BSA 1201- FINANCIAL ACCOUNTING AND REPORTING

PRELIMINARY DEPARTMENTAL EXAM REVIEWER

TOPIC COVERAGE:
 Cash and Cash Equivalents (Nature, Composition, Presentation, Petty Cash Fund, Bank
Reconciliation)
 Accounts Receivable (Nature and Classification, Accounting for Accounts Receivable,
Discounts and Bad Debts)
 Investment in Debt and Equity Securities
THEORIES

1. A cash equivalent is a short-term, highly liquid investment that readily convertible into known
amounts of cash and
a. Is acceptable as a means to pay current liabilities
b. Has a current market value that is greater than its original cost.
c. Bears an interest rate that is at least equal to the prime rate of interest at the date of
liquidation
d. Is so near its maturity that it presents insignificant risk of changes in interest rates

2. The following statements relate to cash. Which statement is true?

a. The term "cash equivalent" refers to demand credit instruments such as money order and
bank drafts.
b. The purpose of establishing a petty cash fund is to keep enough cash on hand to cover
all normal operating expenses for a period of time
c. Classification of a restricted cash balance as current or noncurrent should parallel the
classification of the related obligation for which the cash was restricted
d. Compensating balances required by a bank should always be excluded from cash and
cash equivalent".

3. If the cash balance in a company’s bank statement is less than the correct cash balance and
neither the company nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Outstanding checks
c. Bank charges not yet recorded by the company
d. Deposits in transit
4. The journal entries for a bank reconciliation
a. Are taken from the balance per bank only
b. May include a debit to office expense for bank service charges
c. May include a credit to accounts receivable for a NSF check
d. May include a debit to accounts payable for a NSF check

5. Entries to record the replenishment of petty cash fund result in a debit to various expense
accounts and a credit to cash in bank. This accounting procedure typically exemplifies the
a. Imprest petty cash system c. Internal control
b. Fluctuating petty cash system d. Administrative control

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

a. To effectively plan cash inflows and outflows
b. To ease the payment of cash to vendors.
c. To determine the honesty of the employees.
d. To effectively control cash disbursements.

7. What is a compensating balance?

a. Savings account balances.
b. Margin accounts held with brokers
c. Temporary investments serving as collateral for outstanding loans
d. Minimum deposits required to be maintained in connection with a borrowing arrangement

8. Which of the following statements is false?

a. Not all items included in cash constitute legal tender.
b. Cash may be offset against a liability if the deposit of funds in restricted account clearly
constitutes the legal discharge of the liability.
c. Legally restricted bank deposit held as compensating balances should be segregated from
the cash account and reported under a separate caption.
d. One-year BSP treasury bills with remaining maturity of three months on balance sheet
date may be shown as part of “cash and cash equivalents” provided this is disclosed.

9. A method of estimating doubtful accounts that focuses on the income statement rather than
the balance sheet is the allowance method based on

a. Direct write-off c. Credit sales

b. Aging of trade accounts receivable d. Balance of accounts receivable

10. Receivables denominated in a foreign currency should be

a. Translated to local currency using the exchange rate at the time the receivables arise
b. Shown at face value of the foreign currency
c. Translated to local currency using the exchange rate at balance sheet date
d. Translated to local currency using the exchange rate when the balance sheet is issued
11. When accounts receivable aging schedule is prepared, a series of computations is made to
determine the estimated uncollectible accounts. The resulting amount from this aging
schedule
a. When added to the total amounts written off during the year is the desired credit balance
of the allowance for doubtful accounts at year-end.
b. Is the amount of doubtful accounts expense for the year.
c. Is the amount that should be added to the beginning allowance for doubtful accounts to
get the beginning allowance for doubtful accounts expense for the year.
d. Is the amount of desired credit balance of the allowance for doubtful accounts to be
reported at the year end.

12. Which of the following is not permitted in accounting for uncollectible accounts receivable?
a. Percentage of accounts receivable c. Direct write-off method
b. Percentage of sales d. Aging of accounts receivable

13. In the case of long-term installments receivable (real estate installment sales) where a major
portion of the receivables will be collected beyond the normal operating cycle
a. The entire receivables are classified as current without disclosure of the amount not
currently due.
b. The entire receivables are classified as noncurrent.
c. Only the portion currently due is classified as current and the balance as noncurrent.
d. The entire receivables are classified as current with disclosure of the amount not currently
due.

