Review Material for Accounting 17NC

CASH & ACCRUAL BASIS, SINGLE-ENTRY SYSTEM

1. In its accrual basis of income statement for the year ended December 31, 2014, Daria Company
reported revenue of P3,000,000.Additional information was as follows:
Accounts receivable- January 1
P 400,000
Uncollectible accounts written off
20,000
Accounts receivable- December 31
500,000
Under the cash basis, how much should Daria report as revenue for 2014?
A. P 2,880,000
B. P 2,900,000
C. P 3,000,000
D. P 3,120,000
2. Adam Company reported cash basis sales revenue of P2,300,000 for the year ended December
31, 2014. Additional information was as follows:
January 1
December 31
Accounts receivable
P 500,000
P 650,000
Notes receivable
150,000
200,000
During 2014, uncollectible accounts of P 10,000 were written off and notes receivable of
P100,000 was discounted for net proceeds of P90,000 and credited directly to notes receivable.
Under accrual basis, Adam Company would report sales at
A. P 2,160,000
B. P 2,500,000
C. P 2,510,000
D. P 2,600,000
3. Reid Company, which began operations on January 1, 2013, has elected to use cash basis
accounting for tax purposes and accrual basis accounting for financial statements. Reid reported
sales of P 1,750,000 and P 800,000 in its tax returns for the year s ended December 31, 2014 and
2013, respectively. Reid reported accounts receivable of P 300,000 and P500,000 in its balance
sheets as of December 31,2014 and 2013 respectively. What amount should Reid report as sales
in its income statement for the year ended December 31, 2014?
A. P 1,450,000
B. P 1,550,000
C. P 1,950,000
D. P 2,050,000
4. Ward a consultant, keeps his accounting records on cash basis. During 2014, Ward collected
P2,000,000 in fees from clients. At December 31, 2013, Ward had accounts receivable of
P400,000. At December 31, 2014, ward had accounts receivable of P600,000 and unearned fees
of P50,000. On accrual basis, what was Wards service revenue for 2014?
A. P 1,750,000
B. P 1,800,000
C. P 2,150,000
D. P 2,250,000
5. Zeta Company reported sales revenue of P4,600,000 in its income statement for the year ended
December 31, 2014. Additional information as follows:
12/31/2013
12/31/2014
Accounts receivable
P 1,000,000
P 1,300,000
Allowance for uncollectible accounts
60,000
110,000
Zeta wrote off uncollectible accounts totaling P20,000 during 2014. Under the cash basis of
accounting, Zeta would have reported sales of
A. P 4,900,000
B. P 4,350,000
C. P 4,300,000
D. P 4,280,000
6. During 2014 Kew Company, a service organization, had P200,000 in cash sales and P3,000,000
in credit sales. The accounts receivable balances were P400,000 and P485,000 at December 31,
2013 and 2014 respectively. If Kew desires to prepare a cash basis income statement, how much
should be reported as sales for 2014?
A. P 2,915,000
B. P 3,115,000C. P 3,200,000
B. P 3,285,000
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7. The following information pertains to Spee Companys 2014 sales.

Cash sales
Gross
P 400,000
Return and allowances
20,000
Credit sales
Gross
600,000
Discounts
30,000
On January 1, 2014, customers owed Spee P200,000. On December 31, 2014, customers owed
Spee P150,000. Spee uses the direct write off method for bad debts. No bad debts were recorded
in 2014. Under the cash basis of accounting, what amount of revenue should Spee report for
2014?
A. P 1,000,000
B. P 950,000
C. P 850,000
D. P 380,000
8. The following balances were reported by Easy Company on December 31, 2014 and 2013.
2014
2013
Accounts payable
P 700,000
P 500,000
Notes payable
800,000
300,000
On July 1, 2014, the company issued a 1-year 12% note for a bank loan of P200,000. Total
payments to suppliers in 2014 amounted to P2,200,000, after purchase discounts of P50,000.
During 2014, the company returned merchandise costing P100,000. What is the amount of gross
purchases for 2014 under accrual basis?
A. P 3,050,000
B. P 2,850,000
C. P 2,700,000
D. P 900,000
9. Hard Company maintains its accounting records on the cash basis but restates it financial
statements to the accrual method of accounting. Hard has P6,000,000 in cash basis income for
2014. The following information pertains to the operations for the years ended December 31, 2014
and 2013.
2014
2013
Accounts receivable
P 4,000,000
P 2,000,000
Accounts payable
1,500,000
3,000,000
Under the accrual method, what amount should Hard report in its 2014 income statements?
A. P 2.500,000
B. P 5,500,000
C. P 6,500,000
D. P 9,500,000
10. Clay Company borrows money under various loan agreements involving notes discounted and
notes requiring interest payments at maturity. During the year ended December 31, 2014, Clay
paid interest totaling P100,000. Clays December 31 balance sheets included the following
information:
2013
2014
Prepaid interest
P 23,500
P 18,000
Interest payable
45,000
53,500
8How much interest should Clay report for 2014?
A. P 86,000
B. P 97,000
C. P 103,000
D. P 114,000
11. Under Easter Companys accounting system, all insurance premiums paid are debited to prepaid
insurance. Information for the year ended December 31, 2014, is as follows:
Prepaid insurance at January 1
P 100,000
Charge to insurance expense
440,000
Prepaid insurance at December 31
120,000
What was the amount of insurance premium paid in 2014?
A. P 340,000
B. P 420,000
C. P 440,000
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D. P 460,000
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For items 12 to 13: Agusan Company is engaged in small export business. The company maintains
limited record. The following balances are abstracted from the companys records for the year 2014:
January 1
December 31
Account Receivable
P 150,000
P 100,000
Account Payable
200,000
100,000
Account Receivable Written Off
5,000
Cash Received from costumers
2,100,000
Cash paid to trade creditors
1,400,000
Sales Discounts
15,000
Sales returns and allowances
10,000
Note receivable Trade
50,000
100,000
Purchase discounts
20,000
Purchase returns
5,000
12. What is the amount of gross sale?
A. P 2,055,000
B. P 2,080,000
13. What is the amount of gross purchase?
A. P 1,525,000
B. P 1,500,000

