OSE Practical Accounting 1

SET B
Coverage:

Review of Accounting Process; cash and Cash Equivalents; Receivables; and Inventories

1. Noisy Boy Company had the following information relating to its accounts receivable for the
year 2014:
Accounts receivable, January 1 P 1,200,000
Sales on credit 5,300,000
Collections from customers (including P40,000
recovery of accounts written off) 4,750,000
Allowance for doubtful accounts, January 1 75,000
Accounts written off as worthless 60,000

Noisy Boy uses 2% of sales to estimate its uncollectible accounts. The balance of the accounts
receivable at December 31, 2014 before considering the allowance for doubtful accounts is

A. P1,584,000
B. P1,624,000
C. P1,690,000
D. P1,730,000

2. The following information relates to Smasher Companys accounts receivable for 2014:
Accounts receivable, 1/1/14 P 650,000
Credit sales for 2014 2,700,000
Sales returns for 2014 75,000
Accounts written off during 2014 40,000
Collections from customers during 2014 2,150,000
Allowance for doubtful accounts 1/1/14 90,000

The net realizable value of accounts receivable at December 31, 2014 amounted to P975,000.
The uncollectible accounts expense of Smasher Company for 2014 is

A. P20,000
B. P50,000
C. P60,000
D. P70,000

Use the following information for questions 3-4

 CERTS Bank granted a 8%, 3-year P6,000,000 loan to Ariel Company on January 1, 2014. The
interest on the loan is payable every December 31. CERTS bank incurred P520,600 of direct
origination cost but an origination fee of P200,000 was charged against Ariel Company.

3. What is the carrying value of the loan on December 31, 2015 in CERTS Banks accounting books?
A. P6,219,836
B. P6,320,600
C. P6,000,000
D. P6,113,026

4. What is the interest income to be reported by CERTS Banks in profit or loss for the year 2014?
A. P379,236
B. P442,442
C. P480,000
D. P505,648

5. Davao Finance granted a 10%, 2-year P5,000,000 loan to Cebu Company on January 2014. The
interest is payable every December 31 for each year during the term of the contract. Davao
Finance incurred an origination cost of P328,326 but charge Cebu Company P150,000 as
origination fee. The effective rate is now 8% after considering the origination costs and
origination fee. Due to financial difficulty, Cebu Company was unable to pay the interest on
December 31, 2014. Davao Finance has now considered that the loan to Cebu Company is now
impaired. Reliable estimate shows that the projected cash flows from the loan are as follows:
P2,000,000 on December 31, 2015 and P3,000,000 on December 31, 2016. What amount of
impairment loss on the loan should Davao Finance recognize on December 31, 2014?
A. None
B. P668,723
C. P373,371
D. P462,963

6. Orange, Inc. assigns P1,500,000 of its accounts receivables as collateral for a P1 million loan with
a bank. The bank assesses a 3% finance fee and charges interest on the note at 6%. What would
be the journal entry to record this transaction?
A. Debit Cash for P970,000, debit Finance charge for P30,000 and credit Notes Payable for
P1,000,000
B. Debit Cash for P970,000, debit Finance charge for P30,000 and credit Accounts Receivable
for P1,000,000
C. Debit Cash for P970,000, debit Finance charge for P30,000, debit Due from bank for
P500,000 and credit Accounts Receivable for P1,500,000
D. Debit Cash for P910,000, debit Finance charge for P90,000 and credit Notes Payable for
P1,000,000
7. On December 1, 2014, Alex Company assigned on a nonnotification basis accounts receivables
of P3,000,000 to a bank in consideration for a loan of 80% of the receivables less a 5% service
fee on the accounts assigned. The interest rate of the loan is 12% per annum. The company
collected assigned accounts of P2,000,000 and 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 interest rate is 1% per month on the outstanding balance of the loan.
In its December 31,2014 , the statement of financial position, what amount of note payable
should Alex company report as current liability?
A. None
B. P424,000
C. P400,000
D. P1,024,000

8. On October 31, 2014, Tess Company engaged in the following transactions:

Obtained a P500,000, six-month loan from BPI Bank, discounted at 12%. The company
pledge P500,000 of accounts receivable at security for the loan.
Factored P1,000,000 of accounts receivable without recourse on a non-notification basis
with Help Company. Help charged a factoring fee of 2% of the amount of receivables
factored and withheld 10% of the amount factored.
What is the total cash received from the financing of receivables?
A. P1,350,000
B. P1,470,000
C. P1,380,000
D. P1,320,000