14. Which of the following method of recognizing bad debts is consistent with accrual accounting?
a. Allowance method
b. Direct write off method
c. Percent of sales method
d. Percent of accounts receivable method

15. A 90- day 15% interest bearing note receivable is sold to a bank without recourse after being
held for 60 days. The proceeds are calculated using a 12% interest rate. The amount credited
to note receivable at the date of the discounting transaction should be
a. The same as the cash proceeds. c. The face value of the note.
b. Less than the face value of the note. d. The maturity value of the note.
16. Advocates of the allowance method of recognizing bad debts argue that
a. It provides better matching of bad debts expense with revenue.
b. It provides better measurement of accounts receivable.
c. Both (a) and (b).
d. It avoids the use of estimates.

17. At the beginning of 2024, Finney Ltd received a three-year, zero interest bearing P1,000 note
on the sale of inventory. The market rate for equivalent notes was 8% at that time. Finney Ltd.
reported sales revenue of P1,000 and included the note as a P1,000 trade note receivable on
its balance sheet at the end of 2024. What effect did this accounting treatment for the note
have on Finney’s profit 2024, 2025. 2026, respectively?

a. Overstate, no effect, no effect c. Overstate, understate, understate

b. Understate, overstate, overstate d. None of these

18. Equity securities acquired by a corporation which could be designated to be accounted for by
recognizing unrealized holding gains or losses as other comprehensive income and as a
separate component of stockholders' equity are
a. securities where a company has holdings of more than 50%.
b. non-trading securities where a company has holdings of less than 20%.
c. securities where a company has holdings of between 20% and 50%.
d. trading securities where a company has holdings of less than 20%.

19. Statement I: The Unrealized Holding Gain/Loss—OCI account for equity securities measured
at FVOCI may be transferred to profit or loss once the security has been disposed of.
Statement II: An investment of more than 50 percent of the voting stock of an investee should
lead to a presumption of significant influence over an investee.
a. Statement I is true, Statement II is false
b. Statement II is true, Statement I is false
c. Both statements are true
d. Both statements are false

20. Financial assets classified as FVPL are initially recognized at

a. fair value c. any of these.
b. fair value plus direct acquisition cost d. amortized cost

21. The rate appearing on the face of the bonds

a. nominal rate c. stated rate
b. All of the choices are correct. d. coupon rate
22. Regarding classification of financial assets, which of the following is incorrect?
a. debt securities can be classified as amortized cost
b. debt securities can be classified into FVPL, FVOCI, or at amortized cost.
c. either debt or equity securities may be classified as FVPL
d. equity securities cannot be classified into FVOCI

23. Under the equity method of accounting for investments, an investor recognizes its share of
the earnings in the period in which the
a. investor sells the investment.
b. earnings are reported by the investee in its financial statements.
c. investee declares a dividend.
d. investee pays a dividend.

24. The option to designate financial assets as FVPL and the election to classify financial assets
at FVOCI are
a. revocable under certain circumstances described in PFRS 9
b. mandatory
c. irrevocable
d. revocable

25. Subsequent changes in fair value of financial assets measured at amortized cost are
a. recognized in other comprehensive income
b. recognized in equity
c. recognized in profit or loss
d. not recognized

PROBLEMS
26. L Company had the following account balances on December 31, 2016:

Petty cash fund 50,000

Cash on hand 500,000
Cash in bank-current account 4,000,000
Cash in bank-payroll account 1,000,000
Cash in bank-restricted account for plant addition, expected to
be 500,000
disbursed in 2017
Cash in sinking fund set aside for bond payable due on June 1,500,000
30, 2017
 The petty cash fund includes un-replenished December 2016 petty cash expense vouchers
of ₱5,000 and employee IOU of ₱5,000. The cash on hand includes a ₱100,000 check
payable to Lourdes dated January 31, 2017. In exchange for a guaranteed line of credit, the
entity has agreed to maintain a minimum balance of ₱200,000 in its unrestricted current bank
account. What amount should be reported as “cash and cash equivalents” on December 31,
2016?
a. 6,940,000 c. 5,940,000
b. 6,740,000 d. 7,440,000

