cost of P200 million. The mall has an estimated economic life of 25 years. The mall was
constructed for the purpose of earning rentals by letting out space in the shopping mall to
tenants.  An independent valuation expert was used by the company to fair value the shopping
mall on an annual basis.  According to the fair valuation expert, the fair values of the shopping
mall at the end of 2017 and 2018 were P240 million and P230 million, respectively.  If Blatche
Company opted to use the cost model to measure the shopping mall, how much is the carrying
amount of the shopping mall to be reported in its statement of financial position as of
December 31, 2018?

- P184,000,000.00

Which of the following should form part of the cost of investment property?
I.               Legal fees and transfer taxes directly attributable to acquisition
II.              Fair value of shares issued by the company to acquire the property
III.            Abnormal amounts of wasted material, labor or other resources incurred in developing
the property
IV.            Renovation costs on the building to be held to earn rentals

- I, II, and IV

On January 1, 2015, the Avengers Company bought a piece of land worth P2,600,000.  The
Avengers Company's business model is to buy and sell land.  On February 28, 2018, the
Avengers Company decided to lease the land under an operating lease to another company.
The relevant estimated selling price and cost to sell of the inventories is as follows:

How much is the gain on transfer to be recognized if the investment property will be accounted
using the fair value model?

- P280,000.00

Investment property is initially measured at cost, including transaction costs.  Such cost includes

- Property transfer taxes

On January 1, 2016, Pastillas Co. purchased a building at a cost of P3,000,000. On the same date,
the building was leased out under an operating lease. The company's policy regarding
depreciable asset is to depreciate using straight line method over an estimated useful life of 20
years.  The fair value of the building at the end of 2016 and 2017 is P3,100,000 and P2,450,000,
respectively.  On January 2, 2018, the company-terminated all lease and sold the building for
P2,990,000, incurring disposal cost of P120,000.
If the investment property is accounted using the fair value model, what should be the amount
of derecognition gain or loss to be reported on its profit or loss in 2018?

- P420,000.00

After initial recognition, investment property held by an entity shall be measured using

- Either the cost model or the fair value model and apply the accounting policy to all its
investment property.

Which of the following are valid statements regarding measurement of investment property?
I.               An enterprise shall initially recognize an investment property at purchase price plus
transaction costs
II.              An enterprise using the fair value model for tis investment property shall recognize
the increase in the fair value for the property during the reporting period as a credit to other
comprehensive income.
III.            An entity shall continue to measure an investment property at fair value until its
disposal if it has previously measured the property at fair value
IV.           An entity is required to disclose the fair value of its investment property in its notes to
the financial statements even if it applies the cost model.

- I, III, and IV

Andray Company owns a building purchased on January 1, 2014 for P100 million. The building
was used as the company's head office. The building has an estimated useful life of 25 years. ln
2018, the company transferred its head office and decided to lease out the old building. 
Tenants began occupying the old building by the end of 2018.  On December 31, 2018, the
company reclassified the building as investment property. The fair value on the date of
reclassification was P86 million.  If the investment property is to be carried using fair value
model, how much should be recognized in the 2018 profit or loss as a gain or loss on transfer
from owner-occupied to investment property?

- None

Pagara Inc., a real estate firm, and its subsidiaries have provided you, their PFRS specialist, with a
list of the properties they own:

a)     A building owned by Pagara, Inc. being leased out to Pigar, Inc, a subsidiary of Pagara, Inc.,
P20,000,000.
b)    A property costing P34M held by a subsidiary of Pagara Inc. in the ordinary course of its
business.
c)     Land held for undetermined future use costing P15,000.
In its separate financial statement what should be the amount of investment property to be
reported by Pagara Inc.?

-  P35,000,000.00

The following information relates to Graham Corporation for the year 2022:
 
Land Held as Investment Property (at cost)                                       P5,000,000.00
            Fair value at January 1, 2022                                                       6,000,000.00
            Fair value at December 31, 2022                                                 6,800,000.00
            Estimated disposal cost                                                                  300,000.00
 
Building Held as Investment Property:
            Construction was completed on January 1, 2022 (cost)        P20,000,000.00
            Estimated useful life is 40 years with no residual value
            Fair value at January 1, 2022                                                         19,000,000.00
            Fair value at December 31, 2022                                                  20,000,000.00
            Estimated disposal cost                                                                     500,000.00
 
Rent Revenue recognized during 2022                                                      3,000,000.00
Compensation paid to personnel for administrative & security               200,000.00
Real property taxes applicable to 2022                                                        120,000.00
Cost of maintenance paid to an outsourced company                              340,000.00
 
Required:   What is the total amount taken to profit or loss for the year 2022 relating to the
investment property using the fair value model?

- P4,140,000.00

Which of the following assets held by an enterprise would qualify as investment property as
defined by IAS 40, Investment Property?
I.               Land held for capital appreciation
II.              Building held to earn rentals
III.            Land for sale in the ordinary course of business
IV.            Land held for undetermined future use

- I, II, and IV

Andray Company owns a building purchased on January 1, 2014 for P100 million. The building
was used as the company's head office. The building has an estimated useful life of 25 years. ln
2018, the company transferred its head office and decided to lease out the old building. 
Tenants began occupying the old building by the end of 2018.  On December 31, 2018, the
company reclassified the building as investment property. The fair value on the date of
reclassification was P86 million.  If the investment property is to be carried using cost model,
how much should be recognized in the 2018 profit or loss as a gain or loss on transfer from
owner-occupied to investment property?

- None

On January 1, 2016, Pastillas Co. purchased a building at a cost of P3,000,000. On the same date,
the building was leased out under an operating lease. The company's policy regarding
depreciable asset is to depreciate using straight line method over an estimated useful life of 20
years.  The fair value of the building at the end of 2016 and 2017 is P3,100,000 and P2,450,000,
respectively.  On January 2, 2018, the company-terminated all lease and sold the building for
P2,990,000, incurring disposal cost of P120,000. 
If the investment property is accounted using the cost model, what should be the amount of
derecognition gain to be reported on its profit or loss in 2018?

- P170,000.00

On January 1, 2018, Rachel Company leased a building from Goldemayre Company for the
purpose of letting out to tenants.  The lease is properly classified as finance lease under PAS 17
Leases.  The fair value of the building on January 1 and December 31 is P3.5 million and P4
million, respectively.  The present value of the minimum lease payment computed based on the
implicit interest rate of 12% is P3.2 million.  What should be the amount to be recorded by
Rachel Company on January 1, 2018 as investment property?

- P3,200,000.00

Under the cost model, a building held by an enterprise as an investment property shall be
valued at

- Cost less accumulated depreciation and impairment loss

Aside from the existing investment property held by SME in other countries that are measured
at Fair Value, it bought additional three properties in Singapore that it intends to rent out in the
future. At the date of acquisition there was no active market in the relevant locations. According
to management it is therefore not possible to measure the fair value of the properties reliably.
If management decides to use the fair value model to value its investment property, but it would
still like to measure the investment properties in Singapore at cost, is that acceptable?

- Yes only if it is really impossible to determine the fair value reliably.

On January 1, 2015, the Avengers Company bought a piece of land worth P2,600,000.  The
Avengers Company's business model is to buy and sell land.  On February 28, 2018, the
Avengers Company decided to lease the land under an operating lease to another company.
The relevant estimated selling price and cost to sell of the inventories is as follows:
What is the carrying amount of the inventory as of December 31, 2017 statement of financial
position?

