1.

As contemplated in accounting, cash includes

a. Money only
b. Money and any negotiable instrument
c. Any negotiable instrument
d. Money and any negotiable instrument that is payable in money and acceptable by the bank for deposit and
immediate credit
2. To be reported as “cash and cash equivalent”, the cash and cash equivalent must be
a. Unrestricted in use for current operations
b. Available for the purchase of property, plant and equipment
c. Set aside for the liquidation of long-term debt
d. Deposited in the bank
3. Cash equivalents are
a. Short-term and highly liquid investments that are readily convertible into cash
b. Short-term and highly liquid investments that are readily convertible into cash with remaining maturity of three
months or more
c. Short-term and highly liquid investments that are readily convertible into cash with remaining maturity of three
months or less
d. Short-term and highly liquid marketable equity securities
4. Which is false concerning measurement of cash and cash equivalents?
a. Cash is measured at face value
b. Cash in foreign currency is measured at the current exchange rate
c. If a bank or financial institution holding the funds of the company is in bankruptcy or financial difficulty, cash
should be written down to estimated realizable value
d. Cash equivalents should be measured at maturity value, meaning face value plus interest
5. If material, deposits in foreign bank which are subject to foreign exchange restriction should be classified
a. Separately as current asset, with appropriate disclosure
b. Separately as a non-current asset with appropriate disclosure
c. Be written off as an extraordinary loss
d. As part of cash and cash equivalents
6. Bank overdraft
a. Is a debit balance in a cash in bank account
b. Is offset against demand deposit account in another bank
c. Which cannot be offset is classified as a current liability
d. Which cannot be offset is classified as non-current liability
7. A compensating balance
a. Must be included in cash and cash equivalent
b. Which is legally restricted and related to a long-term loan is classified as a current asset
c. Which is legally restricted and related to a short-term loan is classified separately as a current asset
d. Which is not legally restricted as to withdrawal is classified separately as current asset
8. Unreleased checks
a. Should be treated as outstanding checks
b. Should be restored to the cash balance
c. Should be treated as outstanding checks if the date is shortly after the balance sheet
d. Should be treated as outstanding checks if they are ultimately encashed
9. Which of the following should not be considered cash for financial reporting purposes?
a. Petty cash funds and change funds
b. Money orders, certified checks and personal checks
c. Coin, currency and available funds
d. Post-dated checks and IOUs
10. Which of the following is usually considered cash?
a. Certificates of deposit
b. Checking accounts
c. Money market savings certificates
d. Post-dated checks
11. Petty cash fund is
a. Separately classified as current asset
b. Money kept on hand for making minor disbursements of coin and currency rather than by writing checks
c. Set aside for the payment of payroll
d. Restricted cash
12. The petty cash account under the imprest fund system is debited
a. Only when the fund is created
b. When the fund is created and every time it is replenished
c. When the fund is created and when the size of the funds is increased
d. When the fund is created and when the size of the funds is decreased
13. The internal control feature that is specific to petty cash is
a. Separation of duties
b. Assignment of responsibility
c. Proper authorization
d. Imprest system
14. In reimbursing the petty cash fund, which of the following is true?
a. Cash is debited
b. Petty cash is debited
c. Petty cash is credited
d. Expense accounts are debited
15. A cash over and short account
a. In not generally accepted
b. Is debited when the petty cash fund proves out over
c. Is debited when the petty cash fund proves out short
d. Is a contra account to cash
16. The following statements pertain to accounting for petty cash fund. Which statement is false?
a. Each disbursement from petty cash should be supported by a petty cash voucher
b. The creation of a petty cash fund requires a journal entry to reflect the transfer of fund out of the general cash
account
c. At any time, the sum of cash in the petty cash fund and the total of petty cash vouchers should equal the amount
for which the imprest petty cash fund was established
d. With the establishment of an imprest petty cash fund, one person is given the authority and responsibility for
issuing checks to cover minor disbursements
17. The following statements pertain to the cash short or over account. Which statement is true?
a. It would be impossible to have cash shortage or overage if employees were paid in cash rather than by check
b. The entry to account for daily cash sales for which a small amount of cash shortage existed would include a debit
to cash short or over account
c. If the cash short or over account has a debit balance at the end of the period it must be debited to an expense
account
d. A credit balance in a cash short or over account should be considered a liability because the short changed
customer will demand return of this amount
18. A bank reconciliation is
a. A formal financial statement that lists all of the bank account balances of an enterprise
b. A merger of two banks that previously where competitors
c. A statement send by the bank to depositor on a monthly basis
d. A schedule that accounts for the differences between an enterprise’s cash balance as shown on its bank
statement and the cash balance shown in its general ledger
19. Which of the following items must be added to the cash balance per ledger in preparing a bank reconciliation which
ends with the adjusted cash balance?
a. Note receivable collected by bank in favor of the depositor and credited to the account of the depositor
b. NSF customer check
c. Service charge
d. Erroneous bank debit
20. Which of the following must be deducted from the bank statement balance in preparing a bank reconciliation which
ends with adjusted cash balance?
a. Deposit in transit
b. Outstanding check
c. Reduction of loan charged to the account of the depositor
d. Certified check
21. If the balance shown on a company’s bank statement is less than the correct cash balance and neither the company
nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Outstanding checks
c. Deposits in transit
d. Bank charges not yet recorded by the company
22. If the cash balance shown on a company’s accounting records is less than the correct cash balance and neither the
company nor the bank has made any errors, there must be
a. Deposits credited by the bank but not yet recorded by the company
b. Outstanding checks
c. Deposits in transit
d. Bank charges not yet recorded by the company
23. Which will not require an adjusting entry on the depositor’s books?
a. NSF check from customer
b. Check in payment of account payable amounting to P50,000 is recorded by the depositor as P5,000
c. Deposit of another entity credited to the account of the depositor
d. Bank service charge

