Multiple Choice

Identify the letter of the choice that best completes the statement or answers the question.

1. The cash account of Green Valley on December 31,2005 has a balance of P127,600 and it consists of the
following:
Bills and coins on hand P52,780
Petty cash including paid cash vouchers of P650 1,000
Balance in Savings Account with a bank closed by the Banko Sentral ng Pilipinas 36,000
Customer's check dated January 15,2005 8,000
Credit memo from supplier's for purchase returns 6,500
Postage stamps 120
Money order 800
IOU of an employee 400
Checking Account Balance in Bank of PI 22,000
Total P127,000

The correct cash balance on December 31, 2005 is

a. 76,500 c. 75,130
b. 76,330 d. 75,930

2. Assume the following data of Visayas Corporation of its cash and short-term, highly liquid investments for
December 31, 2005:

Cash on hand P8,000

Checking account-Bank 1 20,000
Checking account-Bank 2 (3,000)

Securities: Date Acquired Maturity Date Amount

120-day Certificate of Deposit 12/10/05 01/31/06 P60,000
BSP-Treasury Bills (No.1) 11/30/05 04/30/06 500,000
BSP-Treasury Bills (No.2) 10/31/05 01/20/06 100,000
180 days Commercial Paper 12/01/05 06/20/06 140,000
Money Market Funds 11/21/05 02/10/06 200,000

The balance of cash and cash equivalents of Visayas Corporation would be

a. 385,000 c. 525,000
b. 388,000 d. 528,000

3. During the year, Aringgay issued the following checks pertaining to its petty cash fund:
*P5,000 check issued to established the petty cash fund
*P2,000 checks issued to replenish the petty cash fund
*P2,000 check to increase the pety cash fund
All the above checks were correctly recorded.

At balance sheet date, the petty cash fund is consisting of the following:
*P2,200 paper currencies and coins
*P4,300 paid, but unreplenished vouchers

To record the adjustment of petty cash fund balance as of balance sheet date, the adjusting entry would have a
a. debit to petty cash shortage of P500 c. credit to overage of P1,500
b. debit to petty cash of P500 d. credit to petty cash of P4, 300

4. On January 1, 2005, St. John Corporation established a petty cash fund of P400. On December 31, 2005, the
petty cash fund was examined and found to have receipts and documents for miscellaneous expenses
amounting to P364. In addition, there was cash amounting to P44. What entry would be required to record
replenishment of the petty cash fund on December 31, 2005?
a. Petty Cash 364 c. Miscellaneous expense 364
Cash short over 8 Cash short over 8
Cash 356 Cash 356
b. Miscellaneous expense 364 d. Miscellaneous expense 356
Cash and short over 8 Cash short and over 8
Petty Cash 356 Cash 364
5. In your audit of the Luzon Inc. as of December 31, 2005, you gather the following:

Balance per bank P100,000

Bank charges 250
Outstanding checks 23,700
Deposit in transit 31,250
Customer's note collected by bank 37,550
Depositor's note charge to account (bank debit note) 25,000
Interest on customer's note 1,500
Customer's check returned NSF 6,250
Balance per book 100,000

The cash balance that should be reported in the balance sheet is

a. 100,000 c. 107,550
b. 101,250 d. 115,000

6. Pico had the following bank reconciliation on March 31, 2005:

Balance per bank statement, March 31, 2005 465,000
Deposit in transit 103,000
Outstanding checks (126,000)
Balance per books, March 31, 2005 442,000

Data per bank for the month of April 2005 as follows:

Deposits P584,000
Disbursements 497,000

All reconciling items on March 31, 2005, cleared the bank in April. Outstanding checks on April30, 2005, totaled
P70,000. There were no deposits in transit on April 30, 2005. What is the cash balance per books on April 30,
2005?
a. 442,000 c. 552,000
b. 482,000 d. 585,000

7. Grado Company had the following bank reconciliation at September 30, 2005:
Bank balance, September 30, 2005 P558,000
Add: Deposit in transit 123,600
Total P681,600
Less: Outstanding checks 151,200
Book balance, September 30, 2005 P530,400

Data per bank statement for the month of October 2005 follow:
Deposits P700,800
Disbursements 596,400

All reconciling items at September 30, 2005, cleared through the bank in October. Outstanding checks on
October 31, 2005, totaled P90,000. What is the amount of cash disbursement per books in October?
a. 535,200 c. 657,600
b. 596,400 d. 686,400

8. The cashier made the following collections at the close of the period:
* Collection of P10,000 from A, not issued with official receipt
* Collection of P20,000 from B, issued official receipt to A for P10,000
* Collection of P50,000 from C, issued official receipt to B for P20,000

The above recording will result to the business a

a. cash shortage of P10,000 c. cash shortage of P50,000
b. cash shortage of P30,000 d. cash shortage of P60,000

