PRACTICAL ACCOUNTING 1 C.T.ESPENILLA
CASH AND CASH EQUIVALENT (PAS 7)
1. On December 31, 2008, the cash account of Germany Corporation shows the following composition:
Petty cash fund, P30,000; Cash in bank (payroll fund), P2,000,000; Travel fund, P150,000; Interest and dividend fund, P250,000; Tax fund, P120,000; Cash in bank (current account), P3,000,000; Certificate of deposit (90-day term), P1,000,000; Certificate of deposit (180-day term), P1,500,000; Cash in foreign bank-restricted, P500,000; Money market fund (60 days), P500,000; Money market fund (6 months). P900,000; Customer’s check dated January 15, 2009, P60,000; Customer’s check dated December 30, 2008 returned by the bank for lack of funds, P40,000; A 30-day BSP treasury bill, P1,000,000; A 3-year treasury bill acquired three months prior to maturity, P1,200,000; Sinking fund cash, P800,000; Preferred Redemption fund, P400,000; Contingent fund, P300,000; Insurance fund, P200,000; Fund for the acquisition of long lived assets, P500,000; Traveler’s check, P60,000; and Cashier’s checks, P100,000. What is the correct cash and cash equivalents balance to be reported by Germany Corporation on December 31, 2008?
a. 7,810,000 c. 9,410,000
b. 8,210,000 d. 9,610,000
2. On December 31, 2008, England Co.’s Cash account balance per ledger of P3,600,000 includes:
Demand deposit, P1,500,000; Certificate of deposit-30 days, P500,000; NSF check of customer, P20,000; Money Market Placement (due date: June 30, 2009), P1,000,000; Savings deposit in closed bank, P50,000; IOU from an employee, P30,000; Pension fund, P400,000; Petty cash fund, P10,000; Customer’s check dated January 31, 2009, P60,000; Customer’s check outstanding for 18 months, P30,000.
Additional information:
Check of P400,000 in payment of an accounts payable was recorded on December 31, 2008, but was mailed to creditors on January 15, 2009.
Check of P50,000 dated January 1, 2009 in payment of accounts payable was recorded and mailed on December 31, 2008.
The company uses the calendar year. The cash receipts journal was held open until January 15, 2009, during which time, P200,000 was collected and recorded on December 31, 2008.
How much “Cash and Cash equivalents” should be shown on the December 31, 2008 balance sheet?
a. 1,960,000 c. 2,160,000
3. On April 1, 2008, Burma Inc. established a petty cash fund for P40,000 by writing a check drawn against the general checking account. On April 30, the fund contained the following:
Currency and coins, P12,000; Paid vouchers for office supplies, P16,000; Receipts for postage still unused, P8,000; Paid vouchers for transportation, P2,400.
On April 30, the company wrote a check to replenish the fund.
Question 1: What is the amount of the replenishment under the imprest system?
a. 12,000 c. 28,000
b. 24,000 d. 40,000
Question 2: What is the amount of the replenishment under the fluctuating system?
a. 12,000 c. 28,000
b. 24,000 d. 40,000
Question 3: What is the amount of the shortage/overage under the imprest system?
a. 800 c. 2,400
b. 1,600 d. 3,200
4. Trinidad Co. provided the following data for the purpose of reconciling the cash balance per book:
Balance per book P170,000
Outstanding checks (including certified check of P20,000) 100,000
Deposit in transit 40,000
December NSF check (of which P10,000 had been
redeposited and cleared on December 27) 30,000 Erroneous credit to Trinidad’s account, representing
proceeds of a loan granted to another company 60,000 Proceeds of note collected by bank for Trinidad, net of
service charge of P4,000 150,000
Erroneous bank charge 3,000
A check of P5,000 in payment of account was recorded by
the company as: 500
Question 1: The correct cash balance to be shown in the company’s December 31, 2008 balance sheet is:
a. 285,500 c. 335,500
b. 295,500 d. 345,500
Question 2: The cash in bank balance as shown in the bank statement on December 31, 2008 is:
a. 372,500 c. 372,500
b. 382,500 d. 392,500
5. In your audit of Georgia Corp. as of December 31, 2008, you ascertained the following:
Balance per book P600,000
Bank charges 1,500
Balance per bank 605,000
Deposit in transit 180,000
Customer note collected by the bank 225,000
Interest on customer note 9,000
Customer check returned NSF 37,500
Depositor’s note charged to account 150,000 What is the total amount of outstanding checks?