- P2,600,000.00

SME bought several properties in Britain, which it rents out. However, one of the buildings is
located in a poor and neglected area of a small town and finding tenants is difficult. The
building has been vacant for over a year now.  As one of the buildings in Britain has been vacant
for over a year already, how should management account for this property?

- Investment property

Investment property excludes

- Property held for future use as owner occupied property

SME constructs a 3-storey building of which it currently rents out 1 floor and occupies the other
2 floors.  The floors could not be sold separately.  How should the three-storey building be
accounted for?

- 1 floor as investment property and 2 floors as property and equipment

Bell, Inc. had the following bank reconciliation at March 31, 2015:
Balance per bank statement, 3/31/15                                                          P37,200
Add: Deposit in transit                                                                                        10,300
                                                                                                                                47,500
Less: Outstanding checks                                                                                  12,600
Balance per books, 3/31/15                                                                            P34,900
Data per bank for the month of April 2015 follow:
Deposits                                                                                                             P46,700
Disbursements                                                                                                    49,700
All reconciling items at March 31, 2015 cleared the bank in April. Outstanding checks at April 30,
2015 totaled P6,000. There were no deposits in transit at April 30, 2015. What is the cash balance
per books at April 30, 2015?

- P28,200.00

Kerr Company had the following transactions in bond investment held as trading for the current
year.
Mar.1  Purchased 2,000, P1,000, 12% bonds of Walsh Company at 93 excluding accrued interest. 
Interest is payable on February 1 and August 1.
Apr. 1  Purchased 4,000, P1,000, 12% bonds of Penny Corporation at 95 plus accrued interest. 
Interest is payable March 1 and September 1.
Oct. 1  Sold 1,000 of the Penny bonds at 105 excluding accrued interest.
Required:
       How much is the gain on sale of the bonds on October 1?

- P100,000.00

Receivables that are individually significant should be considered for impairment separately, if
impaired, the company recognizes it.

- True'.

At the beginning of current year, Perez Company acquired 40% of the outstanding ordinary

shares of an investee for P6,500,000.  The carrying amount of the net assets of the investee
equaled P12,500,000.  Any excess of cost over carrying amount is attributable to equipment with
remaining useful life of 10 years.  During the year, the investee reported net loss of P4,000,000
and paid dividends of P2,500,000.
Required:
     What is the carrying amount of the investment at year-end?

- P3,750,000.00
On the December 31, 2015 statement of financial position of Riser Co., the current receivables
consisted of the following:
Trade accounts receivable                                                                                         P  75,000
Allowance for uncollectible accounts                                                                          (3,000)
Claim against shipper for goods lost in transit (November 2015)                            2,000
Selling price of unsold goods sent by Riser on consignment
      at 130% of cost (not included in Riser‘s ending inventory)                               26,000
Security deposit on lease of warehouse used for storing
      some inventories                                                                                                         30,000
               Total                                                                                                                  P132,000
At December 31, 2015, the correct total of Riser’s current net receivables was?

- P74,000.00

Milford Company sold accounts receivable without recourse with face amount of P6,000,000. 
The factor charged 15% commission on all accounts receivable factored and withheld 10% of
the accounts factored as protection against customer returns and other adjustments. The entity
had previously established an allowance for doubtful accounts of P100,000 for these accounts. 
By year-end, the entity had collected the factor’s holdback there being no customer returns and
other adjustments.
Required:
     What is the amount to be recognized as a loss on factoring?

- P800,000.00

Any receivables not individually assessed should not be collectively assessed for impairment.

- False'.

On January 1, 2021, Emley Company sold an equipment costing P500,000 which had a carrying

amount of P350,000, receiving a P125,000 down payment and, as additional consideration, a
P400,000 noninterest bearing note due on January 1, 2024.  There was no established exchange
price for the equipment, and the note had no ready market.  The prevailing rate of interest for a
note of this type at January 1, 2021 was 12%.  The present values factor of 1 at 12% for three
periods is 0.7118.
Required:
     What is the amount of gain on sale in this transaction?

- P59,720.00

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known
amounts of cash and has a current market value that is greater than its original cost.

- False'.

Nichols Company provided the following data for purchases and sales as follows:

Required:
     What is the gross income for the year 2021 assuming that a FIFO cost formula is being used?

- P345,000.00

Any 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.

- True'.

At the beginning of current year, Winsor Company showed the following account balances:

            Accounts Receivable                                            P1,000,000
            Allowance for Doubtful Accounts                              40,000
The following summary transactions occurred during the current year:
1.     Sales on account, 2/30, n/30                                                                                             
P7,000,000
2.     Collections from customers within the discount period                                                 
2,450,000
3.     Collections from customers beyond the discount period                                               
3,900,000
4.     Accounts receivable written off as worthless                                                                       
30,000
5.     Recovery of accounts previously written off not included in the above collections        
10,000     
6.     Credit memo for sales returns                                                                                                 
70,000
Required:
     What is the net realizable value of accounts receivable at year-end?

- P1,440,000.00

For the year ended December 31, 2015, Naab Co. estimated its allowance for uncollectible
accounts using the year-end aging of accounts receivable. The following data are available:
Allowance for uncollectible accounts, 1/1/15                                                     P56,000
Provision for uncollectible accounts during 2015
        (2% on credit sales of P2,000,000)                                                                    40,000
Uncollectible accounts written off, 11/30/15                                                           46,000
Estimated uncollectible accounts per aging, 12/31/15                                          69,000
After year-end adjustment, the uncollectible accounts expense for 2015 should be?

- P59,000.00

Receivables that are not individually significant are assessed individually. If impaired, the
company recognizes it.

- False'.
Elkin Corp.'s trial balance of income statement accounts for the year ended December 31, 2015
included the following:
                                                                                                 Debit                             Credit  
Sales revenue                                                                                                         P140,000
Cost of sales                                                                            P  60,000
Administrative expenses                                                            25,000
Loss on sale of equipment                                                          9,000
Commissions to salespersons                                                   8,000
Interest revenue                                                                                                      5,000
Freight-out                                                                                   3,000
Loss on disposition of wholesale division                            17,000
Bad debt expense                                                                        3,000                            
      Totals                                                                               P125,000             P145,000
Other information:
Elkin's income tax rate is 30%. Merchandise inventory:
January 1, 2015                                     P80,000
December 31, 2015                                70,000
On Elkin's income statement for 2015, merchandise purchases are?

- P50,000.00

Money market funds may be included under the heading of "cash and cash equivalents" in the
balance sheet.

- 'True'.

Checkers Company purchased the following investments during 2021:

On July 31, 2022, the entity sold all of the shares of Security B for P1,100,000.  On December 31,
2022, the shares of Security A had a market value of P600,000.  No other activity occurred
during 2022 in relation to the trading security portfolio. 
Required:
     What is the total loss on the trading securities should be reported in the income statement
for 2022?

- P900,000.00

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known
amounts of cash and is acceptable as a means to pay current liabilities.

- 'False'.

Companies provide trade discounts to induce prompt payment and easily alter prices for
different customers.

- False'.

On January 1, 2021, Hite Company purchased serial bonds with face amount of P3,000,000 and
stated 12% interest payable annually every December 31.  The bonds are to be held as financial
assets at amortized cost with a 10% effective yield.  The bonds mature at an annual installment
of P1,000,000 every December 31.
Use the following present value factors to compute for your answer:
a)     PV of 1 at 10% for one period                                        .91
b)     PV of 1 at 10% for two periods                                       .83
c)     PV of 1 at 10% for three periods                                    .75
 Required:
     How much is the market price of the bonds?

