Name:

Section:

Long Quiz No. 1

Intermediate Accounting 1

Direction: Encircle the letter of the correct answer.

1. An entity shall classify an asset as current under all of the following conditions, except
A. The entity expects to realize the asset or intends to sell or consume it within the
entity’s normal operating cycle.
B. The entity holds the asset for the purpose of trading.
C. The entity expects to realize the asset within twelve months after the reporting
period.
D. The asset is cash or a cash equivalent that is restricted to settle a liability for more
than twelve months after the reporting period.

2. All of the following may be included in "cash", except

A. Currency
B. Money market fund
C. Checking account balance
D. Savings account balance

3. The petty cash fund account under the imprest fund system is debited
A. Only when the fund is created.
B. When the fund is created and everytime it is replenished.
C. When the fund is created and when the size of the fund is increased.
D. When the fund is created and when the size of the fund is decreased.

4. If the cash balance shown in an entity's accounting records is less than the correct cash
balance and neither the entity nor the bank has made any errors, there must be
A. Deposits credited by the bank but not yet recorded by the entity
B. Deposits in transit
C. Outstanding checks
D. Bank charges not yet recorded by the entity

5. Which of the following shall not be considered cash for financial reporting purposes?
A. Petty cash funds and change funds
B. Money orders, certified checks and personal checks
C. Coin, currency and available funds
D. Postdated checks and IOUs

On December 31, 2018, Peter Quill Company reported cash of 9,950,000 with the following
details:

Undeposited collections 600,000

Cash in bank – BDO checking account 4,000,000
 Undeposited NSF check received from 150,000
customer, dated December 1, 2018
Undeposited check from customer, dated 250,000
January 15, 2019
Cash in Bank – BDO Fund for payroll 1,000,000
Cash in Bank – BDO money market 2,000,000
instrument, 90 days
Cash in foreign banks restricted 1,500,000
Cash in Bank – BDO value added tax 450,000
account
Total 9,950,000
On December 31, 2018 what total amount should be reported as cash and cash
equivalents?

The next two questions are based on the following:

Peter Company reported the following information in relation to cash on December 31,
2018:
• Checkbook balance, 4,000,000
• Undeposited collections, 400,000
• A customer check amounting to 200,000 dated January 2, 2019 was included in
December 31, 2018
• Another customer check for 500,000 deposited on December 22, 2018 was included in
the checkbook balance but returned by the bank for insufficiency of fund. This check was
deposited on December 26, 2018 and cleared two days later.
• A 400,000 check payable to supplier dated and recorded on December 30, 2018 was
mailed on January 16, 2019
• A petty cash fund of 50,000 comprised the following on December 31, 2018:
Coins and currencies 5,000
Petty cash vouchers 40,000
Refundable deposits for returnable 5,000
containers
50,000
A check of 40,000 was drawn on December 31, 2018 payable to petty Cash.

6. What is the adjusted cash in bank on December 31, 2018

a. 4,600,000
b. 4,200,000
c. 4,400,000
d. 3,700,000
7. What total amount should be reported as Cash on December 31, 2018?
a. 4,645,000
b. 4,845,000
c. 4,600,000
d. 4,650,000
8. In preparing the bank reconciliation for the month of August, Gamora Company provided
the following information:
Balance per bank statement 1,805,000
Deposit in Transit 325,000
Return on customer check for 60,000
insufficient fund
Outstanding checks 275,000
Bank service charge for august 10,000
What is the adjusted cash in bank?
 a. 1,855,000
b. 1,795,000
c. 1,785,000
d. 1,755,000

The next two questions are based on the following:

In preparing the bank reconciliation of the month of December, Drax Company provided the
following data:
Balance per bank statement 3,800,000
Deposit in transit 520,000
Amount erroneously credited by bank to Drax’s 40,000
account
Bank service charge for December 5,000
NSF Check 50,000
Outstanding checks 675,000

9. What is the adjusted cash in bank?

a. 3,685,000
b. 3,645,000
c. 3,600,000
d. 3,605,000

10. What is the adjusted cash in bank balance per book?

a. 3,550,000
b. 3,660,000
c. 3,610,000
d. 3,655,000

11. Rocket Racoon Company provided the following data for the purpose of reconciling the
cash balance per book with the balance per bank statement on December 31:
Balance per book 850,000
Balance per bank statement 2,000,000
Outstanding checks, including certified 500,000
check of 100,000
Deposit in transit 200,000
December NSF checks (of which 50,000
had been redeposited and cleared on
December 27)
Erroneuos credit to the Rocket Racoon’s 300,000
account, representing proceeds of loan
granted to another company
Proceeds of note collected by bank for 750,000
rocket raccoon, net of service charge of
20,000
What amount should be reported as cash in bank at year-end?
a. 1,500,000
b. 1,400,000
c. 1,800,000
d. 1,450,000
12. Mantis Company received the bank statement for the month of March. However, the
closing balance of the account was unreadable. Attempts to contact the bank after hours
did not secure the desired information
February 28 book balance 1,460,000
Noted collected by bank 100,000
Interest earned on note 10,000
NSF Check of customer 130,000
Bank service charge on NSF Check 2,000
Other bank service charge 3,000
Outstanding checks 200,000
Deposit of February 28 placed in night 85,000
depository
Check issued by Muntis Company 20,000
charged to Mantis’ account