a. 140,000 c. 160,000
b. 300,000 d. 165,000
6. The following information was included in the bank reconciliation for France Corp. Assume all other reconciling items are listed below:
Check and charges returned by the bank in June including a June service charge of P5,000, P900,000; Check issued by company for P9,000 was recorded at P900;
Erroneous bank debit, P6,000; Service charge made by bank in May and recorded in the books in June, P10,000; Total credits to cash in all journals during June P800,000; Customer’s NSF check returned as bank charge in June (no entry made on book), P100,000; Customer’s NSF check returned in May and redeposited in June (no entry made on books in either May or June), P50,000; Customer’s NSF check in May and recorded in June, P20,000; Outstanding checks at May 31, P200,000.
What is the total outstanding check on June 30?
a. 172,900 c. 189,100
b. 178,900 d. 239,100
7. The following information was included in the bank reconciliation of Swaziland Corp. on December 31, 2008:
Total recorded company receipts for December P850,000 Credit memo for November recorded in December 60,000 Credit memo for December not yet recorded 80,000 Erroneous receipt by the company during December, no
correction was made until the following year 50,000 Erroneous bank disbursement in December corrected by
bank in December 18,000
Total receipts per bank in December 900,000 Deposit in transit, December 31 100,000 Book receipt for P90,000 in December recorded by the
company as 9,000
The total deposit in transit for November 30 is:
a. 243,000 c. 131,000
b. 193,000 d. 81,000
8. Rock Company had the following bank reconciliation at March 31, 2008: Balance per bank statement 3/31 P465,000
Add: Deposit in transit P100,000
Debit memo 10,000 110,000
Total 575,000
Less: Outstanding checks P125,000
Credit memo 60,000 185,000 Balance per book, 3/31 P390,000
All reconciliation items at March 31, 2008 cleared through the bank in April.
Outstanding checks at April 30, 2008 totaled P75,000; Deposit in transit amounted to P150,000; Credit memo for April, P80,000; Debit memo for April, P15,000; Bank receipts for April, P600,000; and bank disbursement in April, P500,000.
Question 1: What is the amount of cash receipts per books in April?
a. 590,000 c. 650,000
b. 630,000 d. 750,000
Question 2: What is the amount of cash disbursement per books in April?
a. 435,00 c. 465,000
b. 445,000 d. 500,000
LOANS AND RECEIVABLES (PAS 32, PAS 39, PFRS 7)
9. On December 31, 2008, the Receivable account of George Corporation shows a debit balance of P5,950,000. Subsidiary details show the following composition:
Accounts receivable, P725,000; Loans receivable, P100,000; Installment receivables, normally due 1 year to 2 years, P300,000; Customers’ accounts reporting credit balances arising from sales returns, P30,000; Advance payments for purchase of merchandise, P150,000; Customers’ accounts reporting credit balances arising from advance
payments, P20,000; Cash advances to subsidiary, P400,000; Claim from insurance company, P15,000; Subscription receivable due in 60 days, P300,000; Accrued interest receivable, P10,000; Deposit on contract bids, P3,000,000 and Advances to shareholders (collectible in 2010), P1,000,000.