- P3,106,800.00

June Company used the conventional retail inventory method to account for inventory.  The
following information relates to its inventory:
Required:
     What amount should be reported as cost of goods sold?

- P5,250,000.00

Lawson Co.’s allowance for uncollectible accounts was P95,000 at the end of 2015 and P90,000
at the end of 2014. For the year ended December 31, 2015, Lawson reported bad debt expense
of P13,000 in its income statement. What amount did Lawson debit to the appropriate account
in 2015 to write off actual bad debts?

- P8,000.00

Howe Company issued rights to subscribe to new share at P150 per share in the ratio of one
new share for every five rights held.  The share has a market value of P190 and the right has a
market value of P10.  An investor held 10,000 shares acquired a total cost of P1,800,000.  The
share rights are accounted for separately.  The investor sold all of the share rights P15 per right.
Required:
     What is the amount of gain on the sale of the rights?

- P50,000.00

Accounts receivable from officers, employees, or affiliated companies are preferably presented
on the statement of financial position as assets but separately from other receivables.

- True'.

The following accounts were abstracted from Malon Co.’s unadjusted trial balance at December
31, 2015:
                                                                                                Debit                              Credit     
Accounts receivable                                                          P750,000
Allowance for uncollectible accounts                                  8,000
Net credit sales                                                                                                         P3,000,000
Malon estimates that 2% of the gross accounts receivable will become uncollectible. After
adjustment at December 31, 2015, the allowance for uncollectible accounts should have a credit
balance of?

- P15,000.00

Morgan Co. prepared an aging of its accounts receivable at December 31, 2015 and determined
that the net realizable value of the receivables was P300,000. Additional information is available
as follows:
Allowance for uncollectible accounts at 1/1/15—credit balance                        P  34,000
Accounts written off as uncollectible during 2015                                                     23,000
Accounts receivable at 12/31/15                                                                                325,000
Uncollectible accounts recovered during 2015                                                             5,000
For the year ended December 31, 2015, Morgan’s bad debt expense would be?

- P9,000.00

Dole Company acquired 40% interest in an associate, Moon Company, for P5,000,000 on

January 1, 2021.  At acquisition date, there were no differences between fair value and carrying
amount of identifiable assets and liabilities.  Moon Company reported net income of P2,000,000
for 2021 and P3,000,000 for 2022.  On December 31, 2021 and 2022, Moon Company paid cash
dividend of P800,000 and P1,000,000, respectively.  On January 1, 2021, Moon Company sold an
equipment costing P500,000 to Dole Company for P800,000.  Dole Company applies a 10%
straight line depreciation.  On July 1, 2022, Moon Company sold an equipment for P900,000
to Dole Company.  The carrying amount of the equipment is P500,000 at the time sale.  The
remaining life of the equipment is 5 years and Dole Company used the straight line
depreciation.  On December 1, 2022, Moon Company sold an inventory to Dole Company for
P2,800,000.  The inventory had a cost of P2,000,000 and was still on hand on December 31,
2022.
Required:
     What is the carrying amount of the investment in associate (Moon Company) on December
31, 2022?
 - P5,720,000.00

A cash equivalent is a short-term, highly liquid investment that is readily convertible into known
amounts of cash and bears an interest rate that is at least equal to the prime rate of interest at
the date of liquidation.

- False'.

The effective-interest method applies the effective-interest rate to the beginning carrying
amount for each interest period.

- True'.

Both debt and equity investments are reported at fair value.

- True'.

Under IFRS, the fair value option may be selected as a valuation method by the company at any
time during the first 2 years of ownership.

- False'.

On January 1, 2016, Patton Company bought 10% of the outstanding ordinary shares of Howell
Construction Company for P3 million.  Their book value was P8 million and the difference was
attributable to the fair value of Howell's buildings exceeding book value.  Howell's net income
for the year ended December 31, 2016, was P10 million.  During 2016, Howell declared and paid
cash dividends of P2 million.  The buildings have a remaining life of 10 years.  The investment in
Howell is to be held as Investment in equity securities designated as at fair Value through other
comprehensive income.  Also, Howell's net income for the year ended December 31, 2017 was
P12 million and Howell declared and paid cash dividends of P2.5 million.  The fair value of
Patton's investment in Howell securities is as follows: December 31, 2016, P3,200,000;
December 31, 2017, P3,100,000; and December 31, 2018, P13 million.  On January 2, 2018,
Patton purchased an additional 20% of Howell's stock for P5,600,000 cash when the carrying
amount of Howell's net assets was P25,000,000. The excess was attributable to building having
a remaining life of 8 years.  Howell's net income for the year ended December 31, 2018 was P15
million and Howell declared and paid cash dividends of P3 million.
What is the carrying amount of the investment in Howell Company as of December 31, 2018?

- P11,887,500.00

Unrealized holding gains and losses are reported as part of net income for trading investments.

- True'.

When bonds sold at a premium and are accounted for using amortized cost, interest revenue
will be less than the interest revenue recorded under fair value.

- 'False'.

Amortized cost is the initial recognition amount of the investment minus repayments plus or
minus cumulative amortization.

- False'.

When recording a sale of a debt investment before maturity date, an entry must be made to
amortize a discount to the date of sale.

- False'.

Debt investments that are accounted for and reported at amortized cost, are debt investments
which are managed and evaluated based on a documented risk-management strategy.

- False'.

Debt investments not held for collection are reported at amortized cost.

- False'.
Under the fair value approach, an unrealized gain or loss is recorded in each year whereas no
unrealized gains or losses are recorded under the amortized cost method.

- True'.

Amortized cost is the initial recognition amount of the investment minus cumulative

amortization and net of any reduction for uncollectibility.

- False'.

The effective-interest method applied to debt investments is different from that applied to
bonds payable.

- False'.

On January 1, 2018, Koehn Company bought 25% outstanding ordinary shares of Cosby
Company for P1 million. The book value of the net asset acquired was P3 million. The
difference was attributable to the fair value of Cosby's machinery exceeding book value. The
machinery has a remaining life of 10 years.  0n January 3, 2018, Koehn Company sold an
equipment costing P600,000 to Cosby Company for P800,000. The equipment has a remaining
life of five years. In 2018, Cosby Company reported net income of P1,000,000. Cash dividends of
P100,000 were declared and paid by Cosby Company on December 31, 2018.
How much is the carrying amount of the investment in associate on December 31, 2018?

- P1,040,000.00

On January 1, 2018, Horton Company acquired 20% of the outstanding ordinary shares of Adam
Company for P4,000,000. This investment gave Horton the ability to exercise significant
influence over Adam. The book value of the acquired shares was P3,000,000. The excess of
cost over book value was attributed to a depreciable asset which was undervalued on Adam’s
statement of financial position and which had a remaining useful life of ten years.  For the year
ended December 31, 2018, Adam’s share capital outstanding is as follows:
10% cumulative preference share capital                  P 2,500,000
Ordinary share capital                                                  10,000,000
Adam reported net income of P1,500,000 for the year ended December 31, 2018.
What amount should Horton record as investment income for the year ended December 31,
2018?

- P150,000.00

On April 1, 2018, Ritter Company acquired 12% bonds with a face amount of P2,000,000.  The
bonds are dated January 1, 2018 and will mature on December 31, 2021.  The bonds were
acquired to yield 10%.  Interest is payable December 31.  What is the total purchase price of the
bonds?  (round off answers to the nearest peso and use four decimal places for your PV
factors)

- P2,179,945.00

On January 1, 2018, Bear Company acquired 12% bonds in the face amount of P2,000,000 at a
cost of P2,126,776. They mature on December 31, 2021. The bonds were acquired to yield 10%.
Interest is payable every December 31.
How much is the noncurrent portion of the bonds on December 31, 2018?