What is the Cash balance per bank statement?

a. 1,435,000
b. 1,530,000
c. 1,340,000
d. 1,550,000

13. All of the following problems are associated with the measurement of accounts
receivable, except
A. Uncollectible accounts
B. Returns
C. Cash discounts under the net method
D. Allowance granted

14. Nontrade receivables are classified as current assets only if they are reasonably expected
to be realized in cash
A. Within one year or within the operating cycle, whichever is shorter.
B. Within one year or within the operating cycle, whichever is longer.
C. Within the normal operating cycle.
D. Within one year, the length of the operating cycle notwithstanding.

15. Estimation of uncollectible accounts receivable based on percentage of sales

A. Emphasizes measurement of the net realizable value of accounts receivable.
B. Emphasizes measurement of bad debt expense.
C. Emphasizes measurement of total assets.
D. Is acceptable only for tax purposes.

16. A debit balance in the allowance for doubtful accounts

A. Should never occur.
B. Is always the result of management not providing large enough allowance in order
to manage earnings.
C. May occur before the end-of-period adjustment for uncollectible accounts.
D. May exist even after the end-of-period adjustment for uncollectible accounts.

17. On September 15, an entity sold goods for which it received a note bearing the market rate
of interest on that date. The four-month note was dated August 15. Note principal, together
 with all interest, is due on December 15. When the note was recorded on September 15,
which of the following accounts increased?
A. Unearned discount
B. Interest receivable
C. Prepaid interest
D. Interest revenue

18. Why would an entity sell accounts receivable to another entity?

A. To improve the quality of credit granting process
B. To limit its legal liability
C. To accelerate access to amount collected
D. To comply with customer agreements

19. After being held for 30 days, a 90-day, 15% interest bearing note receivable was
discounted at a bank at 18%. The proceeds received from the bank upon discounting
would be the:
A. maturity value less the discount at 18%
B. maturity value plus the discount at 18%
C. face value less the discount at 18%
D. face value plus the discount at 18%

20. Note receivable discounted with recourse should be

A. Excluded from total receivables without disclosure of contingent liability
B. Excluded from total receivables with disclosure of contingent liability
C. Included in total receivables without disclosure of contingent liability
D. Included in total receivables with disclosure of contingent liability

Estrel Company provided the following information for 2021:

Accounts receivable - January 1 2,000,000
Credit sales 10,000,000
Collection from customers, excluding the recovery of
accounts written off 8,000,000
Accounts written off as worthless 100,000
Sales returns 500,000
Recovery of accounts written off 50,000
Estimated future sales returns on December 31 200,000
Estimated uncollectible accounts on December 31 per
aging 300,000

21. How much should be recognized as total allowances?

A. 200,000
B. 300,000
C. 500,000
D. 550,000
 22. What is the net realizable value of accounts receivable on December 31, 2021?
A. 3,400,000
B. 3,100,000
C. 2,950,000
D. 2,900,000

Nicole Company reported allowance for doubtful accounts of P1,000,000 on January 1,

2021. During the year, accounts of P400,000 were written off and recoveries of accounts
written off totaled P100,000. The summary of aging of accounts receivable is as follows:
Time Outstanding Account Receivable Percent Uncollectible
Under 30 days 4,000,000 10%
31-180 days 1,500,000 20%
181-360 days 1,000,000 50%
More than one year 500,000 100%
23. What amount should be reported as doubtful accounts expense for the current year?
A. 1,800,000
B. 1,100,000
C. 1,000,000
D. 1,400,000

24. What is the net realizable value of accounts receivable?

A. 6,300,000
B. 6,900,000
C. 7,000,000
D. 5,300,000

On December 31, 2021, Lourdes Company sold used equipment with carrying amount of
P2,000,000 in exchange for a noninterest bearing note requiring ten annual payments of P500,000.
The first payment was made on December 31, 2022.

The market interest for similar note was 12%. The present value of an ordinary annuity of 1 is 5.65
for ten periods and 5.33 for nine periods.

25. What is the carrying amount of the note receivable on December 31, 2022?
A. 2,825,000
B. 5,000,000
C. 4,500,000
D. 2,664,000