9. On January 1, 2014, Santayana Company sold a special machine that had a list price of P900,000.
The buyer paid P100,000 cash and signed an P800,000 note. The note specified that it would be
paid off in four equal annual payments of P274,565 each starting on December 31, 2014. The
carrying amount of the receivable on December 31, 2015 is
A. P452,111
B. P701,435
C. P637,435
D. P725,435

10. Grey Company holds an overdue note receivable of 800,000 plus recorded accrued interest of
P64,000. The effective interest rate is 8%. As a result of a court-imposed settlement on
December 31, 2014, Grey agreed to the following restructuring arrangement:
Reduced the principal obligation to 600,000.
Forgave the P64,000 of accrued interest.
Extended the maturity date to December 31, 2016.
Annual interest of P40,000 is to be paid on December 31, 2015 and 2016.
 The present value of the interest and principal payments to be received by Grey Company
discounted for two years at 8% is P585,734. For the year ended December 31, 2014, Grey would
recognize impairment loss of

A. P278,266
B. P214,266
C. P198,266
D. P54,266

11. During your review of records of Yoko Corporation for the year 2014, you noted that Yoko sold a
machine with a carrying amount of P640,000 (cost is P1,600,000) on June 30, 2014. Yoko
received an P800,000 non-interest bearing note due in 3 years. There is no established market
value for the machine. The prevailing interest rate for a note of this type is 12%. Yoko recorded
the transaction by debiting Note Receivable for P800,000 and crediting Machinery for P640,000
and Gain on sale of Machine for the difference. Because of this, Yokos profit for the year ended
December 31, 2014 had been overstated by
A. P196,394
B. P125,834
C. P162,227
D. P 55,274

12. Silencer, Inc. estimates its doubtful accounts by aging its accounts receivable. The aging
schedule of accounts receivable at December 31, 2014 is presented below:
Age of accounts Amounts
0-30 days P1,264,800
31-60 days 691,500
61-90 days 288,600
91-120 days 114,975
Over 120 days ___59,100
P2,418,975

Silencer, Inc.s uncollectible accounts experience for the past 5 years are summarized in the
following schedule:

A/R Over
Balance 0-30 31-60 61-90 91-120 120
Year Dec.31 Days Days Days Days Days
2013 P1,968750 0.30% 1.80% 12% 38% 65%
2012 1,500,000 0.50% 1.60% 11% 41% 70%
2011 697,500 0.20% 1.50% 9% 50% 69%
2010 1,224,000 0.40% 1.70% 10.20% 47% 81%
2009 1,865,500 0.90% 2.00% 9.70% 33% 95%
 The balance of the allowance for doubtful accounts at December 31, 2014 before adjustment is
P126,751.

The necessary adjusting journal entry to adjust the allowance for doubtful accounts as of
December 31, 2014 would include:

A. No adjusting journal entry is necessary.

B. A debit to retained earnings of P13,894.
C. A debit to doubtful accounts expense P140,644.
D. A credit to allowance for doubtful accounts of P13,894.

Use the following information for the next two questions.

(Round off present value factors to four decimal places)
On December 31, 2014, Merciful Bank entered into a debt restructuring agreement with
Miserable Corp., which was experiencing financial difficulties. A note for P1,000,000 and one
years accrued interest was due on this date from Miserable. The note receivable from
Miserable was restructured as follows:
Reduced the principal obligation to P700,000.
Forgave the P120,000 of accrued interest for 2014.
Extended the maturity date to December 31, 2017.
Reduced the interest rate to 8%.
Interest is payable annually on December 31, beginning 2015. In accordance with the
agreement, Miserable made payments to Merciful Bank on December 31, 2015, 2016 and 2017.