- P2,099,454.00

On January 1, 2018, Landis Company acquired 12% bonds in the face amount of P2,000,000.
They mature on December 31,2021. The bonds were acquired to yield 10%. The bonds mature in
4 equal annual installments of P500,000 every December 31. Interest is payable every
December 31.
What is the purchase price of the bonds? (round off your answer to the nearest peso)

- P2,082,972.00

On January 1, 2016, Reston Co. purchased 25% of Ace Corp.'s ordinary shares; no goodwill
resulted from the purchase. Reston appropriately carries this investment at equity and the
balance in Reston’s investment account was P720,000 at December 31, 2016. Ace reported net
income of P450,000 for the year ended December 31, 2016, and paid ordinary share dividends
totaling P180,000 during 2016. How much did Reston pay for its 25% interest in Ace?
 - P652,500.00

Carlin Co, has the following trading securities:

Investment in Richman Co. - Trading Securities
Date Acquired             Number of shares and Cost per share           Total Cost
Jan. 3, 2018                30,000 shares at P40                                     P1,200,000
Mar. 3, 2018               20,000 shares at P45                                           900,000
Apr. 3, 2018                50,000 shares at P50                                        2,500,000
Carlin Co. does not have significant influence over Richman. On May 1, 2018, Carlin sold 60,000
shares at P60 per share.  How much is the gain (or loss) on sale assuming the company is
using first-in, first out method in valuing its securities?

- P1,000,000.00

Amortized cost is the initial recognition amount of the investment minus repayments and net of
any reduction for uncollectibility.

- False'.

On January 1, 2018, Sycamore Company purchased 5-year bonds with face value of P8,000,000
and stated interest of 10% per year payable every December 31. The bonds were acquired at
P8,311,172 to yield rate of 9%.  The objective of Sycamore's business model is to collect the
contractual cash flows and sell financial asset.  The fair value of the investment for the year
ended 2018 and 2019 is 104 and 105, respectively.  The investment was sold for 102 on
January 1, 2020 and the Company incurred transaction cost amounting to P99,000.  There is no
indication that the investments credit risk increased from initial recognition. 
How much is the derecognition gain or (loss) to be presented in the P&L?  (round off your
answers to the nearest peso value)

- (P141,503.00)

A gain on sale of a debt investment is the excess of the selling price over the bonds face value.
 - False'.

Inventory is a financial asset.

- False'.

On January 1, 2018, Carsen Company purchased 25,000 shares of the 100,000 outstanding
shares of Garrison Company for a total of P2,000,000.  At the time of purchase, the book value
of Garrison Company's equity was P6,000,000.  Garrison Company assets having a market value
greater than book value at the time of the acquisition were as follows:       

Garrison Company's net incomes in 2018 and 2019 were P1,400,000 and P1,600,000
respectively.  Dividends per share paid by Garrison Company amounted to P4 in 2018 and P5 in
2019. The inventory was sold in 2018 while the land was sold at the end of 2019 at a gain on
sale of P50,000.
What amount should Carsen record as investment in associate for the year ended December 31,
2019?

- P2,300,000.00

Held-for-collection investments are reported at amortized cost.

- True'.

Trading investments are held with the intention of selling them in a short period of time.

- True'.
On January 1, 2018, Alvarado Company purchased 5-year bonds with face value of P8,000,000
and stated interest of 10% payable every December 31.  The bonds were acquired at P8,311,172
to yield rate of 9%.  The fair value of the investment for the year ended 2018 and 2019 is 102
and 105, respectively.  At the end of the year 2018, Alvarado Company asses that the
investment's credit risk increased from initial recognition and estimates the present value of
expected loss in P24,500.  Assume that this investment is accounted for as Financial Assets at
Amortized Cost (FAAC), what is the carrying amount of the investment on December 31, 2018?
(round off all your answers to the nearest peso)

- P8,234,677.00

When recording a sale of a debt investment before maturity date, accrued interest will be
received by the seller even though it is not an interest payment date.

- False'.

Debt investments that meet the business model and contractual cash flow tests are reported
at the lower of amortized cost or fair value.

- False'.

On January 1, 2017, Royce Company bought 200,000 ordinary shares out of the 1,000,000
outstanding ordinary shares of Kern Construction Company for P30 million. Their book value
was P130 million and the difference was attributable to the fair value of Kern's buildings and its
land exceeding book value, each accounting for one-half of the difference.  Kern's net income
for the year ended December 31, 2017 was P150 million, other comprehensive of P20 million
arising from revaluation surplus.  During 2017, Kern declared and paid cash dividends of P30
million. The buildings have a remaining life of 10 years.  On January 2, 2018, Royce sold half of
its investment at P28 million and reclassified its remaining investment to fair value through
other comprehensive income. The fair value of the shares this date amounted to P285 per
share.  Kern's net income for the year ended December 31, 2018, was P160 million.  During
2018, Kern declared and paid cash dividends of P28 million. On December 31, 2018, the fair
value of the shares amounted to P290 per share.
How much is the gain or (loss), if any, on sale of 100,000 shares on January 2, 2018?

- (P900,000.00)
When bonds sold at a discount and are accounted for using amortized cost, interest revenue
will be greater than the interest revenue recorded under fair value.

- False'.

Transactions for the month of June were:

                                                 Purchases                                                       Sales               
                        June  1       (balance)    800 @ P3.20                  June  2         600 @ P5.50
                                  3                        2,200 @   3.10                            6      1,600 @   5.50
                                  7                        1,200 @   3.30                            9      1,000 @   5.50
                                15                        1,800 @   3.40                          10         400 @   6.00
                                22                           500 @   3.50                          18      1,400 @   6.00
                                                                                                              25         200 @   6.00
 
Assuming that perpetual inventory records are kept, the ending inventory on a FIFO basis is

- P4,470.00

Companies must allocate the cost of all the goods available for sale (or use) between the
income statement and the statement of financial position.

- True'.

A company should abandon the historical cost principle when the future utility of the inventory
item falls below its original cost.

- True'.

Spark Co. has the following data related to an item of inventory:

Inventory, March 1                                                      100 units @ P4.20
Purchase, March 7                                                     350 units @ P4.40
Purchase, March 16                                                     70 units @ P4.50
Inventory, March 31                                                    130 units
The value assigned to cost of goods sold if Spark uses FIFO is

- P1,696.00

The following information was available from the inventory records of Template Company for
January:
                                                                                       Units            Unit Cost      Total Cost
Balance at January 1                                                     3,000              P9.77          P29,310
      Purchases:
            January 6                                                           2,000               10.30             20,600
            January 26                                                         2,700               10.71             28,917
 
      Sales:
            January 7                                                         (2,500)
            January 31                                                       (4,000)
Balance at January 31                                                  1,200
Assuming that Template does not maintain perpetual inventory records, what should be the
inventory at January 31, using the weighted-average inventory method? (round-off your unit cost
to two decimal places)

- P12,288.00

Goods in transit, shipped FOB shipping point, are included in the buyer’s statement of financial
position at the time of delivery to the common carrier.

- True'.