27. On December 31, 2014, Agenda Company has the following information concerning its cash
equivalents and some other item

Coins and currency P 50,000

Checks received from customers 600,000
Certificate of deposit, term: 12 months 800,000
Petty cash fund 4,000
Postage stamps 600
Bank A, checking account balance 2,100,000
Post-dated check, customer 10,000
Money order from customer 15,000
Cash in savings account 100,000
Bank draft from customer 40,000
Utility deposit to gas company, refundable 5,000
Cash advance received from customer 8,000
NSF check, C. Company 20,000
Cash advance to company executive, collectible 200,000
upon demand
Bank B, checking account, overdraft 20,000
IOUs from employees 12,000
What amount of cash and cash equivalents should Agenda Company report in its December
31, 2014 statement of financial position?
a. P2,869,000 c. P2,882,000
b. P2,874,000 d. P2,909,000

28. Following were the account balances of Born Company at December 31, 2016

Cash on hand P 187,500

Cash in current and savings accounts 3,375,000
Cash set aside for plant expansion (expected for
payment in 2015) 2,400,000

- Cash in current and savings accounts includes P900,000 as holdout against short-term
loan arrangements. There are no legal restrictions as to withdrawal by Born on these
holdouts.
 What is the total cash that should be reported in the current assets section of Born's December
31, 2014 statement of financial position?
a. P2,662,500 c. P3,562,500
b. P3,375,000 d. P5,962,500

29. Delta Corporation has supplied you with the following list of its bank accounts and cash at
December 31, 2019:
Checking account (compensating balance of P 15,000
with no restriction) P 48,000
Savings account, 2% 30,000
Certificate of deposit, 6 months, 10%, due April 20, 2020 60,000
Money market (30-day certificate), current rate, 9.75% 40,000
Payroll account 20,000
Certificate of deposit, 3 months, 10% due
February 15, 2020 75,000
Petty Cash 1.500
Total P 274,500
What should be the balance to be reported as “Cash and Cash Equivalents” in the December
31, 2019 statement of financial position of Delta Corporation?

a. P139,500 c. P214,500
b. P199,500 d. P274,500

30. Reconciliation of Baron Company’s bank account at May 31 was as follows:

Balance per bank statement P105,000

Deposits in transit 15,000
Checks outstanding ( 1,500)
Correct cash balance P118,500

Balance per books P118,640

Bank service charge ( 140)
Correct cash balance, May 31 P118,500
June data are as follows:
Bank Books
Checks recorded P115,000 P118,000
Deposits recorded 81,000 90,000
Service charges recorded 120 -
Collections by bank (P20,000 note plus interest) 21,000

NSF Check returned with June 30 statement

(for redeposit, assumed to be good) 500
Balances, June 30 91,380 90,500
 How much is the outstanding checks at June 30?
a. P(1,500) c. P3,000
b. P 1,500 d. P4,500

31. Gel-O Company provided the following information with respect to its cash and cash
equivalents on December 31, 2016:

Checking account at First Bank (200,000)

Checking account at Second Bank 3,500,000
Treasury bonds 1,000,000
Payroll account 500,000
Value added tax account 400,000
Foreign bank account – restricted (in equivalent pesos) 2,000,000
Postage stamps 50,000
Employee’s postdated check 300,000
IOU from president’s brother 750,000
Credit memo from a vendor for a purchase return 80,000
Traveler’s check 300,000
Not-sufficient-fund check 150,000
Petty cash fund (20,000 in currency and expense receipts
for 30,000) 50,000
Money order 180,000

What amount should be reported as unrestricted cash on December 31, 2016?

a. 5,900,000 c. 4,900,000
b. 4,600,000 d. 6,900,000

32. The petty cash fund of P Company on December 31, 2016 is composed of the following:
Coins and currencies ₱14,000
Petty cash vouchers:
Gasoline payments 3,000
Supplies 1,000
Cash advances to employees 2,000
Employee’s check returned by bank marked NSF 5,000
Check drawn by the company payable to the order of J
Bebe, petty cash custodian, representing his salary 20,000
A sheet of paper with names of employees together with
contribution for a birthday gift of a co-employee in the amount of 8,000
Total ₱53,000