13. The loan impairment loss to be recognized in Merciful Bans 2014 profit or loss is
A. P477,422
B. P420,000
C. P487,239
D. P 0

14. How much interest income should Merciful Bank report for the year ended December 31, 2015?
A. P75,931
B. P64,258
C. P56,000
D. P 0

15. An enterprise often factors its accounts receivable. The finance company requires an 8% reserve
and charges a 1.5% commission on the amount of the receivable. The remaining amount to be
advanced is further reduced by an annual interest charge of 16%. What proceeds (rounded to
the nearest peso) will the enterprise receive from the finance company at the time a P110,000
account that is due in 60 days is turned over to the finance company?
A. P83,630
B. P81,950
C. P99,550
D. P96,895
16. STO Company uses the average retail inventory method to estimate ending inventory for its
monthly financial statements. In the past, STO Company has had a stable cost-to-retail
relationship for its inventory due to buying only from one supplier and making up the goods by a
fixed percentage. Because of lack of competition, STO Company has not previously needed to
mark down any of its goods. During 2014, however, two department store chains have opened
which provided intense competition and STO Company has found itself buying products from a
variety of manufacturers with lower costs, reducing markup on many of its goods and marking
down various items of inventory. The following data pertain to a single department of STO
Company for March 2014: Inventory, March 1: at cost P200,000, at retail P300,000;
purchases: at cost P1,001,510, at retail P1,464,950; freight in P45,400; markup
cancellations P2,650; net markdowns P8,000; normal spoilage and breakage P36,000; sales
P1,347,300.
The cost of the March 31 inventory is
A. P289,380
B. P282,800
C. P265,055
D. P257,600

17. Mexico Company had the following information in relation to its inventory accounts in 2014
Increase in Raw materials: P14,000
Increase in Work in process: P24,000
Decrease in Finished goods: P33,500
Likewise the following costs and expenses were incurred in 2014:
Raw materials purchased P150,000
Direct labor cost 60,000
Indirect factory labor 30,000
Taxes and depreciation on factory building 10,000
Taxes and depreciation on sales room and office 7,500
Freight out 3,000
Freight in 4,000
Sales salaries 20,000
Office salaries 12,000
Utilities (60% applicable to factory, 20% to sales room, and 20% to office) 25,000
Mexico Companys cost of goods sold for the year is
A. P249,500
B. P197,500
C. P264,500
D. P244,500

18. The following information has been extracted from the records of Changeling Company about
one of its products. Changeling Company uses the perpetual system
Unit Total
Units cost cost
Beginning
Jan. 1 balance 8,000 70 P560,000
6 Purchase 3,000 70.5 211,500
Feb. 5 Sale 10,000
 Mar. 5 Purchase 11,000 73.5 808,500
Mar.12 Purchase return 800 73.5 58,800
Apr. 8 Sale 7,000
Apr. 14 Sale return 300

Assuming the FIFO cost flow method is used, what is the cost of the inventory on April 30?

A. P315,000
B. P329,360
C. P330,750
D. P433,876

19. Zeus Company started operations on March 2012. The following information were provided in
relation to its inventory for the past three years

2012 2013 2014

Inventory, beg P - 900,000 P1,100,000
Net Purchases 4,500,000 5,000,000 4,200,000
Inventory, end 900,000 1,100,000 850,000
In preparing the 2014 financial statements of Zeus Company the following items were noted:
The ending inventory reported in the past three years were based on physical counts made
in Zeus Companys warehouses.
Goods out on consignment at the end of 2012, 2013, and 2014 were P130,000, P90,000, and
P110,000 respectively
The last purchase invoice recorded in 2012 was 70,000. These goods were shipped on
December 29, 2012 under the terms fob shipping point and arrived on January 3, 2013

The amount to be reported as cost of sales in the 2014 income statement of Zeus Company is

A. P4,100,000
B. P4,340,000
C. P4,360,000
D. P4,430,000

20. Aldrich Company lost most of its inventory in a fire in December 2014 just before the year-end
physical inventory was taken. The companys books disclosed the following:
Purchases for the year P390,000 Sales P650,000
Purchase returns 30,000 Sales returns 24,000

Merchandise with a selling price of P21,000 remain undamaged after the fire. Damaged
merchandise with an original selling price of P15,000 had a net realizable value of P5,300. Partial
comparative income statements for 2013 and 2012 also disclosed the following:

2013 2012
Sales 500,000 560,000
Cost of Goods Sold
Inventory, Jan 1 94,500 110,000
Purchases (net) 378,000 318,000
 Available for Sale 472,500 428,000
Inventory, Dec. 31 (170,000) (94,500)
Cost of goods sold 302,500 333,500
Gross Profit 197,500 226,500
Using the average gross profit rate for the past two years, Aldrich Companys loss as a result of
the fire is
A. P136,500
B. P132,800
C. P61,000
D. P57,300

