1. Denji Company reported the checkbook balance at December 31, 2021 was P123,450.

In addition,
Denji held the following items in its safe on that date. Check payable to Denji, deposited December
15 and included in December 31 checkbook balance, but returned by the bank on December 30
stamped “NSF”. The check was redeposited on January 2, 2022 and cleared on January 9, 2022. –
P12,500; Check payable to Denji dated January 2, 2022 in payment of a sale made in December
2021, not included in December 31 checkbook balance – P15,000; Check drawn on Denji’s account,
payable to a vendor, dated and recorded in Denji’s books on December 31, but not mailed until
January 10, 2022.

What is the amount of cash in Denji’s December 31, 2021 balance sheet?
A. P127,675
B. P123,450
C. P119,225
D. P104,225

2. Logitech Company provided the following information relating to current operations – Accounts
receivable, January 1, P4,000,000; Accounts receivable collected, P8,400,000; Cash sales,
P2,000,000; Inventory, January 1, P4,800,000; Inventory, December 31, P4,400,000; Purchases,
P8,000,000; Gross margin on sales, P4,200,000.
What amount should Logitech be reported as accounts receivable on December 31?

A. P8,200,000
B. P6,200,000
C. P2,000,000
D. P4,200,000

3. Juicer Company’s allowance for doubtful accounts was P1,000,000 at the end of 2021 and P90,000
at the end of 2020. For the year ended December 31, 2021, the entity reported bad debts expense
of P160,000 in the income statement.

What amount was debited to the appropriate account to write off uncollectible accounts in 2021?
A. P60,000
B. P100,000
C. P160,000
D. P260,000

4. If the month-end bank statement shows a balance of P36,000, outstanding checks are P12,000, a
deposit of P4,000 was in transit at month end, and a check for P500 was erroneously charged by the
bank against the account, the correct balance in the bank account at month end is?
a. P27,500 c. P20,500.
b. P28,500 d. P43,500

5. On December 31, 2022, Saul Goodman Company reported cash and cash equivalents of P5,255,000
comprised of the following:
Petty cash fund (imprest balance) P5,000
Undeposited collections 120,000
Cash in Bank - McGill Bank checking account 900,000
Cash in Bank – McGill Bank payroll fund 1,950,000
Cash in Bank - McGill Bank dividend fund 750,000
Cash in Bank - Binaluyo Bank of Asia (Foreign currency) 800,000
Cash in Bank - money market instrument, 60 days 250,000
 Redeemable preference shares, due in 2 months as of 12/31/22 480,000
Total cash and cash equivalents P5,255,000

Additional information as of December 31, 2022:

The petty cash fund includes unreplenished vouchers amounting to P2,350 and P2,550 of bills and
coins. Included in the undeposited collections were: NSF check received from customer on December
29, 2022 for P15,000 and P20,000 of customers check received on December 30, 2022 dated January 4,
2023. Included in the checks drawn and recorded against McGill checking account were: P180,000
payable to Moira Company dated January 3, 2023 and P145,000 of check issued to Bellie Company
dated June 15, 2022 (not encash as of 12/31/2022). The $16,000 cash in Binaluyo Bank of Asia is not
restricted, closing rate on December 31, 2022 is P56 =$1. The redeemable preference shares were
originally purchased by Saul Goodman Company last November 1, 2022.

What amount should Saul Goodman Company report as cash and cash equivalents on December 31,
2022?

a. P5,638,650 c. P5,255,550
b. P5,542,650 d. P5,158,550

6. Tan Company had the following transaction in its accounts receivable during 2022:

Accounts receivable, beginning balance P2,700,000

Allowance for bad debts, beginning 33,750
Sales on account made to customers 3,950,000
Collection of accounts from credit customers 4,350,000
Sales discounts granted 50,000
Accounts written off as uncollectible 80,000

The following transactions were included in the recorded sales on account during 2022:
[1.] Invoice dated December 28, 2022 for P420,000 was shipped and received by the buyer on
December 31, 2022, terms FOB Destination point.
[2.] Invoice dated and recorded on November 29, 2022 for P600,000 was received by another entity on
December 1, 2022. The agreement of the parties is to remit the selling price less commission
upon sale of the goods. None of the goods have been sold yet as of December 31, 2022.
The following summary was prepared from an aging of accounts receivable outstanding on December
31, 2022:

Number of days outs. % of the ending balance % uncollectible 0 - 30 days

50% 2%
31 - 60 days 30% 5%
Over 60 days 20% 15%
What amount should Tan Company recognized as bad debt expense in profit or loss for period ending
December 31, 2022?
a. P132,600 c. P86,350
b. P120,100 d. P56,750

7. Choujin Company conducted a physical count on December 31, 2022, which revealed inventory with
a cost of P4,410,000. The following items were excluded from the physical count:
Goods held by Choujin on consignment P700,000
 Goods shipped by Choujin FOB Destination to a customer on December 31, 2022 and was
received by the customer on January 3, 2023 400,000
Goods shipped by Choujin FOB Shipping Point to a customer on December 31, 2022 and was
received by the customer on January 6, 2023 420,000
Goods shipped by a vendor FOB Destination on December 31, 2022 and was received by
Choujin on January 10, 2023 910,000
Goods purchased FOB Shipping Point was shipped by the supplier on December 31, 2022 and
received by Choujin on January 5, 2023 640,000

What amount should Choujin Company report as inventory as of December 31, 2022?
a. P2,160,000 c. P5,450,000
b. P4,350,000 d. P5,640,000

8. Cash equivalents do not include:

a. Two-month treasury bills
b. Commercial papers purchased with three months of maturity
c. Money market instrument (one month)
d. Equity investments at FV through profit or loss (expected to be sold in two months)

9. Which of the following is recorded by a credit to accounts receivable but do not affect the net
realizable value of the accounts receivable?
a. estimated sales return at year-end.
b. provisions for estimated bad debts.
c. write-off of accounts receivable proven to be uncollectible.
d. sale of merchandise on account with 2/10, n/30 credit terms.

10. Which of the following shall be included in the reported balance of inventory in the statement of
financial position?
a. cost of goods shipped out on consignment to another entity.
b. cost of goods purchased with a buyback agreement.
c. cost of goods sold in transit – CIF terms.
d. cost of undelivered goods sold in bill and hold agreement

The books of Makima Company disclosed a cash balance of P687,570 on December 31, 2021. The bank
statement as of December 31 showed a balance of P 547,800. Additional information that might be
useful in reconciling the two balances follows:

• Check number 748 for P30,000 was erroneously recorded on the books as P45,000.
• A customer’s note was dishonored on December 29 (maturity date). The bank charged Makima’s
account for P142,650, including a protest fee of P2,650.
• The deposit of December 24 was recorded on the books as P28,950, but it was actually a
deposit of P27,000.
• Outstanding checks totaled P98,850 as of December 31.
• There were bank service charges for December of P2,100 not yet recorded on the books.
• Makima’s account had been charged on December 26 for a customer’s NSF check for P12,960.
• Makima properly deposited P6,000 on December 31 that were not yet reflected in the bank
statement.
• Receipts of December 31 for P134,250 were recorded by the bank on January 2.
 • A bank memo stated that a customer’s note for P45,000 and interest of P1,650 had been
collected on December 27, and the bank charged a P360 collection fee.

11. How much is the adjusted Cash in Bank on December 31, 2021?
a. P583,200
b. P577,200
c. P589,200
d. P512,400

12. How much is the net adjustment to cash in bank account on December 31, 2021?

a. P104,370
b. P110,370
c. P 98,370
d. P175,170

13. On April 1, 2020, Florida Company sold equipment and received a four-year noninterest bearing
P3,200,000 note. The note is payable in annual installments of P800,000 with the first installment
due on March 31, 2021. The present value of the note is P2,591,760. Effective interest on this
note was computed at 9%.

What amount relating to the note should Florida present as non-current at December 31, 2020?
a. 625,057
b. 1,407,270
c. 2,025,018
d. 2,591,760

15. Flockheart Company uses the net method of accounting for cash discounts. In one of its
transactions on December 15, 2021, Flockheart sold merchandise with a list price of P500,000 to
Atlanta Company who was given a trade discount 15% and 20%. Credit terms were 2/10, n/30.
The goods were shipped FOB destination, freight collect. Total freight charges amounted to
P75,000. On December 20, 2021, the customer returned damaged goods originally billed at
P60,000. The customer paid on January 2, 2022.