Jerome Distribution Co. has determined its December 31, 2020 inventory on a FIFO basis at
P255,000. Information pertaining to that inventory follows:
Selling price                                                P250,000
Cost to sell                                                       20,000
Cost to complete                                             30,000
Jerome records losses that result from applying the lower-of-cost-or-net realizable value rule. At
December 31, 2020, the loss that Jerome should recognize is

- P55,000.00

Chaplain uses the periodic inventory system. For the current month, the beginning inventory
consisted of 200 units that cost P65 each. During the month, the company made two
purchases: 300 units at P68 each and 150 units at P70 each. Chaplain also sold 500 units
during the month. Using the average cost method, what is the amount of ending inventory?
(round-off your unit cost to two decimal places)

- P10,131.00

The following data concerning the retail inventory method are taken from the financial records
of Vivacious Company.
                                                                                          Cost                       Retail 
            Beginning inventory                                          P  49,000              P  70,000
            Purchases                                                           224,000                 320,000
            Freight-in                                                                  6,000                       —
            Net markups                                                               —                      20,000
            Net markdowns                                                          —                      14,000
            Sales                                                                            —                    336,000
The ending inventory at retail should be

- P60,000.00

The following information applied to Manifold, Inc. for 2020:

Merchandise purchased for resale                               P300,000
Freight-in                                                                                 5,000
Freight-out                                                                              8,000
Purchase returns                                                                   2,000
                        Manifold's 2020 inventoriable cost was
 - P303,000.00

Beneath Co. recorded the following data pertaining to raw material X during January 2020:
                                                                                                          Units                                        
Date                                     Received           Cost                 Issued         On Hand
1/1/20        Inventory                                      P8.00                                       3,200
1/11/20      Issue                                                                     1,500               1,700
1/22/20      Purchase               4,000            P9.40                                       5,700
What is the moving-average unit cost of X inventory at January 31, 2020? (round-off your
answers to two decimal place)

- P8.98

IFRS requires manufacturers to disclose their inventory components on the statement of

financial position or in related notes.

- 'True'.

A basket purchase occurs when a company agrees to buy inventory weeks or months in
advance.

- False'.

Opulence Co. uses the retail inventory method to estimate its inventory for interim statement
purposes. Data relating to the computation of the inventory at July 31, 2020, are as follows:
                                                                       Cost                     Retail    
Inventory, 2/1/20                                      P   200,000           P   250,000
Purchases                                                  1,000,000               1,575,000
Markups, net                                                                                 175,000
Sales                                                                                            1,760,000
Estimated normal shoplifting losses                                          20,000
Markdowns, net                                                                            120,000
Under the lower of cost and net realizable value method, Opulence’s estimated inventory at July
31, 2020 is

- P60,000.00

Lagoon Company’s accounting records indicated the following information:

Inventory, 1/1/20                                      P   800,000
Purchases during 2020                              3,000,000
Sales during 2020                                      3,600,000
A physical inventory taken on December 31, 2020, resulted in an ending inventory of P700,000.
Lagoon’s gross profit on sales has remained constant at 25% in recent years. Lagoon suspects
some inventory may have been taken by a new employee. At December 31, 2020, what is the
estimated cost of missing inventory?

- P400,000.00

Chaplain uses the periodic inventory system. For the current month, the beginning inventory
consisted of 200 units that cost P65 each. During the month, the company made two
purchases: 300 units at P68 each and 150 units at P70 each. Chaplain also sold 500 units
during the month. Using the FIFO method, what is the amount of cost of goods sold for the
month?

-  P33,400.00

If both purchases and ending inventory are overstated by the same amount, net income is not
affected.

- True'.

Alexis Co. had 450 units of product A on hand at January 1, 2020, costing P42 each. Purchases
of product A during January were as follows:
    Date                   Units            Unit Cost
 Jan. 10                  600                 P44
          18                  750                    48
          28                  300                    46
                        A physical count on January 31, 2020 shows 700 units of product A on hand. The
cost of the inventory at January 31, 2020 under the FIFO method is

- P33,000.00

When using a perpetual inventory system, freight charges on goods purchased are debited to
Freight-In.

- False'.

Application of the lower-of-cost-or-net realizable value rule results in inconsistency because a

company may value inventory at cost in one year and at net realizable value in the next year.

- True'.

Transitory uses the periodic inventory system. For the current month, the beginning inventory
consisted of 1,200 units that cost P12 each. During the month, the company made two
purchases: 500 units at P13 each and 2,000 units at P13.50 each. Transitory also sold 2,150
units during the month. Using the average cost method, what is the amount of cost of goods
sold for the month? (round-off your unit cost and answer to two decimal places)

- P27,842.50

Splendid uses the periodic inventory system. For the current month, the beginning inventory
consisted of 1,200 units that cost P12 each. During the month, the company made two
purchases: 500 units at P13 each and 2,000 units at P13.50 each. Splendid also sold 2,150 units
during the month. Using the FIFO method, what is the ending inventory?

- P20,925.00
Under International Financial Reporting Standards (IFRS), when companies value inventory
using the lower-of-cost-or-net realizable value (LCNRV), in most situations, companies price
inventory on a total–inventory basis.

- False'.

The following information was derived from the 2020 accounting records of Haggard Co.:
                                                           Haggard's Goods
Haggard's Central Warehouse       Held by Consignees
Beginning inventory         P103,000                                   P  41,000
Purchases      575,000                                         90,000
Freight-in            30,000
Transportation to consignees                                                                 5,000
Freight-out                         10,000                                          8,000
Ending inventory         135,000                                       10,000
                        Haggard's 2020 cost of sales was

-  P694,000.00

Viable Corporation had the following amounts, all at retail:

Beginning inventory                    P  3,600         Purchases                                    P100,000
Purchase returns                             6,000         Net markups                                     18,000
Abnormal shortage                          4,000         Net markdowns                                   2,800
Sales                                                 72,000         Sales returns                                      1,800
Employee discounts                        1,600         Normal shortage                                 2,600
            What is Viable’s ending inventory at retail?

- P34,400.00

Moon Corporation had the following amounts, all at retail:

Beginning inventory              P  3,600         Purchases                                       P120,000
Purchase returns                       6,000         Net markups                                        18,000
Abnormal shortage                    4,000         Net markdowns                                      2,800
Sales                                           72,000         Sales returns                                         1,800
Employee discounts                  1,600         Normal shortage                                    2,600
What is Moon’s ending inventory at retail?

- P54,400.00

Both merchandising and manufacturing companies normally have multiple inventory accounts.

- False'.

The lower-of-cost-or-net realizable method is used for inventory despite being less conservative
than valuing inventory at net realizable value.

- False'.

At December 31, 2020, the following information was available from Nightmare Co.’s
accounting records:
                                                                                                 Cost                   Retail    
Inventory, 1/1/20                                                            P147,000           P   203,000
Purchases                                                                          833,000              1,155,000
Additional markups                                                                                           42,000
Available for sale                                                            P980,000           P1,400,000
Sales for the year totaled P1,060,000. Markdowns amounted to P20,000. Under the lower of
cost and net realizable value method, Nightmare’s inventory at December 31, 2020 was

- P224,000.00

If a supplier ships goods f.o.b. destination, title passes to the buyer when the supplier delivers
the goods to the common carrier.

- False'.
A manufacturing concern would report the cost of units only partially processed as inventory in
the statement of financial position.

- True'.

Under International Financial Reporting Standards (IFRS), separate reporting of reversals of

inventory write-downs in the period of sale are required.

- True'.

International Financial Reporting Standards (IFRS) require that a company record an inventory
write-down as part of cost of goods sold.

- False'.

On June 1, 2020, Garr Corp. sold merchandise with a list price of P30,000 to Sam on account.
Garr allowed trade discounts of 30% and 20%. Credit terms were 2/15, n/40 and the sale was
made f.o.b. shipping point. Garr prepaid P400 of delivery costs for Sam as an accommodation.
On June 12, 2020, Garr received from Sam a remittance in full payment amounting to

- P16,864.00

In a basket purchase, the cost of the individual assets acquired is determined on the basis of
their relative standalone sales value.