21. Bianca Company carries its inventory at a lower of cost and the net realizable value. At
December 31, 2014, the cost of the inventory, determined under the FIFO method, as reported
in its financial statements for the year ended was P10,000,000. Due to severe recession and
other negative economic trends in the market, the inventory could not be sold during the entire
month of January 2015. On February 10, 2015, Bianca Company entered into an agreement to
sell the entire inventory to a competitor for P6,000,000.
Presuming the financial statements were authorized for issuance on February 15, 2015, what
amount of write-down should the Bianca Company recognized for the year ended December 31,
2014?
A. None
B. P4,000,000
C. P6,000,000
D. P10,000,000

22. Star Corp.s accounts payable at December 31, 2014, totaled P800,000 before any necessary
year-end adjustments relating to the following transactions:
On December 27, 2014, Star Corp. wrote and recorded checks to creditors totaling P350,000
causing an overdraft of P100,000 in Star Corp.s bank account at December 31, 2014. The
checks were mailed on January 10, 2015.
On December 28, 2014, Star Corp. purchased and received goods for P200,000, terms 2/10,
n/30. Star Corp. records purchases and accounts payable at net amounts. The invoice was
recorded and paid January 3, 2015.
Goods shipped FOB Destination on December 20, 2014 from a vendor to Star Corp. were
received January 2, 2015. The invoice cost was P65,000.
At December 31, 2014, what amount should Star Corp. report as total accounts payable?
A. P1,096,000
B. P1,246,000
C. P1,281,000
D. P1,346,000

23. The following information was available from the records of Rich Company for January:
Units Unit Cost Total Cost
Balance at January 1 `3,000 P9.77 P29,310
Purchases:
 January 6 2,000 10.30 20,600
January 26 2,700 10.71 28,917
Sales:
January 7 (2,500)
January 31 (4,300)
Balance at January 31 900
Assuming that Rich does not maintain perpetual inventory records, what should be the
inventory at January 31, using the weighted-average inventory method, rounded to the nearest
dollar?
A. P9,454
B. P9,213
C. P9,234
D. P9,324

24. The following information was derived from the 2014 accounting records of Perez Co.:
Perezs Goods
Perezs Central Warehouse Held by Consignees
Beginning Inventory P130,000 P14,000
Purchases 475,000 70,000
Freight-in 10,000
Transportation to Consignees 5,000
Freight-out 30,000 8,000
Ending Inventory 145,000 20,000
Perezs 2014 cost of sales was
A. P470,000
B. P500,000
C. P534,000
D. P539,000

25. In your review of Angeline Company, you find that the physical inventory on December 31, 2014
showed merchandise with a cost of P441,000 was on hand at that date. You also discover the
following items were all excluded from the P441,000.
a. Merchandise of P61,000 which is held by Angeline on consignment. The consignor is Alferez
Company.
b. Merchandise costing P38,000 which was shipped by Angeline f.o.b. destination to a
customer on December 31, 2014. The customer was scheduled to receive the merchandise
on January 2, 2015.
c. Merchandise costing P46,000 which was shipped by Angeline f.o.b. shipping point to a
customer on December 29, 2014. The customer was scheduled to receive the merchandise
on January 2, 2015.
 d. Merchandise costing P83,000 shipped by a vendor f.o.b. destination on December 30, 2014,
and received by Angeline on January 4, 2015.
e. Merchandise costing P51,000 shipped by a vendor f.o.b. seller on December 31, 2014, and
received by Angeline on January 5, 2015.
Based on the above information calculate the amount that should appear on the Angelines
statement of financial position at December 31, 2014, for inventory.
A. P538,000
B. P530,000
C. P479,000
D. P441,000

26. XYZ Dairy Ltd is engaged in milk production for supply to various customers. At December 31,
2014, the company held 419 cows able to produce milk (mature assets) and 137 heifers being
raised to produce milk in the future (immature assets). The company produced milk with a fair
value of P550,000 (that is determined at the time of milking) in the year ended December 31,
2014.
The company also estimated the following cocts:
Commissions to brokers and dealers P20,000
Levies by regulatory agencies and commodity exchanges 55,000
Transfer taxes and duties 20,000
Transport and other costs necessary to get assets to a market 10,000
The milk should be valued at
A. P550,000
B. P455,000
C. P445,000
D. P530,000

27. The following pertains to the biological assets owned by ABC Farms. Inc.:
Carrying amount at January 2014 P459,570
Purchases 26,250
Gain arising from changes in fair value less estimated point-of-sale
costs attributable to physical changes 15,350
Gain arising from changes in fair value less estimated point-of-sale
Costs attributable to price changes 24,580
Sales 100,700
The carrying amount of the biological assets on December 31, 2014 is
A. P425,050
B. P499,500
C. P525,750
D. P451,300