The petty cash ledger account has an imprest balance of ₱50,000. What is the correct
amount of petty cash on December 31, 2016?
a. ₱34,000 c. ₱14,000
b. ₱39,000 d. ₱42,000
For items 25 and 26 use the following information:

Opti, Inc. examined the petty cash fund immediately after the close of business December
31, 2016. The petty cash custodian presented the following during the count:
Currency ₱3,300
Petty cash voucher
Postage 840
Office supplies expense 1,800
Transportation expense 680
Computer repairs 1,600
Advances to office staff 3,000
A check drawn by Opti, Inc., payable to the petty cash 14,400
custodian
Postage stamp (unused) 600
An employee’s check, returned by bank, mark NSF 2,000
An envelope containing currency for a gift for a retiring 3,780
employee
Total 32,000
- The general ledger shows an imprest petty cash fund balance of ₱32,000

33. How much is the petty cash shortage or overage?

a. 4,380 shortage c. 4,830 overage

b. 6,380 shortage d. 6,830 overage

34. What is the adjusted balance of the petty cash fund at December 31, 2016?

a. 3,300 c. 17,700
b. 7,200 d. 8,850

35. Ace Co. prepared an aging of its accounts receivable at December 31, 2020 and determined
that the net realizable value of the receivables was 600,000. Additional information is available
as follows:

Allowance for uncollectible accounts at 1/1/20—credit balance 68,000

Accounts written off as uncollectible during 2020 46,000
Accounts receivable at 12/31/20 650,000
Uncollectible accounts recovered during 2020 10,000

For the year ended December 31, 2020, Ace's uncollectible accounts expense would be
a. 50,000. c. 32,000.
b. 46,000. d. 18,000.
36. At January 1, 2015, Queen Co. had a receivable from A Company of P400,000 that has been
outstanding for quite some time. Initial investigation revealed that A Company is in deep
financial dilemma. At present A Company is unable to settle all outstanding obligations but
further investigation revealed that F Company is taking over to run and operate the business
affairs of A Company. However, F Company is more than willing to assume only 75% of A
Company's financial obligations and by the end of 2016, all the assumed financial obligations
of A Company will be settled. As of December 31, 2015, Queen Company expects to collect
P300,000 that is due from A Company. At the time the receivable was recognized the
prevailing effective rate of interest for a similar financial asset is 14%.

What amount should Queen report in its December 31, 2015 statement of financial position
involving its account receivable?
a. P136,843 c. P300,000
b. P263,157 d. P400,000

37. Index Company showed the following information related to the accounts receivable in order
to estimate bad debts through the use of the aging. The credit period of the company is 30
days on the average.

Age of Receivables Amount

Under 30 days P 4,000,000
31-60 days 1,500,000
61-90 days 1,000,000
91-120 days 500,000
121-150 days 200,000
151-180 days 100,000

The company based on experience has the following percent of collectability:

Accounts which are overdue for less than 30 days 97 %
Accounts which are overdue 31 -60 days 90 %
Accounts which are overdue 61-90 days 75 %
Accounts which are overdue 91-120 days 55 %
Accounts which are overdue 121-150 days 30%
Accounts which are overdue for over 150 days 25%

What is the carrying value of accounts receivable for balance sheet reporting purposes?
a P430,000 c P6,340,000
b P960,000 d P6,870,000
38. Nenn Co.'s allowance for uncollectible accounts was 190,000 at the end of 2012 and 180,000
at the end of 2011. For the year ended December 31, 2012, Nenn reported bad debt expense
of 26,000 in its income statement. What amount did Nenn debit to the appropriate account in
2012 to write off actual bad debts?

a. 10,000 c. 26,000
b. 16,000 d. 36,000

39. Blink Company factored P750,000 of accounts receivable to Sparkle Company on December
1, 2015. Blink Company retained significant amount of risks and rewards of ownership and
continues to manage the financial asset.
Sparkle accepted the receivable, assessed a fee of 2% and retains a holdback equal to 4%
of the accounts receivable. In addition, Sparkle charged 12% interest on the amount
advanced.