24. Which statement is true?

a. Bank service charge will cause the cash balance per ledger to be higher than that reported by the bank, all other
things being equal
b. Outstanding checks will cause the cash balance per ledger to be greater than the balance reported by the bank,
all other things being equal
c. An error made by the bank by charging an amount to the depositor’s account requires a correcting entry in the
depositor’s own records
d. The cash amount shown in the balance sheet must be the balance reported in the bank statement
25. A proof of cash
a. Is a physical count of currencies on hand on balance sheet date
b. Is a formal statement showing that total cash receipts during the year
c. Is a four-column bank reconciliation showing reconciliation of cash balances per book and per bank at the
beginning and end of the current month and reconciliation of cash receipts and cash disbursements of the bank
and the depositor during the current month
d. Is a summary of cash receipts and cash payments
26. The following statements relate to cash. Which statement is true?
a. The term cash equivalent refers to demand credit instruments such as money order and bank drafts
b. The purpose of establishing a petty cash fund is to keep enough cash on hand to cover all normal operating
expenses for a period of time
c. Classification of a restricted cash balance as current or noncurrent should parallel the classification of the related
obligation for which cash was restricted
d. Compensating balance required by a bank should always be excluded from cash and cash equivalents
27. Which is not considered as a cash equivalent?
a. A three-year treasury note maturing on May 30 of the current year purchased by the entity on April 15 of the
current year
b. A three-year treasury note maturing on May 30 of the current year purchased by the entity on January 15 of the
current year
c. A 90-day T-bill
d. A 6-day money market placement
28. As of December 31 of the current year, an entity had various checks and papers in its safe. Which item should not
be in its cash account in the current year-end balance sheet?
a. US$ 20,000 cash
b. Past due promissory note issued in favor of the entity by its President
c. Another entity’s P150,000 check payable to the entity dated December 15 of the current year
d. The entity’s undelivered check payable to a supplier dated December 31 of the current year
29. Which item should be excluded from cash and cash equivalent on the current year-end balance sheet of an entity?
a. The minimum cash balance in the entity’s current account which is maintained to avoid service charges
b. A check issued by the entity on December 27 of the current year but dated January 15 of next year
c. Time deposit which matures in one year
d. A customer’s check denominated in a foreign currency

30. At December 31 of the current year, an entity had cash accounts at three different banks. One account balance is
segregated solely for payment into a bond sinking fund. A second account, used for branch operations, is overdrawn.
The third account, used for regular corporate operations, has a positive balance. How should these accounts be
reported in the December 31 classified balance sheet?
a. The segregated account should be reported as a non-current asset, the regular account should be reported as a
current asset, and the overdraft should be reported as a current liability
b. The segregated and regular accounts should be reported as current assets, and the overdraft should be reported
as a current liability
c. The segregated account should be reported as a non-current asset and the regular account should be reported
as a current asset net of the overdraft
d. The segregated and regular accounts should be reported as current assets net of the overdraft
 Problems
1. San Miguel Corporation provided the following data on December 31, 2014:
Checkbook balance……………………………………………………………… P 4,000,000
Bank statement balance………………………………………………………… 5,000,000
Check drawn on San Miguel’s account, payable to supplier, dated
and recorded on December 31, 2015 but not mailed until
until January 2016……………………………………………………… 500,000
Cash in sinking fund…………………………………………………………….. 2,000,000
On December 31, 2015, what amount of cash should be reported as cash under current assets?
a. P 4,500,000
b. P 5,500,000
c. P 3,500,000
d. P 6,500,000

2. On December 31, 2015, DALTA Inc. reported cash accounts with the following details:
Undeposited collections………………………………….............................. P 60,000
Cash in bank – PCIB checking account………………….………………….. 500,000
Cash in bank – PNB (overdraft)…………………………….………………… (50,000)
Undeposited NSF check received from customer dated 12/01/14……….. 15,000
Undeposited customer check, dated 01/15/25……………………………… 25,000
Cash in bank – PCIB (fund for payroll)………………………………………. 150,000
Cash in bank – PCIB (savings deposit)……………………………………… 100,000
Cash in bank – PCIB (90-day money market instrument)…………………. 2,000,000
Cash in foreign bank – restricted……………………………………………… 100,000
IOUs from officers………………………………………………………………. 30,000
Sinking fund cash………………………………………………………………. 450,000
Financial asset held for trading……………………………………………….. 120,000
On December 31, 2014, what total amount should be reported as cash and cash equivalents?
a. P 2,660,000
b. P 2,810,000
c. P 2,770,000
d. P 810,000