9. Jane Corporation keeps all its cash in a checking account. An examination of the company’s accounting records
and bank statement for the month ended June 30,2007 revealed the following information:
 a. The cash balance per book on June 30 is P850,000
b. A deposit o P100,000 that was placed in the bank’s night depository on June 30 does not appear on
the bank statement.
c. The bank statement shows on June 30, the bank collected note for Jane and credited the proceeds of
P95,000 to the company’s account.
d. Checks outstanding on June 30 amount to P30,000
e. Jane discovered that a check written in June for P20,000 in payment of an account payable, had been
recorded in the company’s record as p2,000
f. Included with the June bank statement was NSF check for P25,000 that Jane had received from a
customer on June 26.
g. The bank statement shows a P2,000 service on June 30,2007

The adjusted cash balance is

a. 900,000 c. 936,000
b. 830,000 d. 918,000

10. The cash account in the ledger of Sue Company shows a balance of P1,652,000 at September 30,2007. 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 P 590,000 and a deposit ion
transit . What is the deposit in transit in the September 30,2007 bank reconciliation?
a. 150,000 c. 154,000
b. 440,000 d. 592,000

11. A count of the Petty Cash Fund of Sahara CO. showed its composition as follows:

Coins and currency……………………………………………. P 330

Paid vouchers:
Transportation…………………………………………...P60
Gasoline.………………………………………………..P 40
Office Supplies.………………………………………...P 50
Postage Stamps………………………………………....P30
Due from the employee………………………………...P20 300
Manager’s check returned by Banks
Marked “NSF”……………………………………………… ..100
Check drawn by company to the order
Of petty cash custodian…………………………………… …270

What is the amount of the petty cash fund for balance sheet purposes?
a. 1, 000 c. 600
b. 880 880 d. none of these

12. Joseph Company had the following account balances on December 31, 2007:
Cash in bank – current account 5,000,000
Cash in bank – payroll account 1,000,000
Cash on hand 500,000
Cash in bank – restricted account for building construction expected to
be disbursed in 2008 3,000,000
Treasury bills, purchased December 15, 2007 and due March 15, 2008
2,000,000
The cash on hand includes a P200,000 check payable to Joseph, dated January 15, 2008.
What should be reported as “cash and cash equivalents” on December 31, 2007?

a. 6,300,000 c. 8,300,000
b. 6,500,000 d. 8,700,000

13. The December 31, 2006 trial balance of JP Company includes the following accounts:
Petty cash fund 50,000
Current account – First Bank 4,000,000
Current account – Second Bank (overdraft) (250,000)
Money market placement – Third Bank 1,000,000
Time deposit – Fourth Bank 2,000,000
 The petty cash fund includes unreplenished December 2006 petty cash expense vouchers for P15,000
and an employee check for P5,000 dated January 31, 2007.
A check for P100,000 was drawn against First Bank current account dated and recorded December 29,
2006 but delivered to payee on January 15, 2007.
The fourth bank time deposit is set aside for land acquisition in early January 2007.
The December 31, 2006 balance sheet should report “cash and cash equivalents” at

a. 5,130,000 c. 5,150,000
b. 4,130,000 d. 4,880,000

14. Coney Island Company provided the following information with respect to its cash and cash equivalents on
December 31, 2006
Checking account at First Bank (200,000)
Checking account at Second Bank 3,500,000
Treasury savings 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 checks 300,000
Not-sufficient-fund check 150,000
Petty cash fund (P20,000 in currency and expense receipts for P30,000)
50,000
Money order 180,000

What amount would be reported as unrestricted cash on the balance sheet?

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

15. Rhey Company provided the following data for the purpose of reconciling the cash balance per book with the
balance per bank statement on December 31, 2006:
Balance per bank statement 2,000,000
Balance per book 850,000
Outstanding checks (including certified check of P100,000) 500,000
Deposit in transit 200,000
December NSF checks (of which P50,000 had been re-deposited and cleared by
December 27) 150,000
Erroneous credit to Rhey’s account, representing proceeds of loan granted to
another company 300,000
Proceeds of note collected by bank for Rhey, net of service charge of P20,000
750,000
The cash in bank balance to be shown on Rhey’s December 31, 2006 balance sheet is

a. 1,500,000 c. 1,400,000
b. 1,800,000 d. 1,450,000

16. Omar Company keeps all its cash in a checking account. An examination of the company’s accounting records
and bank statement for the month ended June 30, 2006 revealed the following information:
The cash balance per book on June 30 is P8,500,000.
A deposit of P1,000,000 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 Omar and credited the proceeds of
P950,000 to the company’s account.
Checks outstanding on June 30 amount to P300,000.
Omar discovered that a check written in June for P200,000 in payment of an account payable, had
been recorded in the company’s records as P20,000.
Included with the June bank statement was NSF check for P250,000 that Omar had received from a
customer on June 26.
The bank statement shows a P20,000 service charge for June.
 The cash in bank to be shown on the balance sheet on June 30, 2006 is:

a. 9,000,000 c. 8,300,000
b. 9,360,000 d. 9,180,000

17. Information pertaining to Ana Company appears below.

Balance per bank statement July 31 1,240,000
Balance per ledger, July 31 750,000
Deposit of July 30 not recorded by bank 280,000
Debit memo – service charge 10,000
Credit memo – collection of note by bank for Ana 300,000
Outstanding checks ?
An analysis of the canceled checks returned with the bank statement reveals the following:
Check for purchases of supplies was drawn for P60,000 but was recorded as P90,000.
The manager wrote a check for traveling expenses of P100,000 while out of town. The checks was
not recorded.
What is the amount of outstanding checks on July 31?

a. 970,000 c. 270,000
b. 550,000 d. 610,000

18. The cash account in the ledger of Ruby Company had balance of P105, 600 at December 31, 2007. an
examination of the account, how ever, disclosed the following:

1. The sales book was left open up of January 5, 2008, and cash sales totaling P15, 000
were considered as sales in December.
2. Checks of P9, 300 in payment of liabilities were prepared before December 31, 2007
recorded in the books, but not mailed or deliver to payee
3. Postdated check totaling P7, 800 are being held by the cashier as part of cash. The
company experience shoes that post-dated check are eventually realized.
4. Customer’s check of P1, 500 deposited with but returned by bank :”NSF”, on
December 27, 2007. Return was not recorded in the books.
5. The cash account includes P40, 000 earmarked for the purchases of a mini-computer
which all soon to be delivered
The Cash balanced to be shown on the balance sheet on December 31, 2007 should be:

a. 105, 600 c. 50, 000

b. 58, 400 d. 60, 500

19. The cash account in a company’s ledger showed a balance at December 31,2007 of
P 44,150 which was determined to consist of:

Petty cash fund 240

Undeposited receipts, including a post dated
Customer check for P700 12,200
Cash in Allied Bank, per bank statement, with a
Check for P400 still outstanding 22,450
Bond sinking fund – cash 8,500
Vouchers paid out of collections, not yet recorded 430
IOUs signed by employees, taken from collections 330
----------------
44,150

At what amount should cash on hand and in bank be reported on the company’s balance sheet?
a. 33,790 c. 34,190
b. 34,890 d. 34,490

20. St. John Corporation had the following transactions in its first year of operations:

Sales (90 percent collected in the first year) ....... $750,000

Disbursements for costs and expenses ................. 600,000
Purchases of equipment for cash ...................... 200,000
 Proceeds from issuance of common stock ............... 250,000
Payments on short-term borrowings .................... 25,000
Proceeds from short-term borrowings .................. 50,000
Depreciation on equipment ............................ 40,000
Disbursements for income taxes ....................... 45,000
Bad debt write-offs .................................. 30,000

What is the cash balance at December 31 of the first year?

a. $75,000
b. $85,000
c. $105,000
d. $140,000

21. If the cash balance shown in a company’s accounting records 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. Deposits in transit
c. Outstanding checks
d. Bank charges not yet recorded by the company

22. 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

23. 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 an NSF check
d. May include a debit to accounts payable for an NSF check

24. When preparing a bank reconciliation, bank credits are

a. Added to the bank statement balance
b. Deducted from the bank statement balance
c. Added to the balance per book
d. Deducted from the balance per book

25. Bank overdrafts, if material, should

a. Be reported as a deduction from the current asset section.
b. Be reported as a deduction from cash.
c. Be netted against cash and a net cash amount reported.
d. Be reported as a current liability.

26. The following data relate to accounts receivable of Oyie Company for the year 2007:

Accounts Receivable 1/1 650,000

Credit sales 2,700,000
Sales Returns 75,000
Accounts written off 40,000
Collections from customers 2,150,000
Estimated future sales returns at 12/31 50,000
Estimated uncollectible accounts 12/31 110,000

What amount should Oyie report for accounts receivable, before allowances for sales returns and uncollectible
accounts, at December 31, 2007?
a. 1,200,000
b. 1,125,000
c. 1,085,000
d. 925,000
27. What is the net realizable value of accounts receivable at December 31, 2007?
a. 1,200,000
b. 1,125,000
c. 1,085,000
d. 925,000

28. Cary, Inc. sells to wholesalers on terms 2/15,net 30. Cary has no cash sales but 50% of Cary's customers take
advantage of the discount. Cary uses the gross method of recording sales and trade receivables. An analysis of
Cary's trade receivable at December 31,2007 revealed the following:

Age Amount Collectible

0 - 15 days 2,000,000 100%
16-30 days 1,200,000 95%
31-60 days 100,000 90%
Over 60 days 50,000 50%
3,350,000

In its December 31, 2007 balance sheet, what amount should Cary report as allowance for discounts?
a. 20,000
b. 32,400
c. 33,500
d. 40,000

29. Ryan Company began operations on January 01, 19x7. The following information is available for the year ended
December 31, 19x6.