28. A public limited company, Cromwell Dairy Products, produces milk on its farms. As of January 1,
2014 Cromwell has a stock of a 1,050 cows (average age, 2 years old) and 150 heifers (average
age, 1 year old). Cromwell purchased 375 heifers, average age 1 year old, on July 1, 2014. No
animals were born during the year. The unit values less estimated cost to sell were

1-year old animal at December 31, 2014 P3,200

 2- year old animal at December 31, 2014 4,500
1.5- year old animal at December 31, 2014 3,600
3- year old animal at December 31, 2014 5,000
1-year old animal at Jan. 1, 2014 and July 1, 2014 3,000
2-year old animal at January 1, 2014 4,000
The increase in value of biological assets in 2014 due to physical change is
A. P870,000
B. P720,000
C. P590,000
D. P780,000

29. Mune Company recorded journal entries for the declaration of P100,000 of dividends, the
P64,000 increase in accounts receivable for services rendered, and the purchase of equipment
for P42,000. What net effect do these entries have on owners equity?
A. Decrease of P142,000
B. Decrease of P78,000
C. Decrease of P36,000
D. Increases of P22,000

30. Panda Corporation paid cash of P30,000 on June 1, 2014 for one years rent in advance and
recorded the transaction with a debit to Prepaid rent. The December 31, 2014 adjusting entry is
A. Debit Prepaid rent and credit Rent Expense, P12,500
B. Debit Prepaid rent and credit Rent Expense, P17,500
C. Debit Rent Expense and credit Prepaid rent, P17,500
D. Debit Prepaid Rent and credit Cash, P12,500

31. The supplies account had a balance at the beginning of year 3 of P8,000 (before the reversing
entry). Payments for purchases of supplies during year 3 amounted to P50,000 and were
recorded as expense. A physical count at the end of year 3 revealed supplies costing P9,500
were on hand. Reversing entries are used by this company. The required adjusting entry at the
end of year 3 will include a debit to:
A. Supplies Expense for P1,500
B. Supplies for P1,500
C. Supplies Expense for P48,500
D. Supplies for P9,500

32. Aneens Video Mart sells one- and two-year mail order subscriptions for its video-of-the-month
business. Subscriptions are collected in advance and credited to sales. An analysis of the
recorded sales activity revealed the following:

Year 1 Year 2
Sales P420,000 P500,000
Less Collections 20,000 30,000
Net Sales P400,000 P470,000
Subscription expirations:
 Year 1 P120,000
Year 2 155,000 P130,000
Year 3 125,000 200,000
Year 4 140,000
P400,000 P470,000
In Aneens December 31, year 2 statement of financial position, the balance for unearned
subscription revenue should be
A. P495,000
B. P470,000
C. P465,000
D. P340,000

33. Colaw Co. pays all salaried employees on a biweekly basis. Overtime pay, however, is paid in the
next biweekly period. Colaw accrues salaries expense only at its December 31 year end. Data
relating to salaries earned in December 2014 are as follows:
Last payroll was paid on 12/26/14, for the 2-week period ended 12/26/14.
Overtime pay earned in the 2-week period ended 12/26/14 was P15,000.
Remaining work days in 2014 were December 29, 30, 31, on which days there was no
overtime.
The recurring biweekly salaries total P270,000.
Assuming a five-day work week, Colaw should record a liability at December 31, 2014 for
accrued salaries of
A. P81,000
B. P96,000
C. P162,000
D. P177,000

34. Jim Yount, M.D., keeps his accounting records on the cash basis. During 2014, Dr. Yount
collected P300,000 from his patients. At December 31, 2013, Dr. Yount had accounts receivable
of P40,000. At December 31, 2014, Dr. Yount had accounts receivable of P70,000 and unearned
revenue of P10,000. On the accrual basis, how much was Dr. Younts patient service revenue for
2014?
A. P260,000
B. P320,000
C. P330,000
D. P340,000

35. During 2014, Paul Company discovered that the ending inventories reported on its financial
statements were incorrect by the following amounts:
2012 P60,000 understated
2013 P75,000 overstated
 Paul uses the periodic inventory system to ascertain year-end quantities that are converted to
peso amounts using the FIFO cost method. Prior to any adjustments for these errors and
ignoring income taxes, Pauls retained earnings at January 1, 2014, would be
A. Correct
B. P15,000 overstated
C. P75,000 overstated
D. P135,000 overstated