C. P 2,105,000

D. P 2,130,000

C. P 1,325,000

D. P 1,300,000

14. Camadillo Company reported the following changes in all the account balances for the current
year, except for retained earnings:
Increase (Decrease)
Cash
P 790,000
Accounts receivable, net
240,000
Inventory
1,270,000
Investments
(470,000)
Accounts payable
(380,000)
Bonds payable
820,000
Share capital
1,250,000
Share premium
130,000
There were no other entries in the retained earnings account except for net and dividend
declaration of P 190,000 which was paid in the current year. What is the net income for the current
year?
A. P 1,200,000
B. P 1,190,000
C. P 200,000
D. P 10,000
15. Bart Company provided the following information for the current year:
Disbursements for purchases
P 5,800,000
Increase in trade accounts payable
500,000
Decrease in merchandise inventory
200,000
What is the cost of goods sold for the current year?
A. P 6,500,000
B. P 6,100,000
C. P 5,500,000
D. P 5,100,000
16. During the first year, Exel Company issued 15,000 shares with P 100 par value at P 150 per
share. At year-end, the entity issued 2,000 shares in payment of current obligations of P 250,000.
Dividends of P 500,000 were paid during the year. Total liabilities at the end of the year amounted
to P 200,000 and total assets at the end of the year equalled P 3,000,000. What is the net income
for the first year of operations?
A. P 1,500,000
B. P 800,000
C. P 500,000
D. P 300,000
17. Sunshine Company had total assets of P 4,000,000 and shareholders equity of P 2,080,000 at the
beginning of the year. During the year, assets increased by P 520,000 and liabilities decreased by
P 820,000. What is the shareholders equity at the end of the year?
A. P 3,700,000
B. P 3,420,000
C. P 3,380,000
D. P 1,340,000
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18. Easy Companys beginning and ending total liabilities were P 840,000 and P 1,000,000,
respectively. At year-end, owners equity was P 2,600,000 and total assets were P 200,000 larger
than at the beginning of the year. During the year, the new share capital issued exceeded
dividends by P 240,000. What was the net income or loss for the year?
A. P 280,000 income
B. P 280,000 loss
C. P 200,000 loss
D. P 40,000 income
19. Haze Company provided the following information for 2012:
January 1
Cash
P 620,000
Accounts receivable
670,000
Merchandise inventory
860,000
Accounts payable
530,000

December 31
P?
900,000
780,000
480,000

The sales and cost of goods sold were P 7,980,000 and P 5,830,000, respectively. All sales and
purchases were on credit. Various expenses of P 1,070,000 were paid in cash. There were no
other pertinent transactions. What is the cash balance on December 31, 2012?
A. P 1,090,000
B. P 1,500,000
C. P 2,570,000
D. P 3,050,000
20. During 2012, Noller Co. sold equipment that had cost P294,000 for P176,400. This resulted in a
gain of P12,900. The balance in Accumulated DepreciationEquipment was P975,000 on
January 1, 2012, and P930,000 on December 31. No other equipment was disposed of during
2012. Depreciation expense for 2012 was
A. P45,000.
B. P57,900.
C. P85,500.
D. P175,500.
21. Wellington Corp. has outstanding accounts receivable totaling P5 million as of December 31 and
sales on credit during the year of P25 million. There is also a debit balance of P20,000 in the
allowance for doubtful accounts. If the company estimates that 8% of its outstanding receivables
will be uncollectible, what will be the balance in the allowance for doubtful accounts after the yearend adjustment to record bad debt expense?
A. P2,000,000.
B. P 420,000
C. P 400,000
D. P 380,000
22. The following information for the Lilac Company for the year 2013:
Gross profit on sales
P 76,800
Cost of goods manufactured
272,000
Goods in process inventory, beginning
22,400
Goods in process inventory, ending
30,400
Finished goods inventory, beginning
36,000
Finished goods inventory, ending
41,600
How much was the sales of Lilac Company for the year 2013?
A. P335,200
B. P343,200
C. P347,200

D. P348,800

23. Certain information relative to the 2014 operations of Anko Co. follows:
Accounts receivable, January 1, 2014
P34,000
Accounts receivable collected during 2014
46,000
Cash sales during 2014
12,000
Inventory, January 1, 2014
18,000
Inventory, December 31, 2014
16,500
Purchases of inventory during 2014
40,000
Gross margin on sales
13,500
What is Anko's accounts receivable balance at December 31, 2014?
A. P28,000
B. P31,000
C. P34,000.
D. P43,000.

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