What amount of finance cost should Blink Company report in its December 2015 statement
of comprehensive income related to the factoring of its accounts receivable?

a. None c. P15,000
b. P7,200 d. P22,200

40. Herald Corporation had the following information relating to its accounts receivable:

Accounts receivable, December 31, 2013 P1,950,000

Credit sales for 2014 8,100,000
Collections from customers for 2014 7,125,000
Accounts written off, August 30, 2014 187,500
Estimated uncollectible receivables per aging of
Receivables, December 31, 2014 247,500

In the December 31, 2014 statement of financial position, what is the amortized cost of the
receivable?

a. P2,490,000 c. P2,775,000
b. P2,737,500 d. P2,925,000
41. The following data pertain to B Corporation on December 31, 2016:

Checkbook balance ₱10,000,000

Bank statement balance 15,000,000
Check drawn on B’s account, payable to supplier, dated and
Recorded on Dec. 31, 2016, but not mailed until Jan. 15, 3,000,000
2017
Cash in sinking fund 4,000,000
Money market, three months due January 31, 2017 5,000,000

On December 31, 2016, how much should be reported as “cash and cash equivalents”?
a. ₱13,000,000 c. ₱18,000,000
b. ₱12,000,000 d. ₱17,000,000

42. The following accounts were abstracted from Starr Co.'s unadjusted trial balance at December
31, 2020: Debit Credit

Accounts receivable 750,000

Allowance for uncollectible accounts 8,000
Net credit sales 3,000,000
Starr estimates that 4% of the gross accounts receivable will become uncollectible. After
adjustment at December 31, 2020, the allowance for uncollectible accounts should have a
credit balance of
a. 120,000. c. 38,000.
b. 112,000. d. 30,000.

43. On the December 31, 2019 balance sheet of Microwave Company, the current receivables
consisted of the following:

Trade accounts receivable P 232,500

Allowance for uncollectible accounts ( 5,000)
Claim against shipper for goods lost in transit (Oct. 2020) 7,500
Selling price of unsold goods sent by Microwave to consignee
65,000
Security deposit on lease of warehouse used for storing
inventories 75,000
Total P 375,000

At December 31, 2019, how much should be Microwave's total current net receivables?
a. P235,000 c. P310,000
b. P300,000 d. P375,000
44. Jet Company acquired bonds at a discount of P100,000. Subsequently, Jet sold these bonds
at a premium of P140,000. During the period that Jet held the investment, amortization of the
discount amounted to P20,000. What amount should Jet report as gain from sale of bonds?
a. P120,000 c. P240,000
b. P220,000 d. P260,000

45. On January 1, 2021, E-Bank purchased 5,000 of the P1,000 face value 12% bonds for
P5,500,000. The bonds mature on January 1, 2026 and pay interest annually on December
31. The bonds are intended to be held to maturity and appropriately classified as part of the
bank’s investments in bonds and other debt instruments. On December 31, 2023, the bank
decided to reclassify the bond investment to “available for sale” securities in response to legal
or liquidity reserves, security deposits and allowable alternative investments. The market
value of the bond investment on December 31, 2008 was P6,000,000. In its December 31,
2023 balance sheet, what should it report as unrealized gain on these debt securities?
a. P800,000 c. P300,000
b. P500,000 d. P 0
46. On January 1, 2014, Pike Company purchased at par 5,000 of the P1,000 face value 8%
bonds of Kite Company to be held as long-term investment. The bonds mature on January
1, 2024 and pay interest semiannually on July 1 and January 1. Kite incurred heavy losses
from operations for several years and defaulted on the July 1, 2018 and January 1, 2019
interest payments. Because of the permanent decline in market value of Kite’s bonds, Pike
wrote down its investment to P4,000,000 at December 31, 2018. Pursuant to Kite’s plan of
reorganization effected on July 1, 2019, Pike received 50,000 shares of P100 par value 8%
cumulative preferred stock of Kite in exchange for the P5,000,000 face value bond investment.
The quoted market value of preferred stock was P70 per share on July 1, 2019. What amount
of loss should be included in the determination of Pike’s net income for 2019?
a. P1,500,000 c. P500,000
b. P1,000,000 d. P 0
47. In 2021, Seda Corporation acquired 6,000 shares of its P1 par value common stock at P36
per share. During 2022, Seda issued 3,000 of these shares at P50 per share. Seda uses the
cost method to account for its treasury stock transactions. What accounts and amounts
should Seda credit in 2022 to record the issuance of the 3,000 shares?
Treasury Additional Retained Common
stock paid in capital earnings stock
a 102,000 42,000 6,000
b 144,000 6,000
c 108,000 42,000
d 108,000 42,000
48. Lind Corporation declared a cash dividend of P500,000 on March 10, 2022 to stockholders of
record March 25, 2022, payable on April 5, 2022. As a result of this cash dividend, working
capital:
a. decreased on March 10 by P500,000 c. decreased on March 25 by P500,000.
b. decreased on April 5 by P500,000. d. did not change.