3. SMART Telecoms had the following balances on December 31, 2014:

Cash in bank…………………………………………………………………….. P 2,250,000
Cash on hand……………………………………………………………………. 125,000
Cash restricted for plant addition……………………………………………… 1,600,000
Cash in bank included P600,000 of compensating balances against short-term borrowing agreement. The
compensating balance is not legally restricted as to withdrawal. On December 31, 2015, what total cash should be
reported under current assets?
a. P 1,775,000
b. P 2,250,000
c. P 2,375,000
d. P 3,975,00
4. Petron Tri-Activ had the following account balances on December 31, 2015:
Cash in bank……………………………………………………….. P 2,250,000
Cash on hand………………………………………………………. 125,000
Cash restricted for plant acquisition (to be disbursed in 2016) 1,600,000
Cash in bank included P600, 000 of compensating balance against long-term borrowing. The compensating balance
is not legally restricted as to withdrawal. On December 31, 2015, what is the total cash to be reported under current
assets?
a. P 1,775,000
b. P 2,250,000
c. P 2,375,000
d. P 3,950,000
5. F2 Logistic Cargo reported that the cash had a balance on December 31, 2015 of P 4,415,000 which consisted of the
following:
Petty cash fund…………………………………………………………………. P 24,000
Undeposited receipts including PDC for P70,000………………………….. 1,220,000
Cash in PNB, per bank statement, with P40,000 outstanding checks…... 2,245,000
Bonds in sinking fund………………………………………………………….. 850,000
Vouchers paid out of collection, not yet recorded………………………….. 43,000
IOUs signed by employees…………………………………………………… 33,000
What amount of cash should be reported as cash on December 31, 2015?
a. P 3,379,000
b. P 3,419,000
c. P 3,489,000
d. P 3,449,000
6. Apple Co. provided the following information with respect to the cash and cash equivalents on December 31, 2015:
Checking account at first bank…………………………………………………. P (200,000)
Checking account at second bank…………………………………………….. 3,500,000
Treasury bonds…………………………………………………………………... 1,000,000
Payroll account…………………………………………………………………… 500,000
VAT account……………………………………………………………………… 400,000
Foreign bank account – in peso (unrestricted)……………………………….. 2,000,000
Postage stamps………………………………………………………………….. 50,000
Employee’s postdated check…………………………………………………… 300,000
IOU from president………………………………………………………………. 750,000
Credit memo from a vendor for purchase returns……………………………. 80,000
Travelers check………………………………………………………………….. 300,000
NSF check……………………………………………………………………….. 150,000
Petty cash fund (P20,000 cash & P30,000 vouchers)………………………. 50,000
Money order…………………………………………………………………….... 180,000
What amount should be reported as unrestricted cash on December 31, 2015?
a. P5,900,000
b. P4,600,000
c. P4,900,000
d. P6,900,000
7. Nike reported petty cash fund with the following details:
Currencies……………………………………………………………………….. P 20,000
Coins……………………………………………………………………………… 2,000
Petty cash vouchers
Gasoline payment for delivery of equipment………………………. 3,000
Medical supplies for employees…………………………………….. 1,000
Repairs of office equipment…………………………………………. 1,500
Loans to employees………………………………………………….. 3,500
Check drawn by the entity payable to the order of Grace de la Cruz,
the petty cash custodian, representing her salary………………… 15,000
NSF employee check…………………………………………………………… 3,000
A sheet of paper with names of several employees together
With contribution for a birthday gift of a co-employee…………….. 5,000
The petty cash general ledger account has an imprest balance of P50,000. What is the amount of petty cash fund
that should be reported in the Statement of Financial Position?
a. P 27,000
b. P 37,000
c. P 22,000
d. P 42,000
8. On December 31, 2015, Cignal HD had the following cash balances:
Cash in bank…………………………………………………. P 1,800,000
Petty cash fund (all funds were reimbursed on 12/31/15)…… …. 50,000
Time deposit (due February 1, 2016)……………………… …… 250,000
Cash in bank included P600,000 of compensating balance against short-term borrowing arrangement on 12/31/15.
The compensating balance is legally restricted as to withdrawal. On December 31, 2015, what is the amount that is
to be reported as cash and cash equivalents?
a. P 2,100,000
b. P 1,950,000
c. P 1,500,000
d. P 1,250,000
9. New San Jose Builders Inc. reported petty cash fund which comprised the following:
Coins and currencies………………………………………….......... P 3,300
Paid Vouchers: Transportation………………………………………. 600
Gasoline…………………………………………….. 400
Office supplies……………………………………… 500
Postage stamps……………………………………. 300
Due from employees………………………………. 1,200 3,000
NSF managers check……………………………………………….. 1,000
Checks drawn by the order of the custodian……………………… 2,700
What is the correct amount of petty cash fund for financial statement presentation purposes?
a. P 10,000
b. P 7,000
c. P 6,000
d. P 9,000
10. Megaworld Co. established a P3000 petty cash fund. You found the following items in the fund:
Cash & Currency…………………………………………………………………. P 1683.80
Expense Vouchers………………………………………………………..……… 829.80
Advances to employees……………………………………….…………………. 200.00
IOU from employees……………………………………………………………… 300.00
In the entry to replenish the fund, what amount should be debited to the cash short or over account?
a. P 13.60
b. P 300.00
c. P 500.00
d. P 0
11. Stark Industry’s accountant is preparing its October bank reconciliation and has collected the following data:
Per Books Per Bank
Oct. 1 balance………………………………………………… P11600 P10,000
Oct. deposits………………………………………………… 24,600 21,200
Oct. checks………………………………………………. 27,800 29,000
Note Collected (plus 10% interest)……………… 0 4,400
Oct. service charge……………………………………… 0 20
Oct. 31 balance……………………………….……. 8,400 6,580
Additionally, deposits in transit and outstanding checks from September reconciliation were P4,400 and P2,800,
respectively.
The correct cash balance at October 31 should be:
a. P10,960
b. P12,780
c. P11,180
d. P 3,980
12. Fédération Internationale de Volleyball provided the following information in preparing the August 31, 2015 bank
reconciliation:
Balance per bank statement………………………………………... P 1,805,000
Deposit in transit……………………………………………………… 325,000
NSF customer check………………………………………………… 60,000
Outstanding checks………………………………………………….. 275,000
Bank service charge for August……………………………………. 10,000
On August 31, 2015, how much is the adjusted cash balance?
a. P 1,855,000
b. P 1,795,000
c. P 1,785,000
d. P 1,755,000
13. FIBA prepared the following bank reconciliation on December 31, 2015:
Balance per bank statement………………………………………… P 2,800,000
Add: Deposit in transit……………………………………………. 195,000
Checkbook printing charge………………………………… 5,000
Error made in recording check no. 45 last December….. 35,000
NSF check…………………………………………………… 110,000
Less: Outstanding checks………………………………………… 100,000
Note collected by bank………………………………….. 215,000
Balance per book………………………………………………….. P 2,830,000
The entity had P200,000 cash on hand on 12/31/15. How much should be reported as cash in the statement of
financial position?
a. P 2,930,000
b. P 3,095,000
c. P 2,895,000
d. P 3,130,000
14. When a company’s bookkeeper started to prepare the monthly bank reconciliation, the cash account showed a
balance of P528,600. At the end of the month, the following information was available from the company records and
the monthly bank statement:
Customers NSF check listed in the bank statement……………………… P 40,800
Bank service charge………………………………………………………….. 2,400
Outstanding check……………………………………………………………. 178,000
Deposit of 45,000 was erroneously credited in the bank statement as........ 54,000
Company wrote 1,700 but recorded it as………………………………….. 7,100
Customer default on account……………………………………………….. 12,600
The correct cash balance should be:
a. P 572,400
b. P 490,800
c. P 581,400
d. P 561,600
 15. Samsung Inc. uses four-column bank reconciliation. The bank reconciliation for March shows outstanding checks for
P300. During April, the company wrote check totaling P23,600. The bank statement for April shows P23,010 of checks
clearing the company’s account. The amount of outstanding checks on April bank reconciliation must be:
a. P 890
b. P 600
c. P 300
d. P 1,200
16. Nitendo Co. reported a balance of P14,300 in its cash account at the end of the month. There were P12,000 deposits
in transit and P11,500 of checks outstanding. The bank statement showed a balance of P15,000. Service charge of
P600, and the collection of a note plus interest. The note had a face value of P1500. How much interest did the
company collect?
a. P 1,800
b. P 300
c. P 2,400
d. P 1,200
17. Sony uses four-column bank reconciliation. The bank statement for May shows payments of P13,150, including
service charge of P200. At the beginning of May, there were P900 of checks outstanding. At the end of May, there
were P1,200 of checks outstanding. Before recording the bank service charge, Sony must have recorded May
payments of:
a. P13,250
b. P12,650
c. P13,050
d. P13,650
18. A company received its monthly bank statement, which showed an ending balance of P150,000. Adjustment on the
bank reconciliation included a deposit in transit of P20,000; outstanding checks of P30,000; NSF check of P5,000;
bank service charge of P300; proceeds of a note collected by the bank of P40,000. What was the correct cash balance
to be shown in the statement of financial position?
a. P134,700
b. P105,300
c. P140,000
d. P174,700

