Jullie Carmelle H.

Chatto BSA – 4
Accounting 16: Problems – Part I

Problem I – Killua Company

Requirement 1: ₱ 24,040,000.00
Cash in Bank (5,000,00 + 500,000) ₱ 5,500,000.00
Petty Cash (50,000 – 10,000) 40,000.00
Notes Receivable 4,000,000.00
Accounts Receivable (6,000,000 + 1,500,000) 7,500,000.00
Inventory 3,000,000.00
Bond Sinking Fund 3,000,000.00
Debit Balances in Account Payable 1,000,000.00
Total Current Assets ₱ 24,040,000.00
Add back:
 Bank overdraft of ₱500,000 because it is not netted against the Cash in Bank but should be
classified as current liability.
 Customers’ credit account of ₱ 1,500,000 in order to get the correct balance of A/R
 Net of Suppliers’ account of ₱ 1,000,000 because it is in debit balance considered as a
receivable.
Subtract:
 Unreplenished petty cash expenses of ₱10,000 because only the replenished portion should
be included as petty cash.
Take note:
Notes Receivable: by default, it is considered current, unless stated otherwise.
Bond Sinking Fund: considered as current asset if the liability of related account is a current liability
(payable within one year)

Requirement 2: ₱ 19,000,000.00
Bank Overdraft ₱ 500,000.00
Credit Balances in Accounts Receivable 1,500,000.00
Accounts Payable (7,000,000 + 1,000,000) 8,000,000.00
Notes Payable 4,000,000.00
Bonds Payable 3,000,000.00
Accrued Expenses 2,000,000.00
Total Current Liabilities ₱ 19,000,000.00
Add:
 Bank overdraft of ₱ 500,000 because it was netted in the Cash in bank but supposedly it is a
current liability.
 Customers’ credit account of ₱ 1,500,000 because it is in credit balance
  Net of Suppliers’ account of ₱ 1,000,000 in order to get the correct balance of A/P

Problem II – Montecarlo Company

Requirement 1: ₱ 2,110,000.00
Earnings from long term contracts ₱ 6,680,000.00
Cost and Expenses 5,180,000.00
Income before income tax ₱ 1,500,000.00
Less: Income Tax (1,500,000 x 30%) 450,000.00
Net Income ₱ 1,050,000.00
Retained Earnings Unappropriated 900,000.00
Retained Earnings Restricted 160,000.00
Total Retained Earnings ₱ 2,110,000.00
Add:
 The retained earnings unrestricted / unappropriated of ₱900,000 because it is where you could
allot for dividends
Formula:
Earnings less cost and expenses = EBIT – (EBIT x 30%) = Net Income + Applicable Retained
Earnings = TOTAL RETAINED EARNINGS

Requirement 2: ₱ 1,620,000
Note Payable – Noncurrent ₱ 1,620,000.00

Requirement 3: ₱ 5,700,000.00
Cash ₱ 600,000.00
Accounts Receivable 3,500,000.00
Cost in Excess of Billings 1,600,000.00
Total Current Assets ₱ 5,700,000.00
Add:
 Cost of Excess in Billings on Long-term contracts of ₱ 1,600,000 is actually a receivable
(nasubraan ug bayad)
Take Note:
 Billings in excess of cost on long-term contracts of ₱ 700,000 is a current liability.
 Prepaid Taxes of ₱ 450,000 is an asset BUT it is just an estimated tax expense.

Requirement 4: ₱ 4,890,000.00
Total Retained Earnings ₱ 2,110,000.00
 Share Capital 750,000.00
Share Premium 2,030,000.00
Total Shareholder’s Equity ₱ 4,890,000.00
Formula:
Retained Earnings + Share Capital + Share Premium = TOTAL SHE

Problem III – HXH Company

Requirement 1: ₱ 8,200,000.00
Beginning Inventory ₱ 400,000.00
Gross Purchases ( Squeeze) 8,200,000.00
Freight In 300,000.00
Purchase Returns (900,000.00)
Goods Available for Sale ₱ 8,000,000.00
Ending Inventory 500,000.00
Cost of Goods Sold 7,500,000.00
Formula:
Inventory, Beg
Add: Purchases
Freight-in
Less: Purchase R/A
Purchase Discounts
Goods Available for Sale
Less: Inventory, End
COGS / COS

Problem IV – Vash Inc.

