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FINANCIAL ACCOUNTING 1

LONG QUIZ #1
Accounting for Cash and Cash Equivalents, Accounts Receivable,
Notes Receivable and Loans Receivable
Problem 1. TRIOWTRI Company maintains its current account with BAMA Bank.
The bank statement on December 31, 2013 showed a balance of P638,340.
You gathered the following information:
A check for P22,500 received from a customer whose account is current had
been deposited and then returned by the bank on December 28, 2013. No
entry was made for the return of this check. The customer replaced the check
on January 15, 2014.
A check for P5,720 was cleared by the bank as P7,520. The bank made the
correction on January 2, 2014.
A check for P3,500 representing payment of an employee advance was
received and deposited on December 27, 2012, but was not recorded until
January 3, 2014.
Postdated checks totaling P67,300 were included in the deposits in transit.
These represent collections of current receivable from customers. The checks
were actually deposited on January 5, 2014.
Various debit memos for drafts purchased for payment of importation of
equipment totaling P230,000 were not yet recorded. These purchases were
previously set up as accounts payable. Said equipment arrived in December.
Interest earned on the bank balance for the 4 th quarter of 2013, amounting to
P1,950, was not yet recorded.
Bank service charges totaling P1,260 were not recorded.
Deposit in transit and outstanding checks at December 31, 2013 totaled
P136,250 and P276,380, respectively.
Various expenses from the companys imprest petty cash fund dated December
2013 totaled P16,250, while those dated January 2014 amounted to P5,903. Another
disbursement from the fund dated December 2013 was a cash advance to an
employee amounting to P3,500. A replenishment of the petty cash fund was made
on January 8, 2013.
The companys trial balance on December 31, 2013 includes the following accounts:
Cash in bank BAMA Bank
P748,320
Cash in Bank BSA Bank (restricted account for
plant expansion, expected to be
disbursed in 2014)
700,000
Petty cash fund
30,000
Time deposit, placed December 20, 2013
and due March 20, 2014)
1,000,000
Money market placement LPU Bank
4,000,000
Required:
1. What is the adjusted petty cash fund balance on December 31, 2013?
_______________
2. What is the adjusted Cash in bank BAMA Bank balance on December 31,
2013? _______________

3. Give the necessary entry/entries to adjust Cash in Bank BAMA Bank.


4. The December 31, 2013 Statement of Financial Position should show Cash
and Cash Equivalents at _________________.
Problem 2. Andrew Germs is reviewing the cash accounting for LKCM Inc. Andrews
review will focus on the petty cash fund account and the bank reconciliation for the
month ended May 31, 2014. He has collected the following information from the
bookkeeper:
Petty Cash Fund
The petty cash fund was established on May 2, 2014 in the amount of
P10,000.
Expenditures from the fund by the custodian as of May 31, 2014, were
evidenced by approved petty cash vouchers for the following:
Various office supplies
P3,920
IOU from employees
1,200
Shipping charges
2,298
Miscellaneous Expense
1,526
On May 31, 2012, the petty cash fund was replenished and increased to
P12,000; currency and coin in the fund at that time totaled P756.
Bank Reconciliation
PBI Bank
Bank Statement
Disbursements
Balance
Balance, May 1, 2014
P350,760
Deposits
Note payment direct from customer
(w/ interest of P1,200)
Checks cleared during May
Bank service charges
Balance, May 31, 2014
P260,880
LKCM Inc.s Cash Account
Balance, May 1, 2014
Deposits during May 2014
Checks written during May 2014

Receipts

P1,120,000
37,200
P1,246,000
1,080

P354,000
1,240,000
1,273,000

Deposits in transit are determined to be P120,000, and checks outstanding at May


31 total P34,000. Cash on hand (besides petty cash) at May 31, 2014 is P9,840.
Required:
5. What is the amount of petty cash shortage?
6. Give the necessary entry/entries to record the replenishment of and increase
in the petty cash fund.
7. What total amount of cash should be reported in the May 31, 2014 Balance
sheet?

Problem 3. Information about San Mateo-Do Co. are shown below:


Nov. 30
Dec. 31
Cash account balance
P 20,340
P 48,540
Bank statement balance
107,060
137,820
Deposits in transit
8,200
12,880
Outstanding checks
27,700
30,100
Bank service charges for the month,
not shown on co.s books
720
600
NSF checks returned by bank, not
shown on co.s books
4,300
8,240
Bank collections from company customers,
not shown on co.s books
72,240
80,900
Additional information:
Deposits and credit memos per bank statement
Canceled checks and debit memos per bank statement
Cash receipts per cash book
Checks written per cash book