19. Using the same information in no. 18, how much is the unadjusted cash balance per books?
a. P134,700
b. P105,300
c. P140,000
d. P174,700
20. GIC Enterprise’s cash account had a balance of P96,200 on August 31. This included a bank deposit of P8,700 that
was in transit on the 31st. The August 31 bank statement contained the following information:
Bank statement balance….. P 108,900 NSF check……………… P 1,600
Bank service charge……………. 1,700 Collection of note……. 8,600
GIC also had an outstanding check of P16,100. What is GIC’s reconciled balance?
a. P92,900
b. P96,200
c. P104,700
d. P101,500
21. Leona Company had the following account balances on December 31, 2011:
Cash in Bank- current account 4,000,000.00

Cash in Bank- payroll account 1,500,000.00

Cash on Hand 500,000.00

Cash in Bank- restricted for equipment acquisition on 2012 1,000,000.00

Treasury bill purchased November 1, 2011 to mature on February 1, 2012 2,000,000.00

The cash on hand includes a P 200,000 customer check payable to Leona Company, dated January 15, 2012. What should
be reported as “cash and cash equivalents” on December 31, 2011?

a. P 9,000,000 c. P 8,800,000
b. P 7,800,000 d. P 5,800,000
22. On December 31, 2011, Tigres Company had the following cash balances:
Cash in Bank 5,000,000.00

Petty Cash Fund 50,000.00

Time Deposit, one year, due March 1, 2012 1,000,000.00

Saving Deposit 500,000.00

A check of P 100,000 dated January 15, 2012 in payment of accounts payable was recorded and mailed on December 28,
2011. How much “cash and cash equivalents” should be reported on December 31, 2011?

a. P 6,550,000 c. P 5,650,000
b. P 6,650,000 d. P 5,450,000

23. The “cash” account in Jen Company’s ledger on December 31, 2011 showed a balance of P 5,250,000 which included
the following:
Petty Cash Fund 50,000.00

Undeposited receipts, including a post-dated customer check of P200,000 1,300,000.00

Cash in Bank 2,500,000.00

Cash in Sinking Fund 1,000,000.00

Expenses paid out of collections, not yet recorded 250,000.00

IOUs signed by employees 150,000.00

5,250,000.00

At what amount should Jen Company report as “cash” in the December 31, 2011 statement of financial position?

a. P 3,650,000 c. P 4,650,000
b. P 3,850,000 d. P 4,050,000

24. Enipr Company had the following account balances at December 31, 2011:
Cash on Hand and in Bank 5,000,000.00

Cash restricted for bond payable due on June 30, 2013 2,000,000.00

Time Deposit 6,000,000.00

Saving deposit set aside for dividend payable on June 30, 2012 1,000,000.00

In the December 31, 2011 statement of financial position, what total amount should be reported as “cash and cash
equivalents”?

a. P 12,000,000 c. P 11,000,000
b. P 14,000,000 d. P 13,000,000
25. On April 1, Jennifer Company established an imprest system petty cash fund for P 10,000 by writing a check drawn
against the general checking account. On April 30, the fund contained the following:
Currency and coins 3,000.00

Receipts for office supplies 4,000.00

Receipts for postage still unused 2,000.00

Receipts for transportation 600.00

On April 30, the entity wrote a check to replenish the fund. What is the amount of replenishment under the imprest fund
system?

a. P 10,000 c. P 7,000
b. P 6,600 d. P 3,000

26. During the audit of Maganda Company on December 31, 2011, the following data are gathered:
Balance per book 4,000,000.00

Bank charges 10,000.00

Outstanding checks 950,000.00

Deposit in transit 1,200,000.00

Customer note collected by bank 1,500,000.00

Interest on customer note 60,000.00

Customer check returned NSF 250,000.00

Depositor's note charged to account 1,000,000.00

The correct cash balance amounts to ____.

a. P 4,300,000 c. P 4,250,000
b. P 5,300,000 d. P 4,000,000
 RECEIVABLES

1. The category “trade receivables” includes

a. Advances to officers and employees
b. Income tax refunds receivable
c. Claims against insurance companies for casualties sustained
d. None of these

2. Nontrade receivables are classified as current assets only if they are reasonably expected to be realized in cash
a. Within one year or within the operating cycle whichever is shorter
b. Within one year or within the operating cycle whichever is longer
c. Within one year, the length of the operating cycle, notwithstanding
d. Within the normal operating cycle

3. Which if the following is the proper balance sheet presentation of receivables?

a. Trade receivables and non-trade receivables which are currently collectible should be presented as on line item
called “trade and other receivables”
b. Trade accounts receivables and trade notes receivable should be presented separately
c. Non-trade receivables should be presented as current assets
d. Trade receivables and non-trade receivables should be shown separately

4. Accounts receivable should be stated at

a. Net realizable Value
b. Face value
c. Maturity Value
d. Discounted Value

5. When a specific customer’s accounts receivable was written off as uncollectible but was subsequently recovered,
what will be the effect on Accounts Receivable and Allowance for Doubtful accounts, respectively?
a. No effect, increase c. increase, no effect
b. Increase, increase d. some other answer

6. When the direct write-off method of recognizing bad debt expense is used, the entry to write off a specific customer
account would
a. Decrease accounts receivable
b. Decrease net income
c. Decrease accounts receivable and decrease net income
d. Increase accounts receivable and increase net income

7. Why is the allowance method preferred over the direct write-off method of accounting for bad debts?
a. Determining worthless accounts under direct write-off is difficult to do
b. Allowance method is used for tax purposes
c. Estimates are used
d. Improved matching of bad debt expense with revenue

8. A method of estimating bad debts that focuses on the balance sheet rather than the income statement is the allowance
method based on
a. Aging the trade receivable accounts
b. Credit sales
c. Specific accounts receivable determined to be uncollectible
d. Direct write-off method

9. How should unearned interest included in the face amount of notes receivable be presented on the balance sheet?
a. As a deduction from the related receivables
b. As a deferred credit
c. In the footnotes
d. As a current liability
10. The interest of a non-interest bearing note is equal to
a. Zero
b. The excess of the market value over the present value of the note
c. The excess of the face value over the present value
d. The excess of the present value over the face value
11. Assuming that the ideal measure of short-term receivables in the balance sheet is the discounted value of the cash
to be received in the future, failure to follow this practice usually does not make the balance sheet misleading because
a. Most short-term receivables are not interest-bearing
b. The allowance for uncollectible accounts includes a discount element
c. Most receivables can be sold to a bank of factor
d. The amount of the discount is not material