- 'True'.

Under International Financial Reporting Standards (IFRS), net realizable value is the general rule
for valuing commodities held by broker-traders.

- True'.
Most purchase commitments must be recorded as a liability.

- False'.

If the contract price on a noncancelable purchase commitment exceeds the market price, the
buyer should recognize a liability and corresponding loss in the period in which the market
decline takes place.

- True'.

Latvia Retailers purchased merchandise with a list price of P60,000, subject to trade discounts
of 20% and 10%, with no cash discounts allowable. Latvia should record the cost of this
merchandise as

- P43,200.00

Tang, Inc. sells collectible jewelry on consignment from various manufacturers and should
include this consigned inventory on its statement of financial position.

- False'.

The International Accounting Standards Board has indicated that they believe that financial
statements would be more transparent and understandable if companies recorded and reported
all financial instruments at amortized cost.

- False'.

Why would a company sell receivables to another company?

- To accelerate access to amounts collected

If substantially all the risks and rewards of ownership of the receivables are transferred, then
they are derecognised.
 - True'.

Trade discounts are used to avoid frequent changes in catalogs and to alter prices for different
quantities purchased.

- True'.

All of the following are problems associated with the valuation of accounts
receivable except for

- cash discounts under the net method.

Wellington Corp. has outstanding accounts receivable totaling P2.54 million as of December 31

and sales on credit during the year of P12.8 million. There is also a debit balance of P6,000 in
the allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will
be uncollectible, what will be the balance in the allowance for doubtful accounts after the year-
end adjustment to record bad debt expense?

- P122,000.00

Assume Royal Palm Corp., an equipment distributor, sells a piece of machinery with a list price
of P800,000 to Arch Inc. Arch Inc. will pay P850,000 in one year. Royal Palm Corp. normally sells
this type of equipment for 90% of list price. How much should be recorded as sales revenue?

-  P720,000.00

Rosalie Corporation is located in Los Angeles but does business throughout Europe. The
company builds and sells equipment used in manufacturing pharmaceuticals. On December 31,
2015, Rosalie’s accounts receivable are as follows:
Individually significant receivables
Finley Company        P   80,000
Rios, Inc.                       200,000
Rafael Co.                     120,000
Hunter, Inc.                   100,000
All other receivables     500,000
Total                           P1,000,000
Rosalie Corporation determines that Finley Company’s receivable is impaired by P40,000 and
Hunter, Inc.’s receivable is totally impaired. The other receivables from Rafael and Rios are not
considered impaired. Rosalie determines that a composite rate of 2% is appropriate to measure
impairment on all other receivables. What is the total impairment of receivables for Rosalie
Corporation for 2015?

- P156,400.00

The International Accounting Standard Board requires that companies assess their receivables
for impairment each reporting period and begin the impairment assessment by considering
whether objective evidence indicates that one or more loss events have occurred.

- True'.

What is the normal journal entry for recording bad debt expense under the allowance method?

- Debit Bad Debt Expense, credit Allowance for Doubtful Accounts

Vasguez Corporation had a 1/1/15 balance in the Allowance for Doubtful Accounts of P20,000.
During 2015, it wrote off P14,400 of accounts and collected P4,200 on accounts previously
written off. The balance in Accounts Receivable was P400,000 at 1/1 and P480,000 at 12/31. At
12/31/15, Vasguez estimates that 5% of accounts receivable will prove to be uncollectible.
What is Bad Debt Expense for 2015?

- P14,200.00

Vivian, Inc had net sales in 2015 of P700,000. At December 31, 2015, before adjusting entries,
the balances in selected accounts were: accounts receivable P125,000 debit, and allowance for
doubtful accounts P1,200 credit. Vivian estimates that 2% of its net sales will prove to be
uncollectable. What is the cash realizable value of the receivables reported on the statement of
financial position at December 31, 2015?
 - P109,800.00

When the stated rate of interest exceeds the effective rate, the present value of the note
receivable will be less than its face value.

- False'.

Companies record and report long-term notes receivable on a discounted basis.

- True'.

Under IFRS, a company will derecognize its receivables when the contractual rights to the cash
flows of the receivable no longer exist.

- True'.

Which of the following statements is incorrect regarding the classification of accounts and

notes receivable?

- Any discount or premium resulting from the determination of present value in notes
receivable transactions is an asset or liability respectively.

Ideally, a company should measure receivables in terms of their present value, that is, the
discounted value of the cash to be received in the future.

- True'.

Moon Inc. factors P1,000,000 of its accounts receivables for a finance charge of 4%. The
finance company retains an amount equal to 8% of the accounts receivable for possible
adjustments. What would be the amount as debit to Cash in the journal entry to record this
transaction?
 - P880,000.00

The following information is available for Murphy Company:

Allowance for doubtful accounts at December 31, 2014                               P    8,000
Credit sales during 2015                                                                                          400,000
Accounts receivable deemed worthless and written off during 2015                  9,000
As a result of a review and aging of accounts receivable in early January 2016, however, it has
been determined that an allowance for doubtful accounts of P5,500 is needed at December 31,
2015. What amount should Murphy record as "bad debt expense" for the year ended December
31, 2015?

- P6,500.00

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

- P328,300.00

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
If the estimate of uncollectibles is made by taking 2% of net sales, the amount of the
adjustment is

- P8,220.00
Under IFRS de-recognition of a receivable is determined by using lack of control as the primary
criterion.

- False'.

Which of the following statement is incorrect regarding receivables on the statement of

financial position?

- Accounts receivable are written promises of the purchaser to pay for goods or services.

Before year-end adjusting entries, Dunn Company’s account balances at December 31, 2015, for
accounts receivable and the related allowance for uncollectible accounts were P600,000 and
P45,000, respectively. An aging of accounts receivable indicated that P62,500 of the December
31 receivables are expected to be uncollectible. The cash realizable value of accounts
receivable after adjustment is

- P537,500.00

AG Inc. made a P10,000 sale on account with the following terms: 1/15, n/30. If the company
uses the net method to record sales made on credit, how much should be recorded as sales
revenue?

- P9,900.00

Black Corporation had a 1/1/15 balance in the Allowance for Doubtful Accounts of P12,000.
During 2015, it wrote off P8,640 of accounts and collected P2,520 on accounts previously
written off. The balance in Accounts Receivable was P240,000 at 1/1 and P288,000 at 12/31. At
12/31/15, Black estimates that 5% of accounts receivable will prove to be uncollectible. What
should Black report as its Allowance for Doubtful Accounts at 12/31/15?

- P14,400.00

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
If the estimate of uncollectibles is made by taking 10% of gross account receivables, the
amount of the adjustment is

- P3,540.00

Under IFRS, a company may select the fair value option or amortized cost for valuing a group of
receivables at each statement of financial position date.

- 'False'.