49. Wolf Company’s grant of 30,000 stock appreciation rights enables key employees to receive
cash equal to the difference between P20 and the market price of the stock on the date each
right is exercised. The service period is 2021 through 2023, and the rights are exercisable in
2024 and 2025. The market price of the stock was P25 and P28 on December 31, 2021 and
2022, respectively. What amount should Wolf report as the liability under the stock
appreciation rights plan in its December 31, 2022 balance sheet?
a. 0 c. 160,000
b. 130,000 d. 240,000

50. In connection with a stock option plan for the benefit of key employees, Ward Corporation
intends to distribute treasury shares when the options are exercised. These shares were
bought in 2021 at P42 per share. On January 1, 2022, Ward granted stock options for 100,000
shares at P38 per share as additional compensation for services rendered over the next three
years. The options are exercisable during a 4-year period beginning January 1, 2025, by
grantee still employed by Ward. Market price of Ward’s stock was P47 per share at the grant
date. No stock options were terminated during 2022. In Ward’s 2022 income statement, what
amount should be reported as compensation expense pertaining to the options?
a. 900,000 c. 300,000
b. 400,000 d. 0
ANSWER KEY:
THEORIES
1. D. Is so near its maturity that it presents insignificant risk of changes in interest rates
2. C. Classification of a restricted cash balance as current or noncurrent should parallel
the classification of the related obligation for which the cash was restricted
3. D. Deposits in transit
4. B. May include a debit to office expense for bank service charges
5. A. Imprest petty cash system
6. D. To effectively control cash disbursements.
7. D. Minimum deposits required to be maintained in connection with a borrowing
arrangement
8. D. One-year BSP treasury bills with remaining maturity of three months on balance sheet
date may be shown as part of “cash and cash equivalents” provided this is disclosed.
9. C. Credit sales
10. C. Translated to local currency using the exchange rate at balance sheet date
11. D. Is the amount of desired credit balance of the allowance for doubtful accounts to be
reported at the year end.
12. C. Direct write-off method
13. C. Only the portion currently due is classified as current and the balance as noncurrent.
14. A. Allowance method
15. C. The face value of the note.
16. C. Both (a) and (b).
17. C. Overstate, understate, understate
18. B. non-trading securities where a company has holdings of less than 20%.
19. D. Both statements are false
20. A. Fair value
21. B. All of the choices are correct.
22. D. equity securities cannot be classified into FVOCI
23. B. earnings are reported by the investee in its financial statements.
24. C. irrevocable
25. D. Not recognized
PROBLEMS
26. A. 6,940,000
27. D. P2,909,000
Coins and currency P 50,000
Checks from customers 600,000
Petty cash fund 4,000
Checking account-A 2,100,000
Money order 15,000
Savings account 100,000
Bank draft 40,000
Total P 2,909,000
28. C. P3,562,500
Cash on hand P 187,500
Cash in current and savings 3,375,000
accounts
Total Cash P3,562,500

- Cash on hand (P187,500) and cash in current and savings accounts (P3,375,000) are
both reported as cash in the current assets section of the balance sheet because they are
unrestricted and readily available for use. Cash restricted for additions to plant
(P2,400,000) is not available to meet current operating needs, and, therefore, excluded
from current assets. Instead, it is shown in the non-current assets section of the balance
sheet as an investment.