12. On October 1, 2011, a company received a one year note-receivable bearing interest at the market rate. The face
amount of the note receivable and the entire amount of the interest are due on September 30, 2012. The interest
receivable account at December 31, 2011 would consist of the amount representing
a. Nine months of accrued interest income
b. The excess on October 2, 2011 of the present value of the note receivable over its face value
c. Three months of accrued interest
d. Twelve months of accrued interest income

13. Accounting for the interest in a noninterest bearing note receivable is an example of what aspect of accounting theory?
a. Matching
b. Substance over form
c. Verifiability
d. Accrual basis

14. In an entity’s April 30 statement of financial position, a note receivable was reported as a noncurrent asset and the
accrued interest for eight months was reported as a current assed. Which of the following terms would fit the entity’s
note receivable
a. Principal and interest are due December 31, 2012
b. Both principal and interest are payable on December 31, 2012 and December 31, 2013
c. Both principal and interest are payable on August 31, 2012 and August 31, 2013.
d. Principal is due August 31, 2013, and the interest is due August 31, 2012 and August 31, 2013

15. On July 1, 2013, an entity obtained a two-year 8% note receivable for services rendered. At that time, the market rate
of interest was 10%. The face amount of the note and the entire amount of interest are due on June 30, 2015. Interest
receivable on December 31, 2013 is
a. 5% of the July 1, 2012 present value of the amount due on June 30 2014
b. 4% of the July 1, 2012 present value of the amount due on June 30, 2014
c. 5% of the face amount of the note
d. 4% of the face amount of the note
For Number 16:

The following selected transactions occurred during the year ended December 31,2012:

Gross Sales (Cash and Credit) P750,614

Collections from credit customer, net of 2% cash discount 245,000
Cash Sales 150,000
Uncollectible accounts written off 16,000
Credit memos issued to credit customers for sales returns 8,400
Cash refunds given to cash customers for sales returns 12,640
Recoveries on accounts receivable written off in previous
years (not included in the cash received stated above) 5,421

At the year-end, the company provides for estimated bad debt losses by crediting the Allowance for Bad Debts account for
2% of net credit sales

16. What is bad debts expense to be reported for 2012?

a. P11,844 c. P14,744
b. P11,744 d. P11,491

For number 17:

Bikko Inc. reported the following balances (after adjustment) at the end of 2013 and 2012
12/31/2013 12/31/2012
Total Accounts Receivable P105,000 P96,000
Net Accounts Receivable 102,000 94,500

During 2013, Bikko wrote off customer accounts totalling P3,200 and collected P800 on accounts previously written
off.

17. Bikko’d doubtful accounts expense for the year ending December 31,2013 is

a. P1,500 c. P3,000
b. P2,400 d. P3,900
For Numbers 18,19, 20
Calachuchi Corp.’s accounts receivable subsidiary ledger shows the following information:

CUSTOMER ACCOUNT BALANCE INVOICE AMOUNT

DEC. 31, 2012 DATE

Aruy Inc. P35, 180 12/06/12 P14, 000

11/29/12 21,180

Naku Co. 20,920 09/27/12 12,000

08/20/12 8,920

Syak Corp. 30,600 12/08/12 20,000

10/25/12 10,600

Trip Co. 45,140 11/17/12 23,140

10/09/12 22,000

Uy, Co. 31,600 12/12/12 19,200

12/02/12 12,400

Xac Corp. 17,400 09/12/12 17,400

The estimated bad debts rates below are based on Calachuchi Corps. 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 following for bad debts account had a debit balance of P4000 on December 31, 2012, before adjustment.

18. The Company’s account receivable under “61-90 days” category totalled
a. P32,600 c. P44,600
b. P44,320 d. P42,000

19. The allowance for bad debts to be reported on the balance sheet at December 31, 2012 is
a. P13,199 c. P9,699
b. P6,199 d. P9,043

20. What entry should be made on December 31, 2012, to adjust the allowance for bad debts account?
a. Bad Debt Expense 13,699
Allowance for Bad Debts 13,699

b. Bad Debt Expense 5,199

Allowance for Bad Debts 5,199

c. Allowance for Bad Debts 5,199

Bad Debt Expense 5,199

d. Bad Debt Expense 9,699

Allowance for Bad Debts 9,699
21. Lemonade, Inc. estimates its bad debt losses by aging its accounts receivable. The aging schedule of accounts
receivable at December 31, 2013 is presented below:

Age of Accounts Amount

0-30 days P 843, 200
31-60 days 461, 000
61-90 days 192, 400
91-120 days 76, 650
Over 120 days 39, 400

Lemonade computes the year-end balance of the allowance for bad debts based in the average loss experience for
the past 5 years. Lemonade’s uncollectible account experience for the past 5 years is summarized in the following
schedule:

A/R Balance 0-30 31-60 61-90 91-120 0ver 120

Year Dec. 31 Days Days Days Days Days
2012 P 1, 312, 500 0.3% 1.8% 12% 38% 65%
2011 999, 999 0.5% 1.6% 11% 41% 70%
2010 465, 000 0.2% 1.5% 9% 50% 69%
2009 816, 000 0.4% 1.7% 10.2% 47% 81%
2008 1, 243, 667 0.9% 2.0% 9.7% 33% 95%

The balance of the allowance for bad debts account at December 31, 2013 (before adjustment) is P84, 500.

What is the NET REALIZABLE VALUE of accounts receivable at December 31, 2013?

a. P 1, 518, 887 c. P 1, 603, 387

b. P 1, 528, 150 d. P 1, 612, 650

22. During the year, McGrady Company made and entry to write-off a P 4, 000 uncollectible account. Before this entry
was made, the balance of accounts receivable was P50, 000 and the balance in the allowance account was P4, 500.
The net realizable value of accounts receivable after the write-off entry was
a. P50, 000 b. P49, 500 c. P41, 500 d. P45, 500

23. ART Inc. made a P10, 000 sale on account with the following terms: 1/15, n/30. If the company uses the net method
to record sales made on credit, how much should be recorded as revenue?
a. P9, 800 b. P9, 900 c. P10, 000 d. P10, 100

24. Frame Co. has an 8% note receivable dated June 30, 2007, in the original amount of P150, 000. Payments of P50,
000 in principal plus accrued interest are due annually on July 1, 2008, 2009, 2010. In its June 30, 2009 balance
sheet, what amount should Frame report as a current asset for interest on note receivable?
a. 0 b. P4, 000 c. P8, 000 d. P12, 000

25. On January 1, 2011, Ott Company sold goods to Fox Company. Fox signed a noninterest bearing note requiring
payment of P600, 000 annually for seven years. The first payment was made on January 1, 2011. The prevailing
market rate of interest for this type of note at the date of issuance was 10%. Information of present value factors is
as follows:

Present value of 1 at 10% for 6 periods .56

Present value of 1 at 10% for 7 periods .51
Present value of ordinary annuity of 1 at 10% for 6 periods 4.36
Present value of ordinary annuity of 1 at 10% for 7 periods 4.87

What should be recorded as sales revenue in January 2011?

a. 3, 216, 000
b. 2, 922, 000
c. 2, 616, 000
d. 2, 142, 000
26. On December 27, 2011, Lily Company sold a building, receiving as consideration a P4, 000 000 noninterest-bearing
note due in three years. The building had a cost of P3,800,000 and the accumulated depreciation was P1,600,000 at
the date of sale. The prevailing rate of interest for a note this type was 12%. In its income statement, what amount
of gain should Lily report on the sale? Round PV factor to three decimal places.
a. 1,800,000 c. 200,000
b. 648,000 d. 0
27. SayonKAAYOko Co. sold some machinery to the MAObitaw Co. on January 1, 2011, for which the cash selling price
was P7, 582, 000. MAObitaw Co. entered into an instalment sale contract with
SayonKAAYOko Co. at an interest rate of 10%. The Contract required payments of P2 million a year for over five
years, with the first payment on January 1, 2011. What amount of interest income should be included in
SayonKAAYOko Co.’s 2012 using the interest method?

a. P1,000,000
b. 414,020
c. 634,020
d. 0

28. Alamo Company sold one of its factories in January 2, 2013 for seven million. Alamo received a cash down payment
of one million and a four-year, twelve percent note for the balance. The note is payable in equal annual payments of
principal and interest of P1,975,400 payable of December 31 each year until 2016. What is the carrying amount of
the note receivable of December 31, 2013?
a. 4, 500, 000
b. 4, 744, 600
c. 4, 624, 600
d. 4, 025, 600

29. On December 31, 2011, Park Company sold used equipment and received a noninterest-bearing note requiring
payment of P500,000 annually for ten years. The first payment is was paid on December 31, 2012 and the prevailing
rate of interest for this type of note at the date of issuance is 12%. What is the carrying amount of the note at December
31, 2013 that will be reported at the statement of financial position? Round PV factor to 3 decimal places.
a. 1,610,000
b. 2,825,000
c. 5,000,000
d. 2,483,680

30. On June 30, 2011, Emme Company sold equipment with an original cost of 4,800,000 which was purchased on
January 1, 2010 and with an estimated useful life of 6 with no residual value. As a consideration, Emme company
received a noninterest bearing note amounting P4,000,000 due on April 30, 2014. The prevailing market rate of
interest for this type of note was 10% at the issuance. The present value of 1 at 10% for 3 periods is 0.75.

In Emme’s income statement, at what amount should be reported as gain or loss or sale of equipment assuming the
straight line method of depreciation is used.
a. 600,000 gain
b. 600,000 loss
c. 1,000,000 gain
d. 1,000,000 loss
PROBLEM 5.
Knowhow Bank loaned P10,000,000 to a borrower on January 1, 2011. The terms of the loan require principal payments of
P2,000,000 each year for 5 years plus interest at 10%.
The first principal and interest payment is due on January 1, 2012. The borrower made the required payments during 2012
and 2013. However, during 2013 the borrower began to experience financial difficulties, requiring the bank to reassess the
collectability of the loan. On December 31, 2013, the bank has determined that the remaining principal payment will be
collected but the collection of the interest is unlikely. The bank accrued the interest for 2013.
The principal payments are expected to be P1,000,000 on January 1, 2013, P2,000,000 on January 1, 2014 and P3,000,000
on January 1, 2015. Round off present value factors to two decimal places.

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

a. 1,180,000
b. 2,000,000
c. 1,290,000
d. 1,780,000
2. What is the interest income for 2014?
a. 531,000
b. 431,000
c. 600,000
d. 500,000
3. What is the carrying amount of the loan receivable on December 31, 2014?
a. 5,000,000
b. 4,741,000
c. 4,310,000
d. 3,122,00

PROBLEM 6.
Harrison Company has a loan receivable with a carrying value of P15,000 at December 31, 2010. On January 3, 2011, the
borrower, Thomas Clark Imports, declares bankruptcy, and Harrison estimates that it will collect only 60% of the loan
balance.
1. Which of the following entries would Harrison make to record the impairment under IFRS?
a. Loan Receivable 9,000
Impairment Loss 9,000
b. Loan Recovery Expense 6,000
Loan Receivable 6,000
c. Impairment Loss 9,000
Loan Receivable 9,000
d. Impairment Loss 6,000
Loan Receivable 6,000
2. Assume that on January 5, 2012, Harrison learns that Thomas Clark Imports has emerged from bankruptcy. As a result,
Harrison now estimates that all but P1,500 will be repaid on the loan. Under IFRS, which of the following entries would
be made on January 5, 2012?
a. Loan Receivable 4,500
Recovery of Impairment Loss 4,500
b. Loan Receivable 1,500
Recovery of Impairment Loss 1,500
c. Bad Debt Expense 1,500
Impairment Loss 1,500
d. No journal entry is allowed under IFRS.
PROBLEM 7.
On December 1, 2013, Breakout Company assigned specific accounts receivable totaling P2,000,000 as collateral on a
P1,500,000, 12% note from a certain bank. Breakout Company will continue to collect the assigned accounts receivable. In
addition to the interest on the note, the bank also charged a 5% finance fee deducted in advance on the P1,500,000 value of
the note. The December collections of the assigned accounts receivable amounted to P1,000,000 less cash discount of
P50,000. On December 31, 2013, Breakout Company remitted the collections to the bank in payment for the interest accrued
on December 31, 2013 and the note payable.

1. What amount of cash was received from the assignment of accounts receivable on December 31, 2013?
a. 2,000,000
b. 1,500,000
c. 1,900,000
d. 1,425,000
2. What is the carrying amount of note payable on December 31, 2013?
a. 500,000
b. 550,000
c. 565,000
d. 730,000
3. What amount should be disclosed as the equity of Breakout Company in assigned accounts on December 31, 2013?
a. 500,000
b. 450,000
c. 435,000
d. 270,000

PROBLEM 8.
Brawny Company factored P8,000,000 of accounts receivable to a finance entity on July 1 of the current year. Control was
surrendered by Brawny Company. The factor assessed a fee of 5% and retained a holdback equal to 10% of the accounts
receivable. In addition, the factor charged 15% interest computed on a weighted average time to maturity of the accounts
receivable of 30 days.