36. Conn Co. reported a retained earnings balance of P400,000 at December 31, 2013. In August
2014, Conn determined that insurance premiums of P60,000 for the three-year period beginning
January 1, 2013, had been paid and fully expensed in 2013. Conn has a 30% income tax rate.
That amount should Conn report as adjusted beginning retained earnings in its 2014 statement
of retained earnings?
A. P420,000
B. P428,000
C. P440,000
D. P442,000

37. Richard Company shows the following accounts balances in their financial records as of
December 31, 2014:
Checking account at BPI bank (P40,000); Checking account at PS Bank, P1,000,000; Payroll
account Sterling Bank of Asia, P200,000; Foreign bank account restricted, P1,500,000; Postage
stamps, P44,000; Employees postdated checks, P60,000; IOU from presidents brother,
P150,000; Travelers check, P100,000; No insufficient funds check, P36,000; Petty Cash Fund
(P32,000 in currency and expenses receipts for P168,000), P200,000; and Cashiers checks,
P72,000.
What is the correct cash balance to be reported in the statement of financial position of Richard
Company on December 31, 2014?
A. P1,164,000
B. P1,404,000
C. P1,372,000
D. P1,408,000

38. Charles, Inc.s checkbook balance on December 31, 2014 was P212,000. In addition, Charles Inc.
held the following items in its safe on December 31:
A check for P4,500 from Peters, Inc. received December 30, 2014, which was not included in
the checkbook balance.
An NSF check from Garner Company in the amount of P9,000 that had been deposited at
the bank, but was returned for lack of sufficient funds on December 29. The check was to be
redeposited on January 3, 2015. The original deposit has been included in the December 31,
checkbook balance.
Coin and currency on hand amounted to P14,500.
The proper amount to be reported on Charles Inc.s statement of financial position for cash at
December 31, 2014 is
A. P204,000
B. P222,000
 C. P217,000
D. P213,000

39. Atom Company shows the following account balances in their financial records of December 31,
2014:

Checking account at Morgan Bank P(20,000)

Checking account at Land Bank 500,000
Payroll account National bank 100,000
Foreign bank account restricted 750,000
Postage stamps 22,000
Employee Checks 30,000
I.O.U. from presidents brother 75,000
Travelers check 50,000
No-sufficient fund check 18,000
Petty cash fund (16,000 in currency & expenses receipts for P84,000) 100,000
Cashiers checks 36,000
What is the correct cash balance to be reported in the statement of financial position of Atom
Company on December 31, 2014?
A. P582,000
B. P686,000
C. P702,000
D. P732,000

40. The cash account in the current asset section of the statement of financial position for Heater
Company showed a balance of P555,000. It was found to include the following items:
Petty Cash fund (P1,000 is in the form of paid vouchers) P 5,000
Checking account balance, per book
(A P25,000 check is still outstanding) 255,000
Undeposited receipts, including a post-dated check for P5,000 120,000
Currencies and coins awaiting deposit 55,000
Bond sinking fund cash 100,000
Check drawn by manager, returned by bank marked NSF 20,000
What is the correct cash balance for Heater Companys statement of financial position?
A. P404,000
B. P429,000
C. P430,000
D. P529,000

41. Delta Corporation has supplied you with the following list of its bank accounts and cash at
December 31, 2014:

Checking account (compensating balance of P15,000) P48,000

Savings account, 2% 30,000
Certificate of deposit, 6 months, 10%, due January 20, 2015 60,000
Money market (30-day certificate), current rate, 9.75% 40,000
 Payroll account 20,000
Certificate of deposit, 3 months, 10%, due February 15, 2015 75,000
Petty cash 1,500
Total P274,500

What should be the balance to be reported as Cash and Cash Equivalents in the December 31,
2014 statement of financial position of Delta Corporation?
A. P139,500
B. P199,500
C. P214,500
D. P241,500

42. The Petty cash fund of TBB Company on December 31, 2013 is composed of the following:

Coins and currencies P14,000

Petty cash vouchers:
Gasoline payments 3,000
Postage stamps 1,000
Cash advances to employees 2,000
Employees check 5,000
Unused stamps 300
Check drawn by the company payable to the order of the
Petty cash custodian, representing her salary P20,000
A sheet of paper with names of employees together with
contribution for a birthday gift of a co-employee in
the amount of 8,000
P53,300
The petty cash ledger account has an imprest balance of P50,000. What is the correct amount of
petty cash on December 31, 2013?
A. P34,000
B. P14,000
C. P39,000
D. P42,000