29. C. P214,500
Checking account P 48,000
Savings account 30,000
Money market (30-day) 40,000
Payroll account 20,000
Certificate of deposit, 3 months, 10% due February 15, 2020 75,000
Petty Cash Fund 1.500
Total Cash and Cash Equivalents P 214,500

- The 15,000 compensating balance is not legally restricted hence, it is included as part of
the cash account but requires disclosure.
- Certificate of deposit of 6 months is not considered as cash and cash equivalents since
its term is more than the required time period.
30. D. P4,500
Check issued by company P118,000
Less: Checks paid by bank P115,000
Less: Outstanding checks, May 1,500 113,500
Outstanding checks, June P4,500

31. C. 4,900,000
32. A. ₱34,000
33. A. 4,380 shortage
34. C. 17,700
35. D. 18,000
- Allowance for Doubtful Acct. balance 68,000 + 10,000 – 46,000 = 32,000 (before bad
debt expense)
650,000 – 600,000 – 32,000 = 18,000 (bad debt expense).
36. B. P263,157
- Solution:
Expected cash inflow related to the receivable P300,000
x Present value of 14% after one year .87719
Present value of account receivable P263,157
37. D. P6,870,000
Gross % % of Collectability Amount collectible
P4,000,000 x 100% = P4,000,000
1,500,000 x 97% = 1,455,000
1,000,000 x 90% = 900,000
500,000 x 75% = 375,000
200,000 x 55% = 110,000
100,000 x 30% = 30,000
P7,300,000 P6,870,000

38. B. 16,000
- Solution: 180,000 + 26,000 – 190,000 = 16,000.
39. D. 22,200
- Solution:
Interest cost (P750,000 x 96% x 12% x 30/360) P 7,200
Service charge (P750,000 x 2%) 15,000
Total financial cost P22,200
40. A. 2,490,000
Accounts receivable, December 31, 2013 P 1,950,000
Add: Credit sales 8,100,000
Total P10,050,000
Less: Collection from customers P 7,125,000
Accounts written off 187,500 7,312,500
Accounts receivable, December 31, 2014 P2,737,500
Less: Estimated uncollectible accounts 247,500
Amortized cost (expected net cash inflow) P2,490,000

41. C. ₱18,000,000
42. D. 30,000
- 750,000 × .04 = 30,000.
43. A. P235,000
Trade accounts receivable P232,500
Allowance for uncollectible accounts ( 5,000)
Claim receivable 7,500
Total current net receivables P235,000
- The security deposit is a non-current receivable and should be shown as non-current
asset
44. B. P220,000
Premium on sale of bonds P140,000
Unamortized discount (100,000 – 20,000) 80,000
Gain on sale of bonds P220,000

45. A. 800,000
Cost P5,500,000
Amortization of premium from 1/1/2017 to
12/31/2019 (500,000 / 5 years x 3) 300,000
Book value of investment – 12/31/2019 P5,200,000
Market value – 12/31/2019 6,000,000
Unrealized gain P 800,000

46. C. 500,000

1/1/2014 Investment in bonds P5,000,000

Cash P5,000,000
12/31/2018 Impairment loss 1,000,000
Investment in bonds 1,000,000
7/1/2019 Investment in stock 3,500,000
Loss on exchange 500,000
Investment in bonds 4,000,000
Fair value of asset received
(50,000 x 70) 3,500,000
Book value of asset given (4,000,000)
Loss on exchange ( 500,000)

47. C. 108,000 Treasury Stock, 42,000 additional paid in capital

Cash (3,000 x 50) 150,000

Treasury stock (3,000 x 36) 108,000
Additional paid in capital 42,000
48. A. decreased on March 10 by P500,000
49. C. 160,000
Market price on December 31, 2022 28
Predetermined price 20
Excess 8
Accrued compensation on December 31, 2022
(30,000 8 = 240,000 / 3 x 2 years) 160,000
50. C. 300,000
Market value on grant date 47
Option price 38
Compensation per share 9
Total compensation (100,000 x 9) 900,000
Compensation for 2022 (900,000 / 3) 300,000