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1. Which of the following items should not be included in the Cash caption on the balance sheet?
a. Coins and currency in the cash register
b. Checks from other parties presently in the cash register
c. Amounts on deposit in checking account at the bank
d. Postage stamps on hand
2. A cash equivalent is a short-term, highly liquid investment that is 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.
7. What is the preferable presentation of accounts receivable from officers, employees, or affiliated companies
on a balance sheet?
a. As offsets to capital.
b. By means of footnotes only.
c. As assets but separately from other receivables.
d. As trade notes and accounts receivable if they otherwise qualify as current assets.
8. When a customer purchases merchandise inventory from a business organization, she may be given a
discount which is designed to induce prompt payment. Such a discount is called a(n)
a. trade discount.
b. nominal discount.
c. enhancement discount.
d. cash discount.
10. If a company employs the gross method of recording accounts receivable from customers, then sales
discounts taken should be reported as
a. a deduction from sales in the income statement.
b. an item of "other expense" in the income statement.
c. a deduction from accounts receivable in determining the net realizable value of accounts receivable.
d. sales discounts forfeited in the cost of goods sold section of the income statement.
11. Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the
cash to be received in the future, failure to follow this practice usually does not make the balance sheet
misleading because
a. most short-term receivables are not interest-bearing.
b. the allowance for uncollectible accounts includes a discount element.
c. the amount of the discount is not material.
d. most receivables can be sold to a bank or factor.
12. Which of the following methods of determining bad debt expense does not properly match expense and
revenue?
a. Charging bad debts with a percentage of sales under the allowance method.
b. Charging bad debts with an amount derived from a percentage of accounts receivable under the
allowance method.
c. Charging bad debts with an amount derived from aging accounts receivable under the allowance method.
d. Charging bad debts as accounts are written off as uncollectible.
13. Which of the following methods of determining annual bad debt expense best achieves the matching concept?
a. Percentage of sales
b. Percentage of ending accounts receivable
c. Percentage of average accounts receivable
d. Direct write-off
14. Which of the following is true when accounts receivable are factored without recourse?
a. The transaction may be accounted for either as a secured borrowing or as a sale, depending upon the
substance of the transaction.
b. The receivables are used as collateral for a promissory note issued to the factor by the owner of the
receivables.
c. The factor assumes the risk of collectibility and absorbs any credit losses in collecting the receivables.
d. The financing cost (interest expense) should be recognized ratably over the collection period of the
receivables.
19. Which of the following events does not necessarily provide objective evidence that a receivable is impaired?
20. Unreplenished petty cash vouchers at balance sheet date will require adjustment to avoid
PROBLEMS:
Investment securities of 1,500,000. These securities are share investments in entities that are traded in the
PSE. As a result, the shares are very actively traded in the market.
Investment securities of 1,500,000. These securities are government treasury bills. The treasury bills have a
9-year term and purchased on December 31 at which time they had two months to go until they mature.
Cash of 3,000,000 in the form of coin, currency, saving account and checking account.
Investment securities of 2,000,000. These securities are commercial papers. The term of the papers is nine
months and they were purchased in December 31 at which time they had three months to go until they mature.
What is the total amount should be reported as cash and cash equivalent at the current year-end?
2. On December 31, 2014, the cash account of Difficult Company showed the following information:
Undeposited NSF check received from customer dated December 2, 2014 30,000
What is the total amount should be reported as “cash and cash equivalent” on December 31,2014?
Cash in bank included 500,000 of compensating balance against shot-term borrowing arrangement. The compensating
balance is not legally restricted as to withdrawal. In the December 31, 2012 statement of financial position, what total
cash should be reported under current assets?
4. Tinik Company had the following account balances on December 31, 2013.
The petty cash fund included unreplenished December 2013 petty cash expense of 15,000 and employee IOU of 5,000.
The cash on hand included a200,000 check payable to Tinik dated January 10, 2014. In exchange for a guaranteed
line of credit, the entity has agreed to maintain a minimum balance of 300,000 in its unrestricted current bank account.
The sinking fund is set aside to settle a bond payable that is due on June 11, 2014.