Ludwig Corporation provided for uncollectible accounts receivable under the allowance method
since its inception of operations in December 31, 2007.  Provisions were made monthly at 2
percent of credit sales; bad debts written off were charged to the allowance account; recoveries
of bad debts previously written off were credited to the allowance account; and no year-end
adjustments to the allowance account were made. Ludwig's usual credit terms are net 30 days.
The credit balance in the allowance for doubtful accounts was P260,000 at January 1, 2008.
During 2008, credit sales totaled P18,000,000, interim provisions for doubtful accounts were
made at 2 percent of credit sales, P180,000 of bad debts were written off, and recoveries of
accounts previously written off amounted to P30,000. Ludwig installed a computer system in
November 2008 and an aging of accounts receivable was prepared for the first time as of
December 31, 2008. A summary of the aging is as follows:
Classifications by Balance in Estimated %
Month of Sale Each Category Uncollectible
November-December 2008 P2,280,000  2%
July-October 2008  1,200,000 15%
January-June 2008 800,000 25%
Prior to January 1, 2008 260,000 80%

Based on the review of collectibility of the account balances in the "prior to January 1, 2008"
aging category, additional receivables totalling P120,000 were written off as of December 31,
2008. Effective with the year ended December 31, 2008, Ludwig adopted a new accounting
method for estimating the allowance for doubtful accounts at the amount indicated by the year-
end aging analysis of accounts receivable.  How much then is the credit adjustment to the
allowance for doubtful accounts on December 31, 2008 to account for the change 2008?

- P187,600.00

The International Accounting Standards Board believes that historical cost for financial
instruments provides more relevant and understandable information than fair value.

- False'.

Which of the following should be recorded in Accounts Receivable?

- None of these answer choices are correct.

- Receivables from officers

- Receivables from subsidiaries

- Dividends receivable

Which of the following concepts relates to using the allowance method in accounting for
accounts receivable?

- Bad debt expense is an estimate that is based on historical and prospective information.

Why do companies provide trade discounts?

- To avoid frequent changes in catalogs and to easily alter prices

AG Inc. made a P10,000 sale on account with the following terms: 2/10, n/30. If the company
uses the net method to record sales made on credit, how much should be recorded as debit to
Accounts Receivable?

- P9,800.00
Which of the following is a generally accepted method of determining the amount of the
adjustment to bad debt expense?

- A percentage of sales not adjusted for the balance in the allowance

Which of the following is included in the normal journal entry to record the collection of
accounts receivable previously written off when using the allowance method?

- Debit Accounts Receivable, credit Allowance for Doubtful Accounts

The percentage-of-sales method results in a more accurate valuation of receivables on the

balance sheet.

- False'.

Receivables are classified in the statement of financial position as either trade or non-trade
receivables.

- False'.

Wellington Corp. has outstanding accounts receivable totaling P3 million as of December 31

and sales on credit during the year of P15 million. There is also a debit balance of P12,000 in
the allowance for doubtful accounts. If the company estimates that 8% of its outstanding
receivables will be uncollectible, what will be the balance in the allowance for doubtful accounts
after the year-end adjustment to record bad debt expense?

- P240,000.00

Equestrain Roads sold P50,000 of goods and accepted the customer’s P50,000 10%

1-year note in exchange. Assuming 10% approximates the market rate of return, how much
interest would be recorded for the year ending December 31 if the sale was made on June 30?

- P2,500.00
Data concerning the cash records of Harold Company for the months of September and October
2018 follow:
a) Unadjusted book balance on September 30 amounted to P2,258,000
b) Total receipts per book in October, P1,400,000.
c) Total disbursements per book in October, P2,400,000.
d) Unadjusted bank balance on September 30 amounted to P2,100,000.
e) Total credits per bank in October amounted to P1,200,000.
f) Total debits per bank in October amounted to P2,500,000.
g) NSF checks on September 30 amounted to P60,000 while on October 31 amounted to
P40,000.
h) Collection of accounts receivable not recorded by the company on September 30, P30,000
and P50,000 on October 31.
i) Erroneous bank charge on September 30, P10,000 and P18,000 on October 31.
j) Erroneous bank credit on September 30, P7,000 and P9,000 on October 31.
k) Understatement of check in payment of rent payable on September 30, P90,000 and
P120,000 on October 31.
l) Deposit in transit on September 30, P130,000.
m) Outstanding checks on October 31, P30,000.

Required:
     How much is the adjusted cash receipts during October?

- P1,420,000.00

A bank reconciliation is

- A schedule that accounts for the difference between cash balance shown on the bank
statement and the cash balance shown on the general ledger.

If the cash balance shown in the accounting records is less than the correct cash balance and
neither the entity nor the bank has made any errors, there must be
 - Deposits credited by the bank but not yet recorded by the depositor

The following data relative to the debits per books and credits per bank of Company A:

Required: How much is the undeposited collections at the end of February.

- P347,000.00

Bank reconciliations are normally prepared on a monthly basis to identify adjustments needed
in the depositor’s records and to identify bank errors.  Adjustment on the part of the depositor
should be recorded for

- All items except bank errors, outstanding checks and deposits in transit.

The following data are available for the Cash in bank of a company for February of the current
year:
A.    Checks issued by the company during February, P130,000.  
B.    Outstanding checks, January 31, P52,000.
C.    Customer's check representing receipts in January amounting to P12,000 was erroneously
recorded by the company as P21,000.
D.    Check of the company in January amounting to P20,000 was erroneously recorded by the
company as P2,000.
E.     Checks paid by the bank in February, P150,000.  
F.     Erroneous bank credit in January, P10,000.
G.    Erroneous bank charge in February, P12,000.
H.    Bank service charge, January, P2,000.
I.      Bank service charge, February, F3,000.

Required:
      How much is the outstanding checks on February 28 of the current year?

- P32,000.00

The following information, relative to the credits per books and debits per bank of a company,
were disclosed by the records of the company and its bank statement with BPI:
Required: 
     What is the outstanding checks at the end of February?

- P99,000.00

Petty cash fund is

- Money kept on hand for making minor disbursements of coin and currency rather than
by writing checks

The internal control feature specific to petty cash is

- Imprest system

The following data are available for the Cash in bank of a company for February of the current
year:
A.    Checks issued by the company during February, P130,000.  
B.    Outstanding checks, January 31, P52,000.
C.    Customer's check representing receipts in January amounting to P12,000 was erroneously
recorded by the company as P21,000.
D.    Check of the company in January amounting to P20,000 was erroneously recorded by the
company as P2,000.
E.     Checks paid by the bank in February, P150,000.  
F.     Erroneous bank credit in January, P10,000.
G.    Erroneous bank charge in February, P12,000.
H.    Bank service charge, January, P2,000.
I.      Bank service charge, February, F3,000.

Required:
     What is the unadjusted bank disbursements in February?

- P175,000.00
Data concerning the cash records of Harold Company for the months of September and October
2018 follow:
a) Unadjusted book balance on September 30 amounted to P2,258,000
b) Total receipts per book in October, P1,400,000.
c) Total disbursements per book in October, P2,400,000.
d) Unadjusted bank balance on September 30 amounted to P2,100,000.
e) Total credits per bank in October amounted to P1,200,000.
f) Total debits per bank in October amounted to P2,500,000.
g) NSF checks on September 30 amounted to P60,000 while on October 31 amounted to
P40,000.
h) Collection of accounts receivable not recorded by the company on September 30, P30,000
and P50,000 on October 31.
i) Erroneous bank charge on September 30, P10,000 and P18,000 on October 31.
j) Erroneous bank credit on September 30, P7,000 and P9,000 on October 31.
k) Understatement of check in payment of rent payable on September 30, P90,000 and
P120,000 on October 31.
l) Deposit in transit on September 30, P130,000.

m) Outstanding checks on October 31, P30,000.

Required:
     How much is the outstanding checks September 30?

