1 - Cash & Receivables

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Chapter1

Cash and Cash Equivalents


PROBLEMS
A. The books of Coach Company disclosed a cash balance of P691,720 on June 30.
The bank statement as of June 30 showed a balance of P556,800. Additional
information that might be useful in reconciling the two balances follows:

1. Check No. 128 for P13,000 was erroneously recorded in the check register as
P30,000.
2. A customer's note dated March 31 was discounted on April 12. The note was
dishonored on June 29 (maturity date). The bank charged Coach's account for
P142,650, which includes a protest fee of P420.

3. The deposit of June 24 was recorded on the books as P28,950 but it was actually
a deposit of P29,850.
4. Outstanding checks totaled P98,850 as of June 30.
5. There were bank service charges for June of P2,100 not yet recorded on the
books.
6. Couch's account had been charged on June 26 for a customer's NSF check for
P12,960.
7. Coach properly deposited P6,000 on June 30 that was not recorded by the bank.
8. Receipts of June 30 for P134,250 were recorded by the bank on July 2.
9. A bank memo stated that a customer's note for P45,000 and interest of P1,650
had been collected on June 27 and the bank charged a P360 collection fee.

(1) How much is the correct cash balance at June 30?


a. P564,200
b. P591,720
c. P598,200
d. P596,400
(2) How much is the net adjustment to the cash account?
a. P41,400 credit
b. P41,400 debit
c. P93,520 credit
d. P93,520 debit
.
B. Bally Limited keeps all of its cash in a checking account. Presented below
are the bank reconciliation prepared at the end of May, a summary or the company’s
bank statement for June, and the company's general ledger account for cash.

Bally Limited
Bank Reconciliation Statement
May 31, 2016

Balance per bank statement 625,000


Add deposits in transit 22,500
Total 647,500
Deduct outstanding checks 41,800
Correct cash balance 605,700
Balance per books 607,200
Deduct bank service charge 1,500
Correct cash balance 605,700

A summary of Bally's bank statement for June follows:


Balance, June 1 625,000
Deposits shown for June 2,569,200
Note and interest collected during June less collection fee 156,500
Checks that cleared during June -2,570,700
June service charge -1700
Balance, June 30 778,300

The ledger account for Cash in Bank follows:

Cash in bank
Balance, June 1 607,200 Service charge for May 1,500
June receipts 2,618,200 June disbursment 2,566,400

Additional information:
a. During June, Bally Company incorrectly recorded two checks. Check No. 123567
was drawn for P23,300 but recorded as P32,300; Check No. 123572 was drawn
for P18,000 but recorded as P1,800. Both checks were issued in payment of
accounts payable and cleared the bank in June.
b. During June, the bank erroneously charged a P21,000 check of Bailey Company
to Bally Company's account.
c. A note for P150,000 and interest of P7,500 was collected by the bank during
June. All of the interest was earned during the current year. The bank deducted a
collection fee of P1,000. The company has not yet recorded the collection.
1. What is the amount of deposits in transit at June 30, 2016?
a. 14,900
b. 71,300
c. 71,500
d. 71,800
2. What is the amount of outstanding in June 30, 2016?
a. 17,900
b. 44,700
c. 51,300
d. 65,700
3. How much is the correct cash balance at June 30, 2016?
a. 805,100
b. 801,500
c. 787,100
d. 761,300
e.
C. Louis Company had the following account balances at December 31, 2016:

Cash in Metrobank 1,875,000


Cash in BPI 200,000
Cash on hand (includes a customer's check for P15,000
dated January 5, 2017) 125,000
Cash restricted for acquisition of machinery (expected to be
disbursed in 2017) 1,600,000

Cash in Metrobank include P300,000 of compensating balance against short-term


borrowing arrangements. The compensating balance is not legally restricted as to
withdrawal by Louis.

In the current asset section of Louis" December 31, 2016 statement of financial
position, total cash should be reported at
a. P2,185,000.
b. P1,885,000.
c. P3,785,000.
d. P3,485,000.