Requirement 1: ₱ 150,000.00
Net Sales ( 950,000 x 5) ₱ 4,750,000.00
Cost of Sales (1,150,000 x 4) 4,600,000.00
Gross Income ₱ 150,000.00
Take Note:
 A/R Turnover Formula = Net Sales / Average Accounts Receivable
5 = Net Sales / (900,000 + 1,000,000)
Net Sales = 950,000 x 5
Net Sales = 4,750,000
  Inventory Turnover = COGS / Ave. Inventory
4 = COGS / (1,100,000 + 1,200,000)
COGS = 1,150,000 x 4
COGS = 4,600,000
Formula:
Net Sales – COGS = Gross Income / Gross Profit (Still @ Gross because expenses isn’t
computed yet.

Problem V – Thor Inc

Requirement 1: ₱ 8,750,000.00
Net Income per book ₱ 7,500,000.00
Add: Unrealized Loss as component of OCI ₱ 500,000.00
Adjustment of Profit of Prior Year 750,000.00 1,250,000.00
Adjusted Net Income ₱ 8,750,000.00
Take Note:
 Statement of Comprehensive Income = Basic Income Statement + OCI Items
Add back:
 Unrealized loss on FC translation of ₱500,000 because it is already deducted from the
reported net income when it should be in the other comprehensive income (not part from Basic
Income Statement)
 Adjustment of Profit of Prior Year of ₱750,000 because it is already deducted from the
reported net income when it is should not be included since it is a prior year error (should be in
retained earnings)

Problem VI – Rizuka Inc.

Requirement 1: ₱ 175,000.00
Litigation Settlement Loss ₱ 250,000.00
x 70%
After Tax Effect of Litigation Loss ₱ 175,000.00
Take note:
 Depreciation for 2018 is to be treated retrospectively, there is no effect on continuing
operations for 2020.
 Litigation Settlement is included due to the tax effect. 30% should not be included for the tax.

Requirement 2: ₱ 595,000.00
After-tax effect of litigation loss ₱ 175,000.00
After-tax effect of litigation Loss on discontinued division
420,000.00
(600,000 x 70%)
 Total effect on Net Income ₱ 595,000.00
 Depreciation for 2018 is to be treated retrospectively, there is no effect on net income for 2020.
 Litigation Settlement is included due to the tax effect. 30% should not be included for the tax,
hence, affects the net income.
 Disposed Division has an effect on net income as it is recorded as an after tax effect of
discontinued division. 30% tax should not be included.

Problem VII – Eugene Inc.

Requirement 1: ₱ 3,400,000.00
Cash – Coin, Currency, Savings, and Checking ₱ 3,400,000.00

Requirement 2: ₱ 3,500,000.00
Government Treasury Bills ₱ 2,000,000.00
Commercial Papers 1,500,000.00
Total Cash Equivalents ₱ 3,500,000.00
Take Note:
 Gov’t treasury bills of ₱2,000,000 is a cash equivalent since it has still 2 months to go until
maturity
 Commercial papers of ₱1,500,000 is a cash equivalent since it has still 3 months to go until
maturity.

Problem VIII – Raiku Inc.

Requirement 1: ₱ 4,800,000.00
Check Book Balance ₱ 5,000,000.00
Collection by Bank (500,000.00)
Undelivered Company Check 300,000.00
Adjusted Cash Balance ₱ 4,800,000.00
Take Note:
 Check payable to Raiku, dated 1/21 of ₱2,000,000 is not included because it is post-dated.
 Certificate of Time Deposit is not cash but a cash equivalent

Deduct:
 Check payable to Raiku, returned as No Sufficient Funds should be deducted because it is to
be considered as A/R in 12/31 because wala pa masulod sa account, naabtan nag cut-off.
Add:
  Check deducted on Raiku’s account of ₱300,000 is an undelivered check. It is recorded as
paid as of 12/31, recorded as deducted already from cash, but actually deducted in 1/21,
amount should be returned.