- P30,000.00

Bank statements provide information about all of the following, except

- Errors made by the depositor

Data concerning the cash records of Harold Company for the months of September and October
2018 follow:
a) Unadjusted book balance on September 30 amounted to P2,258,000
b) Total receipts per book in October, P1,400,000.
c) Total disbursements per book in October, P2,400,000.
d) Unadjusted bank balance on September 30 amounted to P2,100,000.
e) Total credits per bank in October amounted to P1,200,000.
f) Total debits per bank in October amounted to P2,500,000.
g) NSF checks on September 30 amounted to P60,000 while on October 31 amounted to
P40,000.
h) Collection of accounts receivable not recorded by the company on September 30, P30,000
and P50,000 on October 31.
i) Erroneous bank charge on September 30, P10,000 and P18,000 on October 31.
j) Erroneous bank credit on September 30, P7,000 and P9,000 on October 31.
k) Understatement of check in payment of rent payable on September 30, P90,000 and
P120,000 on October 31.
l) Deposit in transit on September 30, P130,000.

m) Outstanding checks on October 31, P30,000.

Required:
     How much is the adjusted cash disbursements during October?

- P2,410,000.00

Which of the following must be deducted from the bank statement balance in preparing a bank
reconciliation which ends with adjusted cash balance?

- Outstanding check

What is the major purpose of an imprest petty cash fund?

- To effectively control cash disbursements

Data concerning the cash records of Harold Company for the months of September and October
2018 follow:
a) Unadjusted book balance on September 30 amounted to P2,258,000
b) Total receipts per book in October, P1,400,000.
c) Total disbursements per book in October, P2,400,000.
d) Unadjusted bank balance on September 30 amounted to P2,100,000.
e) Total credits per bank in October amounted to P1,200,000.
f) Total debits per bank in October amounted to P2,500,000.
g) NSF checks on September 30 amounted to P60,000 while on October 31 amounted to
P40,000.
h) Collection of accounts receivable not recorded by the company on September 30, P30,000
and P50,000 on October 31.
i) Erroneous bank charge on September 30, P10,000 and P18,000 on October 31.
j) Erroneous bank credit on September 30, P7,000 and P9,000 on October 31.
k) Understatement of check in payment of rent payable on September 30, P90,000 and
P120,000 on October 31.
l) Deposit in transit on September 30, P130,000.

m) Outstanding checks on October 31, P30,000.

Required:
How much is the adjusted cash in bank balance September 30?

- P2,138,000.00

Data concerning the cash records of Harold Company for the months of September and October
2018 follow:
a) Unadjusted book balance on September 30 amounted to P2,258,000
b) Total receipts per book in October, P1,400,000.
c) Total disbursements per book in October, P2,400,000.
d) Unadjusted bank balance on September 30 amounted to P2,100,000.
e) Total credits per bank in October amounted to P1,200,000.
f) Total debits per bank in October amounted to P2,500,000.
g) NSF checks on September 30 amounted to P60,000 while on October 31 amounted to
P40,000.
h) Collection of accounts receivable not recorded by the company on September 30, P30,000
and P50,000 on October 31.
i) Erroneous bank charge on September 30, P10,000 and P18,000 on October 31.
j) Erroneous bank credit on September 30, P7,000 and P9,000 on October 31.
k) Understatement of check in payment of rent payable on September 30, P90,000 and
P120,000 on October 31.
l) Deposit in transit on September 30, P130,000.

m) Outstanding checks on October 31, P30,000.

Required:
How much is the deposit in transit October 31?

- P369,000.00

Data concerning the cash records of Harold Company for the months of September and October
2018 follow:
a) Unadjusted book balance on September 30 amounted to P2,258,000
b) Total receipts per book in October, P1,400,000.
c) Total disbursements per book in October, P2,400,000.
d) Unadjusted bank balance on September 30 amounted to P2,100,000.
e) Total credits per bank in October amounted to P1,200,000.
f) Total debits per bank in October amounted to P2,500,000.
g) NSF checks on September 30 amounted to P60,000 while on October 31 amounted to
P40,000.
h) Collection of accounts receivable not recorded by the company on September 30, P30,000
and P50,000 on October 31.
i) Erroneous bank charge on September 30, P10,000 and P18,000 on October 31.
j) Erroneous bank credit on September 30, P7,000 and P9,000 on October 31.
k) Understatement of check in payment of rent payable on September 30, P90,000 and
P120,000 on October 31.
l) Deposit in transit on September 30, P130,000.

m) Outstanding checks on October 31, P30,000.

Required:
     How much is the adjusted cash in bank balance October 31?

- P1,148,000.00
 Which of the following items must be added to the cash balance per ledger in preparing a bank
reconciliation which ends with adjusted cash balance?

- Note receivable collected by bank in favor of the depositor and credited to the account
of the depositor

The “Cash” account in the ledger of a company on December 31, 2017 had a balance of
P1,750,000.  A review of the account however disclosed the following:
1.     The sales book was left open up to January 10, 2018 and cash sales totalling P18,200 were
considered as cash sales in 2017.
 2.     Checks of P9,300 in payment of utilities were prepared before December 31, 2017 and
recorded in the books on the same date, but mailed or delivered only on  January 5, 2018.
3.     Checks with January, 2018 dates totalling P 17,800 are being held by the cashier and were
included as part of cash on December 31, 2017.  The company’s experience shows that
postdated checks are eventually realized.
4.     Customer’s check for P11,500 deposited with the bank  on December 15, 2017 was
returned on December 18, 2017.  The return was not recorded in the books.
5.     The cash account includes P 230,000 set aside for payment of dividends.
6.     The cash account includes a check received from a customer in May, 2017 for P3,500,
which the company failed to deposit.  Verification from the customer reveals that the amount
will eventually be realized.
7.     The cash account includes change fund amounting to P 5000.  When the fund was
counted, only P 4,450 was found.
8.     The cash account includes P400,000 fund for payroll. 
9.     The cash account includes petty cash fund amounting to P 20,000.  The fund was last
replenished on December 24, 2017.  When the fund was counted on January 3, 2018, the
following were found:
oins                                                       
with December, 2017 dates                        
with January, 2018 dates                            
10.    An examination of the company’s sales invoice revealed that P3,500 check was received
on December 30, 2017 from sale of scrap materials.  The amount cannot be traced from the
cash receipts book but was verified to have been deposited to the bank.

Required:
     What is the correct amount of cash to be presented on December 31, 2017 balance sheet?

- P1,705,550.00

The following data are available for the Cash in bank of a company for February of the current
year:
A.    Checks issued by the company during February, P130,000.  
B.    Outstanding checks, January 31, P52,000.
C.    Customer's check representing receipts in January amounting to P12,000 was erroneously
recorded by the company as P21,000.
D.    Check of the company in January amounting to P20,000 was erroneously recorded by the
company as P2,000.
E.     Checks paid by the bank in February, P150,000.  
F.     Erroneous bank credit in January, P10,000.
G.    Erroneous bank charge in February, P12,000.
H.    Bank service charge, January, P2,000.
I.      Bank service charge, February, F3,000.

Required:
      What is the unadjusted book disbursements in February?

- P159,000.00

The imprest petty cash fund account is debited

- When the fund is created and when the size of the fund is increased.
Which of the following would be added to the balance per bank statement to arrive at the
correct cash balance?

- Deposit in transit

A cash over and short account

- Is debited when the petty cash fund proves out short.

Which of the following statements in relation to a certified check is not true?

- A certified check is one drawn by a bank upon itself.

Which of the following statements in relation to bank reconciliation is true?

- Bank service charge will cause the cash balance per ledger to be higher than that
reported by the bank, all other things being equal.

If the balance shown in the bank statement is less than the correct cash balance and neither the
entity nor the bank has made any errors, there must be

- Deposits in transit