D. The statement of financial position of Vuitton Company shows cash of P237,390.

The following items were found to comprise this amount:


Cash in Metrobank, per bank statement (outstanding checks as of year-end totaled
P5,200) P99,320; Savings account at Far East Bank - P30,800; Petty cash fund
(including expense receipts of P250) P1,500; Cash on hand (undeposited sales
receipts) -P4,200; Sinking fund cash P20,000; Cash in foreign bank (in equivalent
pesos) - P62,000; Customers' checks on hand: Traveler's checks - P4,450 and
certified check- P3,120; 90-day, BSP treasury bills - P12,000.
What is the correct amount of cash and cash equivalents in Vuitton Companys
statement of financial position?
a. P231,940
b. P211,940
c. P199,820
d. P196,820

E. A surprise count of the petty cash fund of ling Trading on July 4, 2016 showed the
following:

Currencies 5,600
Coins 450
Paid vouchers for
Office supplies (dated July 2, 2016) 1,750
Newspaper subscription for two weeks (dated June 29, 2016) 300
Loans to employees 3,000
Company check representing replenishmentof the
petty cash fund 3,850

The company's fiscal year ends of June 30. The petty cash fund was established
for an amount of P15,000

(1) What is the correct amount of petty cash fund at June 30, 2016?
a. P 6,050
b. P 9,900
c. P11,650
d. P15,000
(2) How much is the shortage or overage in the petty cash fund at June 30, 2016?
a. P50 shortage
b. P50 overage
c. P1,800 shortage
d. P1,800 overage
Receivables

A. Vivian Inc. had net sales in 2020 of P700,000. At December 31, 2020, before
adjusting entries, the balances in selected accounts were: accounts receivable
125,000 debit, and allowance for doubtful accounts 1,200 credit. Vivian estimates
that 2% of its net sales will prove to be uncollectable. What is the cash realizable
value of receivables reported on the statement of Financial Position at December 31,
2020?

a. 109,800
b. 111,000
c. 112,200
d. 122,500

B. Sun Inc. factors P2,000,000 of its accounts receivable without guarantee (without
recourse) for finance charge of 3%. The finance company retains an amount equal
to 10% of the accounts receivable for possible adjustments. What would be
recorded as gain (loss) on the transfer of receivables?
a. P0
b. Loss of P60,000
c. P60,000 gain
d. P260,000 loss

C. Sun Inc. assigns P2,000,000 of its accounts receivable as collateral for a 1million 8%
loan with a bank. Sun also pays a finance fee of 1% on the transaction upfront.
What would be recorded as gain (loss) on the transfer of receivables?
e. P0
f. Loss of P60,000
g. P60,000 gain
h. P260,000 loss

D. The balance of the selected accounts taken from the December 31, 2017 balance
sheet of Madagascar Company are as follows:

Accounts Receivable P650,000


Allowance for Bad Debts P 50,000

The following transactions (in summary) affecting accounts receivable occurred during
the year ended December 31, 2018:
Sales (all accounts terms: 3/10, n60) 3,000,000
Cash Received from credit customer 2,400,000
Cash received includes the following:
Customer paying within 10-day discount period 1,940,000
Recovery of accounts written off 10,000
Customer paying beyond the discount period 450,000
Accounts
AccountsWritten off as worthless
receivable written off as worthless 10,000
10,000
Credit
Credit memorandum
memorandum issued
issued to credit
to credit customer
customer for sales returns and
allowances
for sales returns and allowances 15,000
15,000

An aging of accounts receivable and estimate uncollectable accounts at December 31,


2018 revealed the following:
Age Amount Probability of uncollectability
Less than 30 days 165,000 2%
31-90 days 400,000 10%
More than 90 days Balance 30%

1. What is the amount of Accounts Receivable that would be shown in December


31, 2018 Statement of Financial Position?
a. 1,165,000
b. 941,700
c. 1,155,000
d. 934,700
2. How much is the correct bad debt expense for the year 2018?
a. 173,300
b. 193,300
c. 183,300
d. 223,300

E. On December 31, 2016, Chang Company sold a machine in the ordinary course of
business to Door Company in exchange for a noninterest bearing note requiring ten
annual payments of P100,000. Door made the first payment on December 31, 2016.

The market interest rate for similar notes at date of issuance was 8%.

Present value of 1 Present value of ordinary anuity


Period at 8% of 1 at 8%
9 0.5 6.25
10 0.46 6.71
On December 31, 2016, what is the carrying amount of note receivable?
a. 450,000
b. 460,000
c. 625,000
d. 671,000

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