43. Based on the information in the question number 42, how much is the cash shortage?
A. P4,700
B. P5,000
C. P3,000
D. P 0

44. In reconciling the Cash in bank of Aldwin Company with the bank statement balance foe month
of November 2014, the following data are summarized:
Book debits for November, including g October CM for note collected, P60,000 P800,000
Book credits for November, including NSF of 20,000 and service charge of P800
For October 620,000
Bank credits for November including CM for November for bank loan of P100,000
 And October deposit in transit of P80,000 700,000
Bank debits for November including October outstanding checks of P170,800 and
November service charge of P200 600,000
The outstanding checks for November is
A. P20,000
B. P170,200
C. P171,000
D. P191,000

45. The bank statement of Albino Corporation for February 2014 showed an ending balance of
P169,700. Deposit in transit on February 28 was P18,200. Outstanding checks as of February 28
were P59,000, including P5,000 check which the bank had certified on February 5. During the
month of February, the bank charged back NSF checks in the amount of P3,000 of which P1,000
had been redeposited in February. On February 20, the bank charged the account of Albino for
P2,000 which should have been charged against the account of another company; an error was
not detected by the bank. During February, the proceeds from the note collected by the bank
for Albino was P7,500 and bank charge for this services was P50.
The adjusted cash balance on February 28, 2014 is
A. P141,350
B. P136,350
C. P135,900
D. P130,900

46. Tresh, Inc. had the following bank reconciliation at March 31, 2014:
Balance per bank statement, 3/31/14 P37,200
Add: Deposit in transit 10,300
47,500
Less: Outstanding checks 12,600
Balance per books, 3/31/14 P34,900
Data per bank for the month of April 2014 follow:
Deposits P43,700
Disbursements 49,700
All reconciling items at March 31, 2014 cleared the bank in April. Outstanding checks at April 30,
2014 totaled P6,000. There were no deposit in transit at April 30, 2014. What is the cash balance
per books at April 30, 2014?
A. P25,200
B. P28,900
C. P31,200
D. P35,500

47. On December 31, 2014, the Receivables account of Albert Company shows an amortized cost
of P1,950,000. Subsidiary details show the following:

Trade accounts receivable, P775,000; Trade notes receivable, P100,000; installments receivable,
normally due one (1) year to two (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; Claims from insurance company, P15,000;
Subscription receivable due in 60 days, P300,000; Accrued interest receivable, P10,000.

How much should be presented as trade and other receivables under current assets?
A. P725,000
B. P1,125,000
C. P1,290,000
D. P1,650,000

48. Wellington Corp. has outstanding accounts receivable totaling P1.27 million as of December 31
and sales on credit during the year of P6.4 million. There is also a debit balance of P3,000 in the
allowance for doubtful accounts. If the company estimates that 1% of its net credit sales will be
uncollectible, what will be the balance in the allowance for doubtful accounts after the year-end
adjustment to record bad debt expense?
A. P12,700
B. P15,700
C. P61,000
D. P67,000

49. Lester Company received a seven-year zero-interest-bearing note on February 22, 2014, in
exchange for property it sold to Porter Company. There was no established exchange price for
this property and the note has no ready market. The prevailing rate of interest for a note of this
type was 7% on February 22, 2014, 7.5% on December 31, 2014, 7.7% on February 22, 2015, and
8% on December 31, 2015. What interest rate should be used to calculate the interest revenue
from this transaction for the years ended December 31, 2014 and 2015, respectively?
A. 0% and 0%
B. 7% and 7%
C. 7% and 7.7%
D. 7.5% and 8%

50. On the December 31, 2014 statement of financial position of Vanoy Co., the current receivables
consisted of the following:
Trade accounts receivable P60,000
Allowance for uncollectible accounts (2,000)
Claim against shipper for goods lost in transit (November 2012) 3,000
Selling price of unsold goods sent by Vanoy on consignment
At 130% of cost (not included in Vanoys ending inventory) 26,000
Security deposit on lease of warehouse used for storing
some inventories 30,000
Total P117,000
At December 31, 2014, the correct total of Vanoys current net receivables was
A. P61,000
B. P87,000
C. P91,000
D. P117,000