Problem IX – Geiger Coompany

 BOOK RECONCILING ITEMS

o Credit memos – deposit credited by the bank to the account of the depositor but not yet
recorded in the book as cash receipts (wala pa narecord as receipts: increase bank
balance)
 Proceeds of bank loan – automatically credited to the account of the depositor
 Matured time deposits transferred by the bank to the current account of the
depositor
 Note Collected by the bank
o Debit memos – items not representing checks paid by banks but are charged or debited
by the bank to the account of the depositor (wala pa narecord as disbursement:
decrease bank balance)
 NSF
 Technically defected checks
 Bank Service Charges
 Reduction of Loan
o Errors
 BANK RECONCILING ITEMS
o Deposits in Transit – recorded as depositors in the book as cash receipts (wala pa ma
record sa bank due to cut-off or clearing)
o Outstanding Checks – issued checks but wala pa ma encash sa giissuehan (wala pa
deduct sa bank statement)
 BANK RECONCILATION FORM
o Adjusted Balance Method
 Adj Book Balance: Add Credit Memo Less Debit Memo
 Adj Bank Balance: Add Deposits in Transit Less Outstanding Checks
o Book to Bank Method – magsugod sa book
 Book + CM + OC – DM – DIT = Bank Balance
o Bank to Book Method
 Bank + DIT + DM – OC – CM = Book Balance
Requirement 1: ₱ 4,571,000.00
Balance per book ₱ 4,500,000.00
Collection by bank 94,000.00
NSF Customer Check (32,000.00)
Book Error – Customer Check (54,000 – 45,000) (9,000.00)
Book Error – Check Written (97,000 – 79,000) 18,000.00
Adjusted Book Balance ₱ 4,571,000.00
Take Note:
 Deposits in Transit of ₱230,000 is not included in the adjusted book balance bec it is a bank
reconciling item
Add:
 Collection by bank of ₱94,000 is a credit memo. Sila ray nakakolekta but wala pa nato na
record

Deduct:
 NSF of ₱32,000 was deducted in the reported cash in bank of the bank record but not in the
book records
  Overstatement of Customer Check in the Book of ₱ 9,000 (54,000 sa book but only 45,000
sa bank)
 Understatement of Written Check in the Book of ₱18,000 (97,000 sa bank but 79,000 sa
book)
Problem X – Ash Company

Requirement 1: ₱ 9,000,000.00
Balance per Book ₱ 8,500,000
Note Collected by bank 950,000.00
Total 9,450,000.00
Book Error ( 200,000 – 20,000) (180,000.00)
NSF Check (250,000.00)
Service Charge (20,000.00)
Adjusted Book Balance ₱ 9,000,000.00
Deduct:
 Disbursement understatement of ₱ 180,000, gamay ra ang girecord nga gigasto
 NSF Check of ₱250,000 recorded as receipts in the book but wala pa nato makuha ky
insufficient fund
 Service Charge of ₱20,000 is a debit memo

Requirement 2: ₱ 8,200,000.00
Balance per bank (squeeze) ₱ 8,200,000.00
Deposit in transit 1,000,000.00
Outstanding Checks (200,000.00)
Adjusted book Balance ₱9,000,000.00

Requirement 3: ₱ 500,000.00
Notes Receivable ₱ 1,000,000.00
Service Charge 50,000.00 ₱ 950,000.00

Accounts Payable ₱ 180,000.00

Accounts Receivable 250,000.00
Service Charge 20,000.00 450,000.00

Net Adjustment to Cash in Bank ₱ 500,00.00

Deduct:
 Service Charge of ₱50,000 from N/R since it will be deducted to the cash in bank
 Book error of ₱180,000 as A/P
 NSF of ₱250,000 is to be recorded to A/R not in the Cash In Bank

Problem XI – Leorio Company

Book Balance:
Beginning Book Balance
Add: Book Debits during the month / Cash Receipts (added in Cash in Bank)
Less: Book Credits during the month / Disbursements (deducted in Cash in Bank)
Ending Book Balance

Bank Balance:
Beginning Bank Balance
Add: Bank Credits during the month
Deposits & Credit memos (added in Cash in Bank)
Less: Bank Debits during the month
Checks paid & Debit Memos (deducted in Cash in Bank)
Ending Book Balance

Deposits in Transits:
Beginning Balance
+ Cash Receipts
- Deposits Acknowledged
Deposits in Transits

Outstanding Checks:
Beginning balance
+ Checks drawn by depositor
- Checks paid by the bank
Outstanding check
Requirement 1: ₱ 5,400,000.00
Balance per Book – June 30 ₱ 3,000,000.00
July bank deposits 9,000,000.00
July bank disbursements (7,000,000.00)
Balance per bank – July 31 5,000,000.00
July deposit in transit 1,000,000.00
July outstanding checks (600,000.00)
Adjusted Bank Balance ₱ 5,400,000.00

Requirement 2: ₱ 5,350,000.00
Balance per book – July 31 (squeeze) ₱ 5,350,000.00
Note collected by bank in July 200,000.00
NSF Customer check in July (140,000.00)
Service Charge in July (10,000.00)
Adjusted book Balance ₱ 5,400,000.00

Requirement 3: ₱ 9,400,000.00
Deposits per bank statement for July ₱ 9,000,000.00
Note collected by Bank in July (200,000.00)
Deposit in transit – June 30 400,000.00
Deposit in transit – July 31 1,000,000.00
Cash Receipts per book for July ₱ 9,400,000.00

Requirement 4: ₱ 6,550,000.00
Disbursements per bank – statement for July ₱ 7,000,000.00
NSF Check in July (140,000.00)
Service Charge in July (10,000.00)
Outstanding Checks – June 30 (900,000.00)
Outstanding Checks – July 31 600,000.00
Cash Disbursements for July ₱ 6,550,000.00

Problem XII – Recca Inc.

Requirement 1: ₱ 1,825,000.00
Accounts Receivable – January 1 ₱ 1,300,000.00
Add: Credit Sales 5,400,000.00
Total ₱ 6,700,000.00
Less: Collection from Customers ₱ 4,750,000.00
Accounts Written-Off 125,000.00 4,875,000.00
Accounts Receivable – December 31 ₱ 1,825,000.00

Problem XIII – Gringo Inc.

Requirement 1: ₱ 1,300,000.00
Accounts Receivable – January 1 ₱ 950,000.00
Credit Sales (5,900,000 – 2,100,000) 3,800,000.00
Total 4,750,000.00
Cash received from credit customers (3,024,000.00)
Sales Discount (126,000.00)
Accounts Receivable Written-Off (50,000.00)
Sales Returns and Allowances (250,000.00)
Accounts Receivable – December 31 ₱ 1,300,000.00

Requirement 2: ₱ 200,000.00
Allowance for doubtful accounts – January 1 ₱ 100,000.00
Recovery of Accounts Written-Off 80,000.00
Doubtful Accounts Expense (Squeeze) 70,000.00
Total 250,000.00
Accounts Written-Off (50,000.00)
Allowance for Doubtful Accounts – December 31 ₱ 200,000.00

Problem XIV – Orochimaru Inc

Requirement 1: ₱ 100,000.00
Allowance for doubtful accounts – January 1 ₱ 280,000.00
Recovery of Accounts Written-Off 500,000.00
Doubtful Accounts Expense (Squeeze) 100,000.00
Total 430,000.00
Accounts Written-Off (230,000.00)
Allowance for Doubtful Accounts – December 31 ₱ 200,000.00

Problem XV – Dvariant Inc.

Requirement 1: ₱ 20,000.00
0 – 15 days Amount ₱ 2,000,000.00
Discount Rate 2%
Available Discount ₱ 40,000.00
Collectible Rate 50 %
Sales Discount ₱ 20,000.00

Requirement 2: ₱ 210,000.00
Age Amount x Collectible Rate Total
16 – 30 days ₱ 1,400,000 x 5% ₱ 70,000.00
31 – 60 days ₱ 400,000 x 10% 40,000.00
Over 60 days ₱ 200,000 x 50% 100,000.00
Allowance for Doubtful Accounts ₱ 210,000.00

Requirement 3: ₱ 3,770,000.00
Accounts Receivable ₱ 4,000,000.00
Allowance for Sales Discount (20,000.00)
Allowance for Doubtful Accounts (210,000.00)
Net Realizable Value of Accounts Receivable ₱ 3,770,000.00

Problem XVI – Bambini Company

Requirement 1: ₱ 2,850,000.00
Note Payable ₱ 3,000,000.00
Finance Fee (150,000.00)
Cash Received – December 31 ₱ 2,850,000.00

Requirement 2: ₱ 1,130,000.00
Note Payable ₱ 3,000,000.00
Principal Payment
Remittance ₱ 1,900,000.00
Interest (3,000,000 x 12% x ½) (30,000.00) 1,870,000.00
Note Payable - December 31 ₱ 1,130,000.00

Requirement 3: ₱ 1,650,000.00
Accounts Receivable – assigned ₱ 4,000,000.00
Collections (2,000,000 – 100,000) (1,900,000.00)
Sales Discounts (100,000.00)
Sales Returns (150,000.00)
Accounts Written-Off (200,000.00)
Accounts Receivable – assigned, December 31 ₱ 1,650,000.00

Problem XVII – Zylus Inc.

Requirement 1: ₱ 5,386,849.00
Accounts Receivable ₱ 6,000,000.00
Factor Holdback (6,000,000 x 5%) (300,000.00)
Factoring Fee (6,000,000 x 3%) (180,000.00)
Interest (6,000,000 x 15% x 54/365) (133,151.00)
Cash Initially received from factoring ₱ 5,386,849.00

Requirement 2: ₱ 313,151.00
Factoring Fee (6,000,000 x 3%) ₱ 180,000.00
Interest (6,000,000.00 x 15% x 54/365) 133,151.00
Total Cost of Factoring ₱ 313,151.00