1. What amount was initially received by Brawny Company from the factoring?
a. 6,701,370
b. 6,800,000.
c. 7,501,370
d. 6,700,000
2. Assuming all receivables are collected, what is the cost of factoring?
a. 400,000
b. 498,630
c. 898,630
d. 98,630

PROBLEM 9.
Tender Company accepted from a customer a P4,000,000, 90-day, 12% note dated August 31, 2013. On September 30,
2013, the entity discounted without recourse the note at 15%. However, the proceeds were not received until October 1, 2013.
In the income statement for the year ended September 30, 2013, what amount should be reported as loss on note receivable
discounting?
a. 17,000
b. 23,000
c. 40,000
d. 0

PROBLEM 10.
On November 1, 2013, Duress Company discounted with recourse at 10% a one-year, non-interest bearing, P2,050,000 note
receivable maturing on January 31, 2013. The discounting of the note receivable is accounted for as a conditional sale with
recognition of a contingent liability.

1. What amount of contingent liability should be disclosed in the financial statements for 2012?
a. 2,050,000
b. 2,000,000
c. 2,033,333
d. 0
2. How much did Duress receive from the discounting transaction?
a. 0
b. 2,000,000
c. 2,033,333
d. 1,998,750

PROBLEM 11.
Undaunted Company discounted its own P5,000,000 one-year note at a bank, at a discount rate of 8%, when the prime rate
was 6%. In recording the note in the statement of financial position prior to maturity, what rate should be used for the recording
of interest expense?
a. 6.00%
b. 6.42%
c. 8.00%
d. 8.70%

PROBLEM 12.
Sun Inc. factors P2,000,000 of its accounts receivables without recourse for a finance charge of 5%. The finance company
retains an amount equal to 10% of the accounts receivable for possible adjustments. Sun estimates the fair value of the
recourse liability at P75,000. What would be recorded as a gain (loss) on the transfer of receivables?
a. Loss of P100,000. c. Gain of P175,000.
b. Loss of P375,000. d. Loss of P75,000.
PROBLEM 13.
Mark Co. assigned P400,000 of accounts receivable to Kwik Finance Co. as security for a loan of P335,000. Kwik charged a
2% commission on the amount of the loan; the interest rate on the note was 10%. During the first month, Mark collected
P110,000 on assigned accounts after deducting P380 of discounts. Mark accepted returns worth P1,350 and wrote off
assigned accounts totaling P2,980.
1. The amount of cash Mark received from Kwik at the time of the transfer was
a. P301,500. b. P327,000. c. P328,300. d. P335,000.
2. Entries during the first month would include a
a. debit to Cash of P110,380.
b. debit to Bad Debt Expense of P2,980.
c. debit to Allowance for Doubtful Accounts of P2,980.
d. debit to Accounts Receivable of P114,710.

PROBLEM 14.
On February 1, 2010, Vinson Company factored receivables with a carrying amount of P300,000 to Jessie Company. Jessie
Company assesses a finance charge of 3% of the receivables and retains 5% of the receivables. Relative to this transaction,
you are to determine the amount of loss on sale to be reported in the income statement of Vinson Company for February. The
recourse obligation has a fair value of P1,500.
1. Assume that Vinson factors the receivables on a without recourse basis. The loss to be reported is
a. P0. b. P9,000. c. P15,000. d. P24,000.

2. Assume that Vinson factors the receivables on a with recourse basis. The loss to be reported is
a. P9,000. b. P10,500. c. P15,000. d. P25,500.
 Cost Accounting
Total manufacturing costs
i. Direct materials and direct labor costs total P120,000, conversion costs total P100,000, and factory overhead costs total
P400 per machine hour. If 150 machine hours were used for Job #201, what is the total manufacturing cost for Job #201?

A. 120,000 C. 180,000

B. 160,000 D. 280,000

Overhead
ii. Machine hours used to set the predetermined overhead rate were 25,000, actual hours were 24,000, and overhead
applied was P60,000. Budgeted overhead for the year was

A. P57,600. C. P60,000.

B. P59,000. D. P62,500.
iii. ABC Company had a total overhead of P360,000 and selling and administrative expense of P140,000 for the year. 1,000
units of A and 3,000 units of B were produced. A requires 3 machine hours and B requires one machine hour per unit.
What is overhead chargeable per unit of A

A. P 60 C. P120

B. P 90 D. P180
iv. ABC Company had a total overhead of P360,000 and selling and administration expense of P140,000 for the year. 1,000
units of A and 3,000 units of B were produced. A requires 3 and B requires one machine hours per unit. A requires 6
direct labor hours and B requires 4 direct labor hours per unit. 40% of overhead is related to labor and the balance to
machines. Labor-related overhead per hour amounts to

A. P 8 C. P18

B. P12 D. P24
v. ABC Company had a total overhead of P360,000 and selling and administration expense of P140,000 for the year. 1,000
units of A and 3,000 units of B were produced. A requires 3 and B requires one machine hours per unit. A requires 6
direct labor hours and B requires 4 direct labor hours per unit. 40% of overhead is related to labor and the balance to
machines. The overhead per unit of B amounts to

A. P 60 C. P156

B. P 68 D. P180
vi. ABC Company had a total overhead of P360,000 and selling and administration expense of P140,000 for the year. 1,000
units of A and 3,000 units of B were produced. Assuming that 20% of all overhead are batch-related for 1,000 batches,
40% of which was for producing product A, batch-related overhead for product A per unit amounts to

A. P20 C. P60

B. P40 D. P80
vii. ABC Company had a total overhead of P360,000 and selling and administration expense of P140,000 for the year. 1,000
units of A and 3,000 units of B were produced. Assuming that 30% of overhead is product related overhead - 20% of
which is related to product A, product-related overhead per unit of A amounts to

A. P30 C. P50

B. P40 D. P60
viii. Cooke Company uses the equation P450,000 + P1.50 per direct labor hour to budget manufacturing overhead. Cooke
has budgeted 150,000 direct labor hours for the year. Actual results were 156,000 direct labor hours and P697,500 total
manufacturing overhead. The total overhead variance for the year is

A. P4,500 favorable. C. P4,500 unfavorable.

B. P18,000 favorable. D. P18,000 unfavorable.

ix. If estimated annual factory overhead is P800,000, estimated annual direct labor hours are 400,000, actual June factory
overhead is P82,000, and actual June direct labor hours are 38,000, then overhead is:

A. P6,000 overapplied C. P1,800 underapplied

B. P1,800 overapplied D. P6,000 underapplied

x. BKY Company predicted that factory overhead for 2006 and 2007 would be P60,000 for each year. The predicted and
actual activity for 2006 and 2007 were 30,000 and 20,000 direct labor hours, respectively.
2006 2007

Sales in units 25,000 25,000

Selling price per unit P10 P10

Direct materials and direct labor per unit P 5 P 5

The company assumes that the long-run production level is 20,000 direct labor hours per year. The actual factory
overhead cost for the end of 2006 and 2007 was P60,000. Assume that it takes one direct labor hour to make one finished
unit.