Total merchandise purchases P700,000

Merchandise inventory at 12/31/19x7 140,000
Collections from customers 400,000

All merchandise is marked to sell at 40% above cost. Assume that all sales are credit sales all receivables are
collectible. The balance in accounts receivable at December 31, 19x7 should be
a. P160,000
b. P244,000
c. P300,000
d. P384,000

30. The allowance for bad debts in the books of MJ Company had a credit balance of P17,800 at the close of
calendar year 2006. During 2007, uncollectible accounts of P14,500 were written off against the allowance. The
provision for doubtful accounts is computed at 3% of the net sales for the year. The credit balance of the
allowance account at December 31, 2007 amounted to P29,550.

The net sales for 2007 was:

a. P985,000
b. P875,000
c. P593,333.33
d. None of these

31. The following data were taken from the records of MJ Corporation for the
year ended December 31, 2007.

Sales on account 3,600,000

Notes received to settle accounts 400,000
Provision for doubtful accounts 90,000
Accounts receivable determined to be worthless 25,000
Purchases on account 3,900,000
Payments to creditors 3,200,000
Discounts allowed by creditors 260,000
Merchandise returned by customer 15,000
Collections received to settle accounts 2,450,000
 Notes given to creditors in settlement of accounts 250,000
Merchandise returned to suppliers 70,000
Payments on notes payable 100,000
Discounts taken by customers 40,000
Collections received in settlement of notes 180,000

What is the net realizable value of accounts receivable on December 31, 2007?
a. 605,000
b. 890,000
c. 825,000
d. 670,000

32. Trade receivables are classified as current assets when they are reasonably expected to be collected
a. Within one year
b. Within the normal operating cycle
c. Within one year or within the normal operating cycle whichever is shorter
d. Within one year or within the normal operating cycle whichever is longer

33. Nontrade receivables are classified as current assets only if they are reasonably expected to be realized in
cash
a. Within one year or normal operating cycle, whichever is shorter.
b. Within the normal operating cycle
c. Within one year or the normal operating cycle, whichever is longer
d. Within one year, the length of the operating cycle notwithstanding

34. Credit balances in accounts receivable should be classified as

a. Current liability
b. Part of accounts payable
c. Noncurrent liability
d. Deduction from accounts receivable

35. A method of estimating doubtful accounts that focuses on the income statement rather the balance sheet
is the allowance method based on
a. Direct writeoff c. Credit sales
b. Aging of trade accounts receivable d. Balance of accounts receivable

36. A method of estimating doubtful accounts that emphasizes asset valuation rather than income measurement
is the allowance method based on
a. Aging of receivables
b. Direct writeoff
c. Gross sales
d. Credit sales less sales returns and allowances

37. On December 1, 2007 Joshtin Company assigned on a nonnotification basis accounts receivable of P5,000,000 to
a bank in consideration for a loan of 90% of the receivables less a 5% service fee on the accounts assigned.
Joshtin signed a note for the bank loan. On December 31, 2007, Joshtin collected assigned accounts of
P3,000,000 less discount of P200,000. Joshtin remitted the collections to the bank in partial payment for
the loan. The bank applied first the collection to the interest and the balance to the principal. The agreed
interest is 1% per month on the loan balance. In its December 31, 2007 balance sheet, Joshtin should
report note payable as a
current liability at

a. 1,745,000 c. 1,700,000
b. 1,545,000 d. 2,250,000
38. Steven Co. assigned P500,000 of accounts receivable to Currimao Finance Co. as security for a loan of P420,000.
Currimao charged a 2% commission on the amount of the loan; the interest rate on the note was 10%. During
the first month, Steven collected P110,000 on assigned accounts after deducting P380 of discounts. Steven
accepted returns worth P1,350 and wrote off assigned accounts totaling P3,700.
Entries during the first month would include a

a. debit to Cash of P110,380.

b. debit to Bad Debts Expense of P3,700
c. debit to Allowance for Doubtful Accounts of P3,700
d. debit to Accounts Receivable of P115,430

39. When the allowance method of recognizing bad debt expense is used, the entries at the time of collection
of an account previously written off would
a. Decrease the allowance for doubtful accounts
b. Increase net income
c. Have no effect on the allowance for doubtful accounts
d. Have no effect on net income

40. When a specific customer’s account receivable is written off as uncollectible, what will be the effect on net
income under each of the following methods of recognizing bad debt expense?

Allowance Direct writeoff

a. None Decrease
b. Decrease None
c. Decrease Decrease
d. None None