What is the total receivable to be reported on December 31, 2021?

a. P199,400
b. P274,400
c. P280,000
d. P205,000

The accounting records of Aki Corporation included the following:

December 31, 2021 December 31, 2022

Accounts receivable 735,000
Allowance for uncollectible accounts 16,200
Sales on account P4,500,000
Cash collected from credit customers 4,200,000
Among the cash collections was the full recovery of a P16,000 receivable from Beam Company whose
account had been written off worthless late in 2021. During 2022, it was necessary to write-off
uncollectible customers’ accounts totaling P20,200.
On December 1, 2022, a customer settled his account amounting to P260,000 by a 6%, six-month notes.

On December 31, 2022, the accounts receivable included P100,800 past due accounts. After careful
study of all past-due accounts, the management estimated that the probable loss contained therein
was 10%. In addition, 2% of the current accounts receivable might prove uncollectible.

16. How much is the Accounts Receivable ledger balance as of December 31, 2022?
a. P770,800
b. P747,320
c. P11,480
d. P23,480

17. How much is the bad debts expense for the year ended December 31, 2022?
a. P770,800
b. P747,320
c. P11,480
d. P23,480

18. How much is the balance of the allowance for uncollectible accounts after all the necessary
adjusting entries on December 31, 2022?
a. P770,800
b. P747,320
c. P11,480
d. P23,480

19. On January 1, 2022, Kishibe Company had a balance in the Allowance for Doubtful Accounts of
P10,000. During 2022, it wrote off P13,500 of accounts and collected P2,000 on accounts
previously written off. The balance in Accounts Receivable was P200,000 at January 1 and
P250,000 at December 31. At December 31, 2022, Kishibe Company estimated that 5% of accounts
receivable will prove to be uncollectible.
What is the Bad Debts Expense for the year 2022?
a. P14,000
b. P11,000
c. P2,500
d. P12,500

Nayuta Company reported the following notes receivable balances as of December 31, 2019:

Notes receivable from sale of goods P2,000,000

Notes receivable from sale of equipment 3,000,000
Notes receivable from services rendered 1,000,000

Additional information:
 a. The notes receivable from sale of goods has a coupon rate of 12% per annum dated July 1,
2019. The note is payable in two equal annual installments of P1,000,000 plus interest on the
unpaid balance every July 1. The initial principal and interest payments were made on July 1,
2020.
b. The notes receivable from sale of equipment is dated January 1, 2019, has a stated rate of
12%. The principal and compounded interests are to be received on maturity date. The note
matures on January 1, 2021.

c. The notes receivable from services rendered dated December 31, 2019 has a stated rate of
12% payable annually every December 31. The note matures on December 31, 2021.

Present value of P1 at 12% for two periods is 0.797. Present value of P1 at 12% for one period is 0.893.
The present value of an ordinary annuity of 1 at 12% for two periods is 1.690.
20. How much is the interest receivable on December 31, 2020 related to notes receivable from sale of
goods?
a. P60,000
b. P120,000
c. P180,000
d. P0

21. How much is the interest income for the year 2020 related to notes receivable from sale of
equipment?
a. P360,000
b. P403,200
c. P286,920
d. P763,200

22. How much is the carrying value of notes receivable on December 31, 2020 related to notes
receivable from services rendered?
a. P893,000
b. P1,120,000
c. P1,000,000
d. P797,000

23. On October 1 of the current year, an entity received a one-year note receivable bearing interest at
the market rate. The face amount of the note receivable and the entire amount of the interest are
due on September 30 of next year. The interest receivable on December 31 of the current year
would consist of an amount representing
a. Three months of accrued interest income
b. Nine months of accrued interest income
c. Twelve months of accrued interest income
d. The excess on October 1 of the present value of the note receivable over its fact
amount

24. The account title “Inventories” as shown on an entities financial statements include
a. Goods sold with a buyback arrangement
 b. Goods held on consignment
c. Unused supplies for administrative purposes
d. Goods in transit, purchased FOB buyer
25. Which of the following statements is incorrect?

a. Receivables other than trade receivables are initially recognized at fair value plus transaction
cost.
b. Unearned interest income on a receivable is treated as contra-asset account rather than a
liability.
c. A short-term, non-trade receivable may nevertheless be discounted if it clearly contains a
financing component.
d. All interest-bearing notes need not be discounted.

