CAT

CERTIFIED ACCOUNTING TECHNOLOGY

NAME:
EXAM PROVIDER:
DATE OF EXAM: VENUE:

INSTRUCTION TO CANDIDATES

1. This is a FINAL paper.

2. This paper consists of 5 pages (back to back). PLEASE CHECK BEFORE
COMMENCING.
3. Please read the problem and the instruction carefully.
4. You are given 4 hours to read, comprehend, and solve the problem.
5. All required solutions must be presented in the answer sheets/ form provided.
6. Electronic hand held calculators are permitted.
7. Used black pen.

CAT EXAMINATION LEVEL 1- ACCOUNTING

CASE 1

ALPHA COMPANY, a VAT – registered employing the periodic inventory system, had the following
transactions for the month of July 2008:

DATE TRANSACTION
Jul 3 Purchased from BETA merchandise with list price of P12, 000 less 4% trade discount,
on terms 2/10, n/30. The amount is inclusive of 12% value added tax (VAT)
3 Paid P500 freight charges (inclusive of 12%VAT) on merchandise purchased from
BETA. Term of freight: FOB shipping point.
5 Received from BETA a credit memo in the amount of P900 for allowance granted on
defective merchandise bought. This amount is inclusive of 12% VAT.
7 Sold to CHARLIE a credit memo with P18, 000 on terms /25,1/30, n/60. This amount
is inclusive of 12% VAT.
9 Issued to CHARLIE a credit memo in the amount of P2, 200 for return of defective
merchandise sold. This amount is inclusive of 12%VAT.
11 Settled in full the outstanding account with BETA.
12 Sold to DELTA merchandise worth P8, 800 on terms COD. This amount is inclusive of
12% VAT.
16 Purchased from EPSILON store supplies worth P2,600 on terms COD. This amount is
inclusive of 12% VAT.
18 Received a P300 cash refund for the return of store supplies bought from EPSILON.
This amount is inclusive of 12% VAT.
25 Collected in full the outstanding account of CHARLIE.

REQUIRED:

Prepare the necessary journal entries in the general journal to record the above transactions
using periodic inventory system. Round- off amounts to nearest two decimal places. Omit
explanations.

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CAT EXAMINATION LEVEL 1 - ACCOUNTING
CASE 2

After GEMMA COMPANY had completed all posting for the month of December, the sum of the balances
in the following Accounts Payable subsidiary ledger did not agree with the balance of the control account
in the general ledger.

Name Diamond Trading

Date Item Post Ref. (F) Debit Credit
Balance
Dec. 2 PJ25 2, 400 2, 400

Name Emerald Company

Date Item Post Ref. (F) Debit Credit
Balance
Dec. 1 Balance 7, 600
10 CPJ23 7, 600 -
20 PJ32 3,300 3, 300
29 GJ15 500 3, 800

Name Jade Company

Date Item Post Ref. (F) Debit Credit
Balance
Dec. 1 Balance CPJ28 9,900
18 PJ34 9, 900 -
29 10, 600 700

Name Ruby Trading

Date Item Post Ref. (F) Debit Credit
Balance
Dec. 8 PJ27 6, 000 6, 000
27 PJ33 8, 000 14, 000

Name Sapphire Supplies

Date Item Post Ref. (F) Debit Credit
Balance
Dec. 1 Balance 8, 200
7 PJ26 5, 600 13, 800
12 GJ11 420 12, 380
20 CPJ29 6, 000 18,380

The balance in the Accounts Payable control account of P37, 180 has been verified as correct.
Also assume that the journal references in the Post Ref. (folio) columns of the Accounts Payable
subsidiary ledger have been verified as correct.

REQUIRED:

Do the following:

(1) Determine the errors in the preceding Accounts payable subsidiary accounts.
(2) Prepare a corrected schedule of Accounts Payable as of December 31, 2008

CASE 3

Mr. Y, the Vice President of Operations at ZEE COMPANY, noticed that the amount of the
adjusted entry for depreciation of equipment changes every year, even when the company is
applying the straight- line method of depreciation. The amount depreciation reported as follows:

Year 2005 P 2,500

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CAT EXAMINATION LEVEL 1 - ACCOUNTING
 2006 3, 000
2007 3, 600
2008 3, 200

You, the controller, were tasked by Mr. Y to explain the varied amounts of the depreciation
expense. All the depreciation amounts reported were verified to be correct and you were able to
gather the following information:

 The equipment was purchased in 2005.

 There was a purchase of additional equipment (of the same type) at start of 2007.
 There was a sale of one of the equipment at the start of 2008.
 The company estimates the useful life of the equipment to be 10-years with no scrap
value.
 No other transactions affecting the equipment occurred during the 4- year period.