How much is the amount to be presented as trade and other receivables under the current assets section of the balance sheet?
a. 725,000 c. 1,590,000
b. 1,125,000 d. 1,600,000
10. On January 1, 2008, Swiss Inc.’s Trade receivables has an outstanding balance of P500,000. Below are the transactions in its receivables and other elated accounts during 2008:
Sales on account, P7,200,000; Accounts receivable written off due to impairment, P50,000; Notes receivable to settle accounts, P800,000; Purchases on account,
P7,800,000; Payments to creditors, P6,400,000; Purchase discounts, P520,000; Sales returns, P30,000; Collections received to settle accounts, P4,900,000; Notes given to settle accounts, P500,000; Purchase returns, P140,000, Payments of notes, P200,000;
Discounts taken by customers, P80,000; Collection on notes receivables, P360,000; Provision for future returns and discounts on outstanding receivables, P25,000. What is the carrying value of the accounts receivable on December 31, 2008?
a. 1,815,000 c. 2,255,000
b. 1,840,000 d. 2,280,000
11. On December 31, 2008, Globe Company’s general ledger of its account receivable showed an outstanding balance of P2,100,000. Below is summary of the aging schedule of the said general ledger:
Classification Balance % of collectability 1-60 days P1,000,000 100%
61-120 days 400,000 90% 121-180 days 300,000 80% 181-360 days 200,000 70% More than one year 200,000 10% Additional information:
Half of more than one year receivables are deemed worthless, thus has to be further written off.
During the year the company has made a recovery of a previous write off. Question 1: Determine the net amount to be charged against income related to receivables in 2008?
a. 150,000 c. 220,000
b. 164,000 d. 320,000
Question 1: What is the net book value of receivables as of December 31, 2008?
a. 2,100,000 c. 1,750,000
b. 2,000,000 d. 1,650,000
12. Point company has an outstanding receivable of P1,000,000 as of December 31, 2008. A test of collectibility of the receivables showed that P600,000 is currently collectible and not impaired. P300,000 has been outstanding more than the required period for similar transaction an objective evidence showed that only P158,000 is considered realizable; the remaining receivable balance has been outstanding for 2 years and Point Company
estimates that none of which will be realized. What amount should the account receivable be reported in the December 31, 2008 balance sheet?
a. 158,000 c. 600,000
b. 458,000 d. 758,000
13. On March 1, 2008, Curse Company sold goods to Matt Company. Matt signed a non-interest bearing note requiring payment of P60,000 annually for seven years. The first payment was made on March 1, 2008. The prevailing rate of interest for this type of note at the date of issuance was 10%. Information
Periods Present value Present value of Ordinary of 1 at 10% Annuity of 1 at 10%
6 0.56 4.36
7 0.51 4.87
Curse company should report sales revenue in March 1, 2008 at:
a. 321,600 c. 261,600
b. 292,200 d. 214,200
14. On December 31, 2008, Large Corporation sold for P50,000 an old machine having an original cost of P70,000 and a book value of P20,000, the term of the sale were as
follows:
P10,000 down payment
20,000 payable on December 31, each of the next two years
The agreement of the sale made no mention of interest; however, 9% would be a fair rate for this type of transaction. What should be the amount of the notes receivable, net of the unamortized discount and gain on sale, respectively on December d31, 2005?
a. 35,182 and 25,282 c. 45,182 and 25,182 b. 40,000 and 20,000 d. 70,364 and 30,000
15. On December 31, 2008, Ball Company finished consultation services and accepted in exchange a promissory note with a face value of P200,000, a due date of December 31, 2008, and a stated rate of 5% with interest receivable at the end of each year. The fair value of the services is not readily determinable and the note is not readily marketable. Under the circumstances, the note is considered to have an appropriate imputed rate of interest of 10%.