What is the total amount should be reported as “cash and cash equivalents” on December 31, 2013?
5. IOU Company reported that the cash account per ledger had a balance at December 31, 2010 of 5,000,000
which consisted of the following:
Cash in PNB, per bank statement, with a check for 45,000 still outstanding 2,000,000
5,000,000
What amount should be reported as cash in the December 31, 2010 statement of financial position?
6. Gunbound Company's month-end bank statement showed a balance of P3,600,000. Outstanding checks
amounted to P1,200,000, a deposit of P400,000 was in transit at month-end, and a check for P50,000 was
erroneously charged by the bank against the account. What is the correct balance in the bank account at
month-end?
7. The accounts of Ragnarok Company showed the following facts on February 28, 2013.
The cashier-bookkeeper had misappropriated P30,000 and an additional P10,000 by charging sales discounts and
crediting accounts receivable. The stub for check number 765 and the invoice relating thereto show that it was for
P50,000. It was recorded incorrectly in the cash disbursements journal as P70,000. This check was drawn in payment
of an account payable. Payment has been stopped on check number 555 which as drawn in payment of an account
payable. The payee cannot be located. What is the adjusted cash in bank on February 28, 2013?
8. The cash account of Point Blank Company showed a balance of P4,500,000. The bank statement did not
include a deposit of P230,000 made on the last day of the month. The bank statement showed a collection by
the bank of P94,000 and a customer's check for P32,000 returned because it was NSF. A customer's check
for P45,000 was recorded on the books as P54,000, and a check written for P79,000 was recorded as
P97,000. What is the correct balance in the cash account?
9. Carrie Company provided the following data pertaining to the cash transactions and bank account for May of
the current year:
10. The cash account in the ledger of Assault Company shows a balance of P1,652,000 at December 31. The
bank statement, however, shows a balance of P2,090,000 at the same date. The only reconciling items consist
of a bank service charge of P2,000, a large number of outstanding checks totaling P590,000 and a deposit in
transit. What is the deposit in transit in the December 31 bank reconciliation?
11. At year-end, EP Company reported cash and cash equivalents comprising cash on hand 250,000, demand
deposit 1,000,000, postdated customer’s check 150,000, petty cash fund 25,000, traveler’s check 100,000,
manager’s check 50,000 and money order 75,000. What total amount of cash should be reported at year-
end?
12. In preparing the August 31, 2013 bank reconciliation, CMC Company provided the following information:
13. In preparing the bank reconciliation on December 31, 2013, PJG Company provided the following information:
14. In an audit of ULR Company on December 31, 2013, the following data are gathered
16. MJJ Company keeps all its cash in a checking account. An examination of the entity’s accounting records and
bank statement for the month ended June 30, 2013 revealed the following information:
** The cash balance per book on June 30 is 4,250,000
** A deposit of 500,000 that was placed in the bank’s night depository on June 30 does not
appear on the bank statement.
** The bank statement shows on June 30, the bank collected note for MJJ and credited the proceeds of
475,000 to the entity’s account.
** MJJ discovered that a check written in June for 100,000 in payment of an account payable, had been
recorded in the entity’s records as 10,000
** Included with the June bank statement was NSF check for 125,000 that MJJ had received from the
customer on June 26.
What is the cash in bank to be reported in the statement of financial position on June 30, 2013?
17. On December 31, 2013, Busy Company received its bank statement. However, the closing balance of the
account was unreadable. Attempts to contact the bank after hours did not secure the desired information. The
following data are available in preparing bank reconciliation:
18. Shinn Company’s bank statement for the month of April included the following information:
In comparing the bank statement to its own cash records, the entity found the following:
Deposits made but not yet recorded by the bank 350 000
Checks written and mailed but not yet recorded by the bank 650 000
In addition, the entity discovered that it had drawn erroneously recorded a check for P46 000 that should have been
recorded for P64 000.
What is the cash balance per ledger on April 30?
19. On July 31. 2013, the bank statement of Rose Company had an ending balance of P3 735 000. The following
data were assembled in the course of reconciling the bank balance:
The bank erroneously credited Rose Company for P21 000on July 25.