REQUIRED:

Provide brief answers to the following questions:

(1) What is the straight-line method of depreciation?

(2) Is the concern of Mr. Y valid? State the reason/s.
(3) What causes the amount of depreciation expense to increase or decrease over the
years?
(4) How do you explain the increase in depreciation expense from 2005 to 2006 to Mr. Y?
(5) Provide Mr. Y with a table on the computation of the depreciation expense every year.
The table should be represented as follows:
(6)

Year Cost Supporting Computations Depreciation Expense

2005
2006
2007
2008

CASE 4

CHRISTIAN AUTO SUPPLY is a VAT- registered company which uses a perpetual inventory system. During
October 2008, the following transactions occurred:

Date Transaction

Oct. 4 Purchased from MATILDA COMPANY 16 side –view mirrors cost of P220 each on
terms 2/10, n/30

5 Returned 3 defective side- view mirrors to Matilda Company.

14 Paid Matilda Company in full.

REQUIRED:

Prepare all the necessary journal entries in the books of Christian Auto Supply for the above
transactions.

CASE 5

Important objectives of a system of internal controls are to safeguard assets and to enhance the
accuracy and reliability of the accounting records.

REQUIRED:

Briefly discuss how (1) cost benefit considerations, (2) the human element, and (3) the size of
the business affect the implementation of a system of internal controls.

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CAT EXAMINATION LEVEL 1 - ACCOUNTING
CASE 6:

AJE TRADING, non-VAT registered, uses a perpetual inventory system. Its income statement,
prior to any year- end adjustments , for the fiscal year ended September 30, 2008, is shown
below;

AJE TRADING INCOME STATEMENT

Income Statement
For the fiscal year ended September 30, 2008
Net sales revenue (Note1) P2, 634, 000
Cost of sales (1, 302, 000)
Gross Profit 1, 302, 000
Other Income (Note 2) 25, 000
Total Income 1, 327, 000
Expenses:
Distribution Costs (Note 3) P188, 000
Administrative Expenses (Note4) 844,000
Finance Costs(Note5) 18, 000 (1, 050, 000)
NET INCOME P 277, 000

Note 1 -Net Sales Revenue

Sales P 2, 708, 000
Less: Sales Returns and Allowances P 40, 000
Sales Discounts 34,000 74, 000
NET SALES REVENUE P 2, 634, 000

Note 2 - Other Income

Interest Income P 25, 000

Note 3 - Distribution Cost

Sales Commissions P 131, 700
Freight - out 22, 000
Miscellaneous Distribution Costs 34, 300
TOTAL P 188, 000

Note 4 - Administrative Expenses

Utilities Expense P 304 ,000
Office Salaries expense 286, 000
Rent Expense 180, 000
Taxes and Licenses Expenses 41, 000
Miscellaneous Administative Expenses 33, 000
TOTAL P 844, 000

Note 5 - Finance Costs

Interest Expense 18, 000

An analysis of the accounts revealed the following:

 The Sales account includes P10, 000 worth of merchandise to be delivered next month,
but did not include a P35, 000 sales on account in September, since these are to be
billed next month.
 The interest income account did not include the interest earned on P24, 000 10% 120-
day note received on July 3, 2008.
 The amount of Sales Commission is equivalent to 5% of net sales revenue.
 The reported Rent Expense balance includes the 120, 000 one year rent paid in
advance on December 1, 2007.
 The Reported interest Expense balance refers to the total interest paid in advance on a
P300, 000 180- day 12% note dated August 2, 2008. The said account, however, did not

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CAT EXAMINATION LEVEL 1 - ACCOUNTING
 include the interest incurred on a P120, 000 90-day 12% note dated September 20,
2008.
 It is company policy provide 1% of net sales as a doubtful of collection. The allowance
for doubtful accounts has a credit balance of P14, 000 at the beginning of the fiscal year.

REQUIRED:

Prepare all the necessary adjusting journal entries on September 30, 2008.

CASE 7

SIMS COMPANY received a notice with its October 2008 bank statement that the bank had
collected a note receivable for P60, 000 plus P3, 000 of interest. The bank had credited
these amounts to Sim’s account less a collection fee of P100. Sims Company had already
accrued the interest for this note on its books.

REQUIRED:

Do the following:

(1) Prepare a short essay answer on how these items will affect Sims Company’s Bank
reconciliation?
(2) Prepare the journal entry that Sims Company will make to record this information on
its books.

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CAT EXAMINATION LEVEL 1 - ACCOUNTING