P249,100
218,340
172,880
211,900

Required:
8. Prepare a Proof of Cash.
Problem 4. ANGINGAY Co. reported the following information at the end of its first
year of operations, December 31, 2013:
Bad Debts Expense
P271,000
Uncollectible accounts written off during 2013
35,400
Net realizable value of accounts receivable
895,000
Required:
9. What is the accounts receivable balance at December 31, 2013?
Problem 5. EPALA Co. sells a variety of imported goods. By selling on credit, the
company cannot expect to collect 100% of its accounts receivable. At December 31,
2012, EPALA Co. reported the following in its statement of financial position:
Accounts Receivable
P2,197,500
Less: Allowance for bad debts
(133,500)
Net Realizable Value
P2,064,000
During the year ended December 31, 2013, EPALA Co. earned sales revenue
of P537,702,500 and collected cash of P528,070,500 from customers. Assume bad
debt expense for the year was 1% of sales revenue and that EPALA Co. wrote off
uncollectible accounts receivable totaling P5,349,500.
Required:
10.What is the accounts receivable balance at December 31, 2013?
11.What is the December 31, 2013 balance of the Allowance for Bad Debts
account?
Problem 6. PAPANS Inc.s accounts receivable subsidiary ledger shows the
following information:
CUSTOMER
ACCOUNT BALANCE
INVOICE

Aruy Inc.

Dec. 31, 2013


P35,180

Naku Co.

20,920

Syak Corp.

30,600

Trip Co.
23,140
Uy Co.
Eew Co.
17,400

45,140
31,600
17,400

DATE

AMOUNT
12/06/13
P14,000
11/29/13
21,180
09/27/13
12,000
08/20/13
8,920
12/08/13
20,000
10/25/13
10,600
11/17/13
10/09/13
22,000
12/12/13
19,200
12/02/13
12,400
09/12/13

The estimated bad debt rates below are based on PAPANS Inc.s receivable
collection experience:
Age of Accounts
Rate
0 30 days
1%
31 60 days
1.5%
61 90 days
3%
91 120 days
10%
Over 120 days
50%
The allowance for bad debts account had a debit balance of P5,500 on December
31, 2013, before adjustments.
Required:
12.Prepare an Accounts Receivable Aging Schedule
13.Give the necessary entry to adjust the allowance for bad debts account.
Problem 7. The balances of selected accounts taken from the December 31, 2012
of KAYAKOPA Co. are shown below:
Accounts Receivable
P674,000
Allowance for doubtful accounts
24,000
The following transactions (in summary) affecting accounts receivable occurred
during the year ended December 31, 2013:
Sales (all on account, terms: 2/10, 1/15, n/60)
P3,000,000
Cash received from customers
3,200,000
The cash received includes the following:
Customers paying within the 10-day discount period
P1,764,000
Customers paying within the 15-day discount period
990,000
Recovery of accounts written off
6,000
Customers paying beyond the discount period
?
Accounts receivable written off as worthless
22,000
Credit memo for sales returns
12,000

It is the companys policy to provide for uncollectible accounts equal to 1% of


sales.
14.How much is the carrying value of the accounts receivable as of December
31, 2013? _____________
Problem 8. On January 1, 2013, PAPASAKABA Co. sells its equipment with a
carrying value of P160,000. The company receives a non-interest bearing note due
in 3 years with a face amount of P200,000. There is no established market value for
the equipment. The prevailing interest rate for a note of this type is 12%.
Required:
15.What is the gain or loss to be recognized on the sale of the equipment?
16.Prepare a discount amortization table using effective interest method.
Problem 9. On January 2, 2013, LASTNATO Co. sold equipment with a carrying
amount of P480,000 in exchange for a P600,000 non-interest bearing note due
January 2, 2016. There was no established exchange price for the equipment.
The prevailing rate of interest for a note of this type at January 2, 2013 was 10%.
17.How much should LASTNATO Co. report as interest income in its 2013 profit
or loss? ___________
18.How much should LASTNATO Co. report as gain or loss on sale of equipment
in its 2013 profit or loss? _______________
19.What is the carrying value of the note receivable as of December 31, 2013
statement of financial position? ___________________
Problem 10. On January 1, 2012, CONFUSED Bank loaned P5,500,000 to STRESSED
Co. The initial loan repayment terms include a 10% interest rate plus annual
principal payments of P1,100,000 on January 1 each year. STRESSED made the
required interest payment in 2012 but did not make the P1,100,000 principal
payment nor the P550,00 interest payment for 2013. CONFUSED is preparing its
annual financial statements on December 31, 2013. STRESSED is having
financial difficulty, and CONFUSED has concluded that the loan is impaired.
Analysis of STRESSED Co.s financial condition on December 31, 2013 indicates
that the principal payments will be collected, but the collection of interest is
unlikely. CONFUSED did NOT accrue the interest on December 31, 2013.
The projected cash flows are:
December 31, 2014
December 31, 2015
December 31, 2016

P1,750,000
2,000,000
1,750,000
P5,500,000

20.What is the loan impairment loss on December 31, 2013? _____________


21.What is the interest income to be reported by CONFUSED Bank in 2014?
______________
22.
What is the carrying value of the loan receivable on December 31,
2014? ______________
- end of quiz-