During the month, the bank charged back NSF checks amounting to P23 000 of which P8 000 had been
redeposited by July 28.
Collection for July 31 totaling P103 000 was deposited the following month.
Checks outstanding on July 31 amounted to P302 000.
Note collected by the bank for Rose Company was P80 000 and the corresponding bank charge was P5 000.
What is the unadjusted cash in bank per ledger on July 31, 2013?
20. Betty Company’s bank statement for the month of March included the following information:
In comparing the bank statement to its own records, the entity found the following:
All deposits in transit and outstanding checks have been properly recorded in the entity’s book.
A customer’s check for P35 000 payable to Betty Company had not been recorded by the entity. The cash in bank
account balance per ledger is P920 000.
21. Sugarfree Company prepared the following bank reconciliation on August 31:
Check No. 180 was made for the proper amount of P249 000 in payment of account. However, it was entered in the
cash payments journal as P294 000. The entity authorized the bank to automatically pay its water bills as submitted
directly to the bank. What is the adjusted cash in bank on July 31?
22. Butterfly Company prepared the following bank reconciliation on November 30, 3013:
Balance per bank statement 2 800 000
Add: Deposit in transit 195 000
Checkbook printing charge 5 000
Error made by Butterfly in recording
check No. 35 (issued in November) 35 000
NSF check 110 000 345 000
3 145 000
Less: Outstanding check 100 000
Note collected by bank (includes
P15 000 interest) 215 000 315 000
2 830 000
The entity had P200 000 cash on hand on November 30, 2013. What amount should be reported as cash in the
statement of financial position on November 30, 2013?
23. Polo Company keeps all cash in a checking account. An examination of the entity’s accounting records and
bank statement for the month ended January 31, 2013 revealed a bank statement balance of P8 469 000 and
a book balance of P8 524 000.
A deposit of P950 000 placed in the bank’s night depository on January 28 does not appear on the bank statement.
Checks outstanding on January 31 amount to P270 000.
The bank statement shows that on January 25, the bank collected a note for Polo company and credited the proceeds
of P935 000 to the entity’s account. The proceeds included P35 000, all of which Polo Company earned during the
current period. Polo Company has not yet recorded the said collection.
Polo Company discovered that check number 1000800 written in January for P183 000 in payment of an account had
been recorded in the entity’s records as P138 000.
Included with the January 31 bank statement was an NSF check for P250 000 that Polo Company had received from
Ralph Company on January 25. Polo Company has not yet recorded the returned check. The bank statement shows a
P15 000 service charge for January.
What is the journal entry to adjust the cash in bank on January 31, 2013?
24. While checking the cash account of Black Veil Brides Company on December 31, 2013, the following
information is discovered:
25. Slipknot Company provided the following data for the month of October of the current year:
26. In reconciling the cash balance on December 31, 2013 with that shown in the bank statement, the following
facts are gathered from the records of Belle Company:
Total 440,000
Collection fee 5,000 435,000
27. In the December 31, 2012 statement of financial composition of Com Company, the current receivables
consisted of the following:
At December 31, 2012, the correct total of current net receivables was
28. The following information is available for Cha-Cha Company relating to 2010 operations:
29. On December 31, the accounts receivable control account of Sweet Company had a balance of P8,200,000. An
analysis of the accounts receivable showed the following:
30. The statement of financial position of Ice Company shows accounts receivable at January 1, 2012 as follows:
The net realizable value of accounts receivable at December 31, 2012 was
For Questions 21 to 23
On December 1, 2013, Hubby Company assigned specific accounts receivable totaling P2,000,000 as a collateral
for a P1,500,000, 12% note from a certain bank. The entity will continue to collect the assigned accounts
receivable. In addition to the interest of the note, the bank also charged 5% finance fee deducted in advance on
the P1,500,000 value of the note. The December collections of assigned accounts receivable amounted to
P1,000,000 less cash discounts of P50,000. On December 31, 2013, the entity remitted the collections to the bank
in payment for the interest accrued on December 31,2013 and the note payable.