How much should of the note be initially recognized on the transaction date?
a. 24,869 c. 175,133
b. 150,264 d. 200,000
16. Maxx Company sold its inventory for P300,000 to Maxx on January 2, 2008 and receive a one-year note bearing an interest of 12% for the full amount. On December 31, 2008, Maxx determined based on Maxx recent financial crisis, that the amount due on January 2, 2009 will not be collected and that only P210,000 of the principal will be collected with some delay until the end of 2010. What is the carrying value of the notes receivable on Maxx’s 2008 balance sheet?
a. 167,410 c. 210,000
b. 187,500 d. 300,000
17. At January 1, 2008, Queen Co. had a receivable from King Company of P400,000 that has been outstanding for quite some time. Initial investigation revealed that King is in deep financial difficulties. At present King Company is unable to settle all outstanding obligation but further investigation revealed that Jack Company is taking over to run and operate the business affairs of King Company. However, Jack Company is more than willing to assume only 75% of King Company’s financial obligation and by the end of 2009, all financial obligations of King will be settled. As of December 31, 2008 Queen Co. expects to collect P300,000 that is due from King. At the time the receivable was granted
the prevailing rate of interest for similar financial asset is 14% while the prevailing implicit rate on December 31, 2008 is 15%.
Question 1: What amount should Queen report in its December 31, 2008 balance sheet involving the receivable?
a. 136,843 c. 300,000
b. 263,157 d. 400,000
Question 2: What amount of bad debt/impairment loss should Queen report in 2008?
a. 136,843 c. 300,000
b. 263,157 d. 400,000
18. Peter Company assigned P1,000,000 of its accounts receivable to BPI Financing Co. as a security for P600,000 loan. BPI charged a 2% commission on the amount of the loan. The interest on the loan was 10%. During the first month, Peter collected P245,000 on the assigned accounts after deducting P5,000 of discounts. Peter company accepted returns worth P10,000 and wrote off assigned accounts totaling P9,000.
Question 1: The amount of cash received at the time of the assignment was?
a. 588,000 c. 882,000
b. 600,000 d. 980,000
Question 2: How much is the loss to be recognized from the transfer of asset?
a. 0 c. 412,000
b. 12,000 d. 588,000
Question 3: What is the balance of the accounts receivable-assigned at the end of the first month?
a. 0 c. 731,000
b. 588,000 d. 755,000
19. On November 1, 2008, Chandler Company assigned on a non-notification basis accounts receivable of P4M to a bank in consideration for a 24% interest bearing loan. The loan value was 80% of the receivable assigned and a 5% service fee on the accounts assigned was charged by the finance company. Chandler collected assigned accounts of P1,500,000 and P1,000,000 on November and December, respectively, and remitted the collections to the finance company on a monthly basis in partial payment for the loan. The finance company applied first the collection to the interest and the balance to the principal. In its December 31, 2008 balance sheet, Chandler should report note payable as a current liability at
a. 0 c. 799,280
b. 700,000 d. 828,000
20. On February 1, 2006, Pacific Corporation factored receivables with a face amount of P600,000 to BDO. BDO advanced P490,000 to Pacific while retaining P30,000. Prior to the sale of the receivables, it was determined that 2% of the receivables were deemed not collectible based on the available information at that time, thus, the company made the necessary accounting of the said development in their 2008 financial records. At the time of transfer, what amount of loss should Pacific recognize?
b. 68,000 d. 88,000
21. On October 31, 2008, Crade Company engaged in the following transactions: Factored P1,000,000 of accounts receivable with recourse on a non notification
basis with BDO. BDO charged a factoring fee of 2% of the amount of recievables factored and withheld 10% of the amount factored. Fair market value of the recourse obligation is P8,000.
Obtained a P500,000, six month loan from City Bank, discounted at 12%. The company pledged the remaining accounts receivable amounting to P600,000 as a security to the loan.
What is the total cash received from the financing of receivables and the amount of loss, respectively?
a. 1,320,000 and 28,000 c. 1,380,000 and 20,000 b. 1,350,000 and 28,000 d. 1,470,000 and 20,000
22. On July 31, 2008, Gary Co. discounted at a bank a 6-month, 10% customer note amounting to P600,000 and dated May 31, 2008. The bank discounted the note at 12%. How much net proceeds did Gary receive from the discounting?
a. 564,000 c. 604,800