When the annual estimated factory overhead rate is used, the gross profits for 2006 and 2007, respectively, are

A. P 75,000 and P 75,000 C. P125,000 and P125,000

B. P 75,000 and P 55,000 D. P 75,000 and P 50,000

xi. Britney Company has unit costs of P10 for materials and P30 for conversion costs. If there are 2,500 units in ending work
in process, 40% complete as to conversion costs, and fully complete as to materials cost, the total cost assignable to the
ending work in process inventory is

A. P 45,000 C. P 75,000

B. P 55,000 D. P100,000
xii. In the Star Company, the predetermined overhead rate is 80% of direct labor cost. During the month, P210,000 of factory
labor costs are incurred, of which P180,000 is direct labor and P30,000 is indirect labor. Actual overhead incurred was
P200,000. The amount of overhead debited to Work in Process Inventory should be

A. P120,000 C. P168,000

B. P144,000 D. P160,000
xiii. The Assembling Department’s output during the period consists of 20,000 units completed and transferred out, and 5,000
units in ending work in process 60% complete as to materials and conversion costs. Beginning inventory is 1,000 units,
40% complete as to materials and conversion costs. The equivalent units of production are

A. 22,600 C. 24,000

B. 23,000 D. 25,000
xiv. The Amor Company has 2,000 units in beginning work in process, 20% complete as to conversion costs, 23,000 units
transferred out to finished goods, and 3,000 units in ending work in process one-third complete as to conversion costs.
The beginning and ending inventory is fully complete as to materials costs. Equivalent units for materials and conversion
costs are

A. 22,000 and 24,000 C. 24,000 and 26,000

B. 26,000 and 24,000 D. 26,000 and 26,000

xv. Dodge Company has a mixing department and a refining department. Its process-costing system in the mixing department
has two direct materials cost categories (material J and material P) and one conversion costs pool. The company uses
First-in, First out cost flow method. The following data pertain to the mixing department for November 2006

Units

Work in process, November 1: 50 percent completed

15,000

Work in process, November 30, 70 percent completed 25,000

Units started 60,000

Completed and transferred 50,000

Costs

Work-in-process, November 1 P218,000

Material J 720,000

Material P 750,000

Conversion Costs 300,000

Material J is introduced at the start of operations in the Mixing department, and Material P is added when the product is
three-fourths completed in the mixing department. Conversion costs are added uniformly during the process.

The respective equivalent units for Material J and Material P in the mixing department for November 2006, are

A. Both 50,000 units C. 75,000 units and 60,000 units

B. 60,000 units and 50,000 units D. 60,000 units and 75,000 units
xvi. The cost of goods completed and transferred out to the Refining department was

A. P1,930,750 C. P1,600,500

B. P1,350,000 D. P1,550,500
xvii. The Amor Company’s accounting records reflected the following data for April 2003. The company accounts its production
using First-in, First-out cost flow method:
Work in process, March 31,2003, 60% completed as
to materials and conversion costs
? units

Work in process, April 30, 2003, 30% completed as to

materials and conversion costs
24,000 units

Equivalent units of production for April 2003 64,000

Units started and completed in April 50,000

How many units were in the beginning work-in-process?

A. 6,800 C. 17,000

B. 11,333 D. 24,000
xviii. Had the company used the weighted-average method of accounting for its production, the equivalent units should be

A. 74,200 C. 81,000

B. 57,200 D. 53,800
xix. In the Newman Company, there are zero units in beginning work in process, 7,000 units started into production, and 500
units in ending work in process 20% completed. The physical units to be accounted for are

A. 7,000 C. 7,600

B. 7,360 D. 7,340
xx. For the month of May, the Production Control Department of La Mesa, Inc. reported the following production data for
Finishing Department (second department):
Transferred-in from Assembly Department 75,000

Transferred-out to Packaging Department 59,250

In-process end of May (with 1/3 labor and factory overhead) 15,750

All materials were put into process in Assembly Department. The Cost Accounting Department collected these figures for
Finishing Department.

Unit cost for unit transferred-in from Assembly Department P 2.70

Labor cost in Finishing Department 41,280.00

Applied factory overhead 112.5% of labor cost

How much was the cost of Finished goods transferred out to the Packaging Department?

A, P240,555 C. P260,580

B. P 80,580 D. P159,975
Use the following data to answer question Nos. 18 through 20.

Mergy Company uses process costing in accounting for its production department, which uses two raw materials. Material
Alpha is placed at the beginning of the process. Inspection is at the 85% completion stage. Material Bravo is then added to
the good units. Normal spoilage units amount to 5% of good output. The company records contain the following information
for April:

Started during the period 20,000 units

Material Alpha P26,800

Material Beta P22,500

Direct labor cost P75,160

Factory overhead P93,950

Transferred to finished goods 14,000

Work in process (95% complete), April 30 4,000

xxi. How much were Material cost per equivalent unit for Alpha and Beta, respectively?

A. P1.40; P1.36 C. P1.34; P1.06

B. P1.40; P1.06 D. P1.34; P1.25

xxii. The equivalent units of production for Material Alpha and Beta are

Alpha Beta

A. 18,000 14,000

B. 18,000 18,000

C. 20,000 18,000

D. 20,000 14,000
xxiii. The number of normal and abnormal lost units are:

Normal Abnormal

A. 700 1,400

B. 1,400 700

C. 900 1,100

D. 1,100 900
xxiv. Catridge Company has no beginning work in process; 9,000 units are transferred out and 3,000 units in ending work in
process are one-third finished as to conversion costs and fully complete as to materials cost. If total materials cost is
P60,000, the unit materials cost is

A. P5.00 C. P5.45

B. P6.00 D. P5.35
xxv. Lapid Company uses process costing. All materials are added at the beginning of the process. The product is inspected
when it is 90 percent converted, and spoilage is identified only at that point. Normal spoilage is expected to be 5% of
good output.

The following are extracted from the production records of Lapid Company for May 2003:

Units put into process 21,000

Units transferred to finished goods 14,000

In-process, May 31, 75% complete 6,000

How many are considered abnormal lost units?

A. Zero C. 15

B. 300 D. 850

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