31. What amount of cash was received from the assignment of accounts receivable on December 1, 2013?
32. What is the carrying amount of note payable on December 31, 2013?
33. What amount should be disclosed as the equity of Bamboo Company in assigned accounts on December 31,
3013?
34. E Company accepted from a customer P1,000,000 face amount 6-month, 8% note dated April 15, 2010. On
the same date, E Co. discounted the note without recourse at Union bank at a 10% discount rate.
36. On December 1, 2012, A Company assigned specific accounts receivable totalling P2,000,000 as collateral
on a P1,500,000, 12% note from a certain bank. A Company will continue to collect the assigned accounts
receivable. In addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance
on the P1,500,000 value of the note. The December collections of assigned accounts receivable amounted to
P1,000,000 less cash discounts of P50,000. On December 31, 2012, A Company remitted the collections to
the bank in payment for the interest accrued on December 31, 2012 and the note payable.
Question 1: How much cash was received from the assignment of accounts receivable on December 1, 2012?
38. How much is the equity of A Company in assigned accounts on December 31, 2012?
39. B 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. B Company had previously established an allowance for
doubtful accounts of P200,000 for these accounts. By year-end, the entity had collected the factor’s holdback
there being no customer returns and other adjustments.
41. Epsilon Company sells to wholesalers on terms 5/5, net 30. The entity has no cash sales but 56/100 of the
customer take advantage of the discount. The entity used the gross method of recording sales and accounts
receivable. An analysis of the trade accounts receivable on December 31, 2018 revealed the following:
42. Miku Hatsune Company began operations on January 1, 2019. The entity has found that its estimated bad
debt expense has been consistently higher than actual bad debts. Management proposed lowering the
percentage from 10% of credits to 5%. Credit Sales for 2019 totaled P 45,000,000, and the accounts written
off as uncollectible during 2013 totaled P 20,000,000. What is the bad debt expense for 2019?
43. Totoy Gold Company assigned P 10,000,000 of accounts receivable as collateral for a P 2,000,000 45% loan
with a bank. The entity also paid a finance fee of 15% on the transaction upfront. What amount should be
recorded as a gain or loss on the transfer of accounts receivable?
44. Valix Company is a dealer in books. On December 31, 2020, the entity sold a book in exchange for a
noninterest bearing note required five annual payments of P 990. The first payment was made on December
31, 2021. The market interest for similar notes was 8%. The PV of 1 at 8% for 5 periods is .68, and the PV of
an ordinary annuity of 1 at 8% for 5 periods is 3.99.
45. On June 30, 2023, Tom Ford Company sold goods for P 2,000,000 and accepted the customer’s 30% one-
year note in exchange. The 30% interest rate approximates the market rate of return. What amount should be
reported as interest income for the year ended December 31, 2023?
46. Ben Company received from a customer a one-year, P 500,000 note bearing annual interest 8%. After holding
the note for six months, the entity discounted the note without recourse 10%. If the net proceeds is P 513,000,
what is the loss on note receivable discounting?
47. Luffy Company had the following information for 2014 relating to accounts receivable:
On December 31, 2014, what is the balance of accounts receivable, after allowance for doubtful accounts?
48. On January 1, 2015, the statement of financial position of San Miguel Company showed accounts receivable
of P 10 and allowance for doubtful accounts 452. During the current year, the transactions were:
Recoveries on accounts receivable written off as uncollectible in prior periods (not included in cash amount
stated above) 567,123
Accounts receivable written off as worthless 215,540
Cash received from cash customers 222,333
Sales (cash and credit) 1,000,001
Cash refunds given to cash customers for sales returns and allowances 500,000
49. HTC Company prepared an aging of accounts receivable on December 31, 2016 and determined that the net
realizable value of the accounts receivable was P 543,098. Additional information is as follows:
For the year ended December 31, 2016, what amount should be recognized as doubtful accounts expense?
50. A Colossal Titan Company’s allowance for doubtful accounts was P 2,000,052 at the end of 2017 and
P2,500,002 at the end of 2016. For the year ended December 31, 2017, the entity reported doubtful accounts
expense of P 902 in the income statement. What amount was debited to the appropriate account in 2013 to
write off uncollectible accounts?