26. The concept that best supports the discounting of notes to their present value is

a. Time value of money

b. Matching
c. Accrual basis
d. Legal form over substance

27. On March 1, 2022, Fata Morgana Co. received a 12% noted dated January 1, 2022. Principal and
interest on the note are due on July 1, 2021. On initial recognition, which of the following
accounts increased?

a. Prepaid interest
b. Interest receivable
c. Unearned interest income
d. Interest Revenue

28. Inventories are measured at

a. Cost
b. Net realizable value
c. Replacement Cost
d. Lower of a and b

29. If the merchandise inventory at the end of the period is understated,

a. Gross profit will be overstated.

b. Total equity will be overstated.
c. Gross profit will be understated.
d. Cost of merchandise sold will be understated.

30. Inventories are classified on the statement of financial performance as:

a. Current assets
b. Non-current assets
c. Current / Non-current depending on its nature
d. None of the above
SHORT PROBLEMS:

1. Pochita Co. received a non-interest bearing note with face amount of P1,000,000 from a
customer on January 1, 2021. The note is due in five equal annual installments every December
31. The effective interest rate is 12%. How much is the current portion of the note on
December 31, 2022?

2. The current and non-current portions of Wren Co.’s noninterest bearing note receivable on
December 31, 2021 are P127, 104 and P480,366, respectively. The note has a face amount of
P1,000,000, dated January 1, 2021 and is due in 5 equal annual installments every December
31. Wren Co. reported interest income of P86,515 in 2021 and P72,896 in 2022. How much is
the unamortized discount on the note on December 31, 2023?

3. On Jan 1, 2021, Rendezvous Co. received a noninterest-bearing note with face amount of
P1,000,000, due in five equal annual installments starting on Jan. 1, 2021, and every 1 st of
January thereafter. The current rate on Jan. 1, 2021 was 12%. How much are the interest
income of the note on December 31, 2021, respectively?

4. On Jan 1, 2021, Juno Co. received a 3-year, P900,000 non-interest bearing note receivable due
as follows: P400,000 on December 31, 2021, P300,000 on December 31, 2022, and P200,000 on
December 31, 2023. The prevailing rate of interest for this type of note is 10%. How much is
the carrying amount of the receivable on December 31, 2021?

5. On Jan 1, 2021, Platinum Co. received a 3-year, noninterest-bearing note with face amount of
P2,100,000 due in equal semi annual payments every July 1 and December 31. The effective
interest rate is 10%. What is the carrying amount of the note on December 31, 2021?

COMPREHENSIVE PROBLEM:

Xnova Corp. is an international company dealing with retail of microchips for cellular phones.
The accountant of Xnova provided the following information regarding its sales for year-end &
beginning next year.
         
Recorded as Sales in December 2022    
         
Selling Price Cost Terms Shipment Date Received by Customers
18,000.00 16,500.00 FOB Shipping Point 12/26/2022 12/29/2022
12,500.00 10,200.00 FOB Destination 12/26/2022 12/29/2022
8,680.00 7,240.00 FOB Destination 12/28/2022 1/2/2023
14,200.00 12,500.00 Shipped to consignee 12/29/2022 1/2/2023
9,000.00 7,500.00 FOB Shipping Point 12/30/2022 1/2/2023
10,000.00 7,750.00 FOB Destination 12/31/2022 1/3/2023
7,800.00 6,100.00 FOB Shipping Point 12/31/2022 1/2/2023
14,000.00 12,000.00 Shipped to consignee 12/31/2022 1/2/2023
         
 Recorded as Sales in January 2023    
         
Selling Price Cost Terms Shipment Date Received by Customers
21,000.00 18,200.00 FOB Shipping Point 12/31/2022 1/3/2023
10,500.00 8,800.00 FOB Destination 12/31/2022 1/3/2023
4,500.00 3,200.00 FOB Destination 1/2/2023 1/3/2023
6,500.00 5,000.00 FOB Shipping Point 1/2/2023 1/5/2023
         
A count of all inventories within the premises was made in the morning of December 31, 2022 prior to
any shipment during the day. The total cost of the count was recorded as inventories as of December
31, 2022. The goods shipped to consignees are still unsold at December 31.

The unadjusted balances show the following:

Accounts Receivable P 276,500

Inventories P 425,000
Sales P 1,320,000
Cost of Sales P 842,000

Requirements:
Determine the adjusted balances of:

1. Accounts Receivable
2. Inventories
3. Sales
4. Cost of Sales

Answer:

1. 250,620
2. 420,440
3. 1